USDCAD – Top  of the Range?

USDCAD – Top of the Range?

Chart Of The Day

The collapse in oil prices yesterday pushed USDCAD to the top of its recent range at 1.3500. With crude still stuck at the $50/bbl and further weakness likely the loonie could push through the key 1.3500 resistance level as traders begin to worry about the impact of lower oil prices on the Canadian economy. But push higher may not have much traction especially if oil finds support at the $45/bbl level.

The Canadian economy is no longer so dependent on resource prices and has shown remarkable resilience in the wake of lower oil prices. Tomorrow the market will get a look at Canadian CPI data and if inflation numbers come in hotter than the 0.4% projected rate, USD/CAD 1.3500 could prove to be the cap to this rally as the pair turns back off the highs of the range towards support at 1.3200

GBPUSD – 1.3000 in View?

GBPUSD – 1.3000 in View?

Chart Of The Day

The pound took out not one, not two but three big figures today in the wake of a surprise announcement that Theresa May will call a snap election on June 8th. The news was met with resounding approval from the currency market as traders appreciated the shrewdness of the move which could consolidate Ms. May’s power and allow her unbridled power to negotiate the terms of Brexit.

The move by cable wiped out many long-standing shorts and is likely to extend further challenging the key 1.3000 level over the near term horizon. For now, the pair sees support at 1.2600 and resistance at the 1.3000 level with a decidedly upward bias.

AUDJPY- Bouncing off 82.00?

AUDJPY- Bouncing off 82.00?

Chart Of The Day

The Australian Employment report last night was a game changer. The final print of 60.9K jobs was a whopping three times the market estimate. Better yet full-time employment exploded at 74K rate indicating that the Australian labor markets remain robust. The news clearly puts the RBA into a neutral state and perhaps even leaves the door open to a tightening bias if labor demand continues at this pace.

Meanwhile, the dollar took a beating on comments from President Trump, who stated his preference for a lower dollar and lower rates. But the move was emotionally driven and USDJPY is now so deeply oversold that it is due for a bounce. All of which provide a good foundation for a rally in AUDJPY as the pair finds strong support at the 82.00 level and could see a rebound towards 84.00 over the next few days.

EURJPY – Timber to 115.00?

EURJPY – Timber to 115.00?

Chart Of The Day

EURJPY dropped below the RSI 30.00 level on the daily charts today sending a very bearish signal that more selling may due. The pair is caught in the crossroads of risk aversion as both yen and the euro feel the heavy weight of concern from investors.

On the yen side, lower US yields, lower US stocks and geopolitical rumblings in the Korean peninsula have investors on edge sending USDJPY below the key 110.00 level for the first in months. The break of this key support suggests that the pair may drift towards the 108.60 level in the coming days.

In the meantime on the euro side, the wild, unpredictable four-way election in France is creating waves of uncertainty about the final outcome and that tension could only increase if the populist candidate Marie Le Pen produces a strong showing in the first round. The EURUSD dipped to below 1.0600 and has hardly been able to stage a rally despite a very weak dollar environment.

All of these factors combine for a strong possibility of further downside in EURJPY which does not have any significant support until 115.00 and sees resistance above 117.50

EURUSD – Will it Ever Move?

EURUSD – Will it Ever Move?

Chart Of The Day

Trader this week can be forgiven if they think that their EURUSD charts are frozen. The pair has seen some of the tepid price action in months with average daily range barely reaching 50 pips. There is no doubt that currency traders are simply marking time as they await US labor market data tomorrow.

But euro has some structural problems of its own, not the least of which is the French election which appears to be split in a four-way tie and the persistently low inflation that is causing the ECB to rethink its QE taper move just yet.

The economic conditions in the EZ are actually improving as the low exchange rate and better labor demand fuel growth in the export-driven region, but the market is looking at interest rate differentials and if President Draghi continues to hint that taper will be delayed for another quarter or so, the EUR/USD could test the key 1.0500 support level once again.

USDJPY – Will 110.00 Hold?

USDJPY – Will 110.00 Hold?

Chart Of The Day

Tomorrow the market will finally get the long-awaited US labor data starting with ADP report and then the ISM Non-Manufacturing release which often serves as a good barometer of the Non-Farm payrolls due at the end of the week.

In Q1 the US data has slowed, as sentiment has climbed to record highs, but actual consumer spending has been subdued. That’s the reason why US bond yields have declined and the dollar rally has stalled. The market will be looking for concrete evidence that US growth continues to maintain its pace. Otherwise, any miss in the data could send USDJPY tumbling.

The pair has survived three attempts at testing the 110.00 figure. So far support has held. However, the short will redouble their efforts if the news disappoints and the pair is likely to tumble through the key 110.00 support level.

USDCAD – End of the Move?

USDCAD – End of the Move?

Chart Of The Day

For the past few days, oil has come back to life rising from the lows of $47/bbl to above the key $50/bbl mark. The move has put some life into the loonie with USDCAD falling nearly 200 points since the start of the week, but unless the crude rally extends further loonies gains are likely to end here.

Canada has been able to weather the decline in crude relatively well, but its economy remains mired in a low growth environment and the central bank remains unabashedly dovish. Tomorrow’s Canadian GDP is expected to match last month’s 0.3% rate. Overall, Canadian GDP is expanding at 1.9% rate and unless the data tomorrow surprises to the upside it’s unlikely to provide much of a boost to the loonie.

USDCAD remains mired in a 1.3200-1.3400 range and is unlikely to break much beyond those barriers for the time being.

GBP/AUD – Sell Signal in Play?

GBP/AUD – Sell Signal in Play?

Chart Of The Day

GBP/AUD posted a major signal on the charts today as profit taking came into cable while Aussie found support at the 7600 figure boosted by firming commodity prices. With Article 50 to be triggered tomorrow, the pound is feeling the full weight of the event as traders begin to pare their longs. Although Brexit has been well anticipated for months, the reality of the situation is beginning to sink in. There is plenty of uncertainty regarding how UK will be able to extract itself from the European Union which could translate into further selling pressure.

Meanwhile, in Australia, the better tone in commodity prices is supporting the pair which has only experienced a shallow correction off its recent highs. Another positive day could propel the unit towards a retest of the recent 7700 highs which could push GBPAUD even lower.

Technically the pair has carved out a major bearish engulfing candle at the 1.6500 figure and look ready to target support at the 1.6000 level as shorts press their trades.

GBP/NZD – Gunning for 1.8000?

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This morning’s UK inflation report was hot, fueling expectations for more hawkishness from the Bank of England. The UK government could trigger Article 50 any day now, but until they do, rate hike expectations could drive GBP to 1.25. UK CPI printed at 2.3% versus 2.1% eyed while core reading rose to the key 2.0% level from 1.8% forecast. The core reading is now above the BoE’s target rate and was the real reason for the pound rally, as currency markets begin to price in the possibility of a rate hike.

The New Zealand dollar, on the other hand, could come under selling pressure on the back of the RBNZ rate decision. Since their last meeting in February, consumer spending has fallen, GDP growth slowed, the trade deficit widened while dairy prices declined. There was some strength in the services and manufacturing sectors but with the currency so strong, we don’t think that will be enough to ease the central bank’s concerns.

Therefore GBP/NZD has scope to rise further. The pair has no significant resistance until 1.7800-1.8000 corridor while support comes in at 1.7400

GBPJPY – Looking Better Bid

GBPJPY – Looking Better Bid

Chart Of The Day

Cable completely reversed course today on a much more hawkish than expected BOE rate decision which included a single vote for a rate hike. Despite some clear slowdown in UK economic growth monetary policy officials are clearly eager to move back to normalization and that helped to put bid underneath sterling for the whole day.

Meanwhile, USD/JPY drifted lower today but appeared to have found a bottom the 113.00 figure leaving GBPJPY in a consolidative position. Although GBP/JPY has been in highly compressed low volatility zone for more than a month, there is a discernable upward pattern to the pair as evidenced by the slightly rising RSI slope. A break above the 141.00 level could signal a major move up.

Part of the reticence in USD/JPY has been due to relatively muted consumer confidence readings, so tomorrow’s U of M data looms large and if it beats, could provide the fuel for a move up in the pair.

USD/JPY – The Point of Truth is Here

USD/JPY – The Point of Truth is Here

Chart Of The Day

We have been arguing for a long time that the 115.00 level remains the separating line between dollar rally and dollar failure. Tomorrow the market will get to test that thesis as the market get ready for FOMC day.

Last Friday’s Non-Farm Payrolls confirmed the US growth continues unabated. The economy generated 235,000 jobs versus forecasts of 196,000. Even the unemployment rate declined for the right reasons as more individuals sought jobs rather than abandon the workforce. Although wage growth was slightly tepid at 0.2% versus 0.3%, it still remains on pace to grow at more than 2% this year.

All of this data should make traders confident about US yields and the prospects for the buck going forward. Yet despite the robust economic numbers, the greenback quickly gave back its gains and managed to close below the key 115.00 level against the Japanese yen on Friday.

That has been the story since the start of this year. No matter how good US data appears to be, no matter how hawkish the Fed, the dollar rally fizzles out very quickly.

Tomorrow that may change if Janet Yellen signals that the Fed is prepared to make 4 rate hikes rather than 3. It’s difficult to see how the greenback would not rally off that news. One hundred basis points of yield would give the buck a huge premium on the yen and would attract carry traders looking to finally make some return. Technically the breakout above the 116.00 level will be key and could be spark of a fresh dollar rally.

EURJPY – Gunning for 124.00?

EURJPY – Gunning for 124.00?

Boris Schlossberg

The EURJPY trade is starting to show signs of life as the pair makes a sharp bottom off the 118.00. The bounce may be reflecting the “reflation” trade as all the major central banks are now moving away from QE mode into a more normal monetary policy regime.

Today’s ECB presser highlighted the fact that the central bank looking to taper eventually, although Mr. Draghi was quick to note that the ECB saw no signs of any serious inflation in the system just yet and therefore ready to maintain the status quo. Still, the market took his words a tilt to the hawkish side and the euro has remained supported throughout the day.

Meanwhile, USDJPY continues to probe the 115.00 barrier which has acted as cement ceiling for the pair since the start of the year. If tomorrow’s NFPs prove to be as good as forecast the 115.00 figure will likely fall by the wayside and EURJPY could explode towards the 124.00 target.