*Good morning/afternoon everyone!* The U.S. dollar is trading lower against most of the major currencies this morning as risk appetite improves after yesterday’s brutal selling. Stock futures are up, helping to bolster pairs like EUR/USD and USD/JPY. However as we begin the NY session, the decline in Treasury yields could also tip the scale and push USD/JPY lower. Yen crosses on the other hand will take their cue from stocks today. The currency most vulnerable to weakness is the Canadian dollar because oil prices are down more than 2% after President Trump tweeted that he hopes Saudi Arabia and OPEC will not cut oil production because he thinks oil prices should be much lower based on supply. Despite a softer Eurozone ZEW survey, EUR/USD is trading above 1.1250 on the hope that progress could be made on the Italian budget front. the expectations component of the ZEW surely also increased. The best performing currency this morning is sterling which is up on higher wages (despite a higher unemployment rate) and continued Brexit optimism. On the Brexit front, we are getting closer to a deal but with some counterproductive headlines, traders are still reluctant to overload sterling positions but when an announcement is made, we can almost be assured that there will be a strong followup rally. AUD and NZD are also up from yesterday but having risen strongly in Asian trade, they are mostly consolidating and even weakening slightly. We also have our eyes on the Swiss Franc which appears to be topping below 1.0130. *The MAIN THEMES I see today are* +EUR +CHF -CAD -JPY *Trading Biases* +EUR, +CHF, +GBP, -CAD, -JPY mildly +AUD, +NZD, -USD *Today’s Initial Trades* Here’s the summary – 1. Buy EURCAD at 1.4885, Stop at 1.4857, Target 1.4912 2. Buy EURUSD at 1.1247, Stop at 1.1219, Target 1.1275 3. Buy AUDCAD at .9531, Stop at .9503, target .9559 4. Sell AUDCHF at .7270, Stop at .7298, Target .7242

Swing

*Good morning/afternoon everyone!*

The U.S. dollar is trading lower against most of the major currencies this morning as risk appetite improves after yesterday’s brutal selling. Stock futures are up, helping to bolster pairs like EUR/USD and USD/JPY. However as we begin the NY session, the decline in Treasury yields could also tip the scale and push USD/JPY lower. Yen crosses on the other hand will take their cue from stocks today. The currency most vulnerable to weakness is the Canadian dollar because oil prices are down more than 2% after President Trump tweeted that he hopes Saudi Arabia and OPEC will not cut oil production because he thinks oil prices should be much lower based on supply. Despite a softer Eurozone ZEW survey, EUR/USD is trading above 1.1250 on the hope that progress could be made on the Italian budget front. the expectations component of the ZEW surely also increased. The best performing currency this morning is sterling which is up on higher wages (despite a higher unemployment rate) and continued Brexit optimism. On the Brexit front, we are getting closer to a deal but with some counterproductive headlines, traders are still reluctant to overload sterling positions but when an announcement is made, we can almost be assured that there will be a strong followup rally. AUD and NZD are also up from yesterday but having risen strongly in Asian trade, they are mostly consolidating and even weakening slightly. We also have our eyes on the Swiss Franc which appears to be topping below 1.0130.

*The MAIN THEMES I see today are*

+EUR
+CHF
-CAD
-JPY

*Trading Biases*

+EUR, +CHF, +GBP,
-CAD, -JPY
mildly +AUD, +NZD, -USD

*Today’s Initial Trades*

Here’s the summary --

1. Buy EURCAD at 1.4885, Stop at 1.4857, Target 1.4912
2. Buy EURUSD at 1.1247, Stop at 1.1219, Target 1.1275
3. Buy AUDCAD at .9531, Stop at .9503, target .9559
4. Sell AUDCHF at .7270, Stop at .7298, Target .7242

USD/JPY Headed for 112.50

USD/JPY Headed for 112.50

Chart Of The Day

USD/JPY Headed for 112.50

USD/JPY dropped like a rock after the Federal Reserve raised interest rates. Investors completely ignored the rate hike, focusing instead on the dot pot and Fed President Kashkari’s dissent. They were disappointed that today’s decision to raise interest rates was not unanimous as Kashkari preferred to leave rates steady this month and the Fed sees only 2 more rate hikes this year. The dot plot did not shift to 3 rounds of tightening and Janet Yellen was not hawkish enough to rescue the dollar. While she talked positively about the labor market and business sentiment, she also felt that not much had changed since December. She did not offer anything more than to say that 3 rate hikes qualifies as gradual and they expect policy to remain accommodative for some time. The disappointment can be felt across the financial markets because aside from the fall in the dollar, 10 year Treasury yields dropped 10bp and Fed Fund futures went from pricing in a 60% chance of a 25bp hike in June to a 46% chance. These odds could fall further in the coming days as bond traders adjust expectations in light of Yellen’s comments and recent data. If that happens and we think it will USD/JPY could sink as low as 112.50.

Technically, today’s sell-off has taken USD/JPY below the 20 and 50-day SMA along with the 23.6% Fibonacci retracement of the 2011 to 2015 rally AND the 23.6%. retracement of the June 2016 to Dec 2017 rally. There is some support at the 100-day SMA near 113 but the main level to watch once 113 breaks is the 50% retracement of the 2015 to 2016 move near 112.50.