Today’s Trading Plan for 07.12.2017 – EURJPY

Swing

*Good morning/afternoon everyone!*

Today is the day that we have been waiting for all week. Fed Chair Janet Yellen testifies to Congress beginning 8:30 AM NY / 12:30 GMT / 10:30 PM AEST and thats followed by the Bank of Canada’s “rate hike” at 10AM NY Time / 14:00 GMT / 12:00AM AEST. The U.S. dollar has been hit hard in overnight trade but we think there could be a relief rally before Yellen speaks and have recommended a small USD/JPY buy trade to take advantage of the move. Our stop is at 113.07 but we could exit the trade prematurely if it drops to 113.20 and we’ll definitely close the trade before 8:30 NY Time.

Stronger than expected job growth and a mild uptick in average weekly earnings ex bonuses helped to lift GBP. We still see the currency as a sell on rallies but the volatility in the market today is too high to take a preemptive trade. With that in mind, we would love to buy EUR/GBP between 0.8870-0.8880.

Although the Bank of Canada is widely expected to raise interest rates, we haven’t seen any additional USD/CAD weakness ahead of the big event. This tells us that the 25bp hike has been fully discounted by the market and the only thing that matters right now is Governor Poloz’s guidance. We’ll be Live Trading beginning at 9:30AM NY Time / 13:30 GMT to cover Yellen and BoC (daily webinar link)

EUR/USD didn’t make it to 1.15 overnight but it should only be a matter of time before the currency pair tests that level. The slide in the USD has driven AUD and NZD higher this morning with the move in AUD supported by stronger consumer confidence.

*The MAIN THEMES I see today are*

+USD
+CAD
+EUR
-GBP
-NZD

*Trading Biases*
These will could change after Yellen

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

*Today’s Potential Ideas*

Just one pre-Yellen, rest will be in LIVE Trading

1. Buy EURJPY at market now 130.05, Stop at 129.55, Target 130.35

Cancel ALL pending orders by 3:30PM NY / 19:30 GMT / 5:30AM AEST
Close ALL open day trades by 4PM NY / 20 GMT / 6AM AEST

*We have just one trade pre-Yellen, rest will be in LIVE Trading*

Today’s Trading Plan for 06.28.2017 – EURJPY

Swing

*Good morning/afternoon everyone!*

All 3 of the major currencies (EUR/USD, USD/JPY, and GBP/USD) held their breakouts, which is important because it means that these moves are durable. Traders haven’t taken these pairs (and USD/CAD back) ahead of the quadruple threat of central bank speak this morning. The heads of the ECB, Bank of Canada, Bank of Japan and Bank of England will be speaking at 13:30 GMT and traders are positioned for positive comments from Draghi and Poloz. While Draghi will be hawkish (as he just spoke yesterday), a hint of dovishness from Poloz and USD/CAD will u-turn higher, so beware! Meanwhile U.S. yields continue to rise, supporting the move in USD/JPY. AUD and NZD are flat for the day and are likely to take their cue from the U.S. dollar.

*The MAIN THEMES I see today are*

+EUR
+USD
+CAD
+CHF

*Trading Biases*
These will change after US data

+EUR, +USD, +CAD, +JPY
neutral AUD, NZD, GBP
-JPY

*Today’s Potential Ideas*

1. Buy EURJPY at market now 127.47, Stop at 126.97, Target 127.77
2. Sell USDCAD at 1.3091, Stop at 1.3141, Target 1.3061

All pending orders canceled by 3:30PM NY / 19:30 GMT
All open day trades closed by 4PM NY / 20 GMT

EURJPY – No More Mo?

EURJPY – No More Mo?

Chart Of The Day

EURJPY is now fully 600 points off the lows set in pre- French election as all of the investor jitteriness has clearly been wrung out of the pair. It’s difficult to see how much more upside there is in the move given the fact that the market has already priced in a Macron victory. EURJPY may also be trading on positive sentiment vis a vis US policy as traders await tax reform legislation from Congress, but any action on that front will take months to achieve.

In the meantime, tomorrow’s US ADP data and ISM Non-Manufacturing reports could put a serious dent in the rally if they disappoint to the downside. So far FX markets have been ignoring weak US data, but if the labor numbers prove soft the prospect of a June rate hike will fade and so with it the relentless rally in yen pairs.

EURJPY has a massive triple top at the 123.00-124.00 corridor and would need a fresh burst of momentum to clear such stiff resistance. A correction could take it to 120.00 and still preserve the nascent uptrend

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

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.

Is EUR/JPY Headed for 120?

Chart Of The Day

Is EUR/JPY Headed for 120?

The 2 best performing currencies today were the EUR/USD and USD/JPY so naturally, EUR/JPY traded sharply higher, enjoying its best day in more than 2 weeks. Between stronger U.S. data, hawkish Fed speak and the sharp recovery in U.S. yields, USD/JPY should continue to trade higher. While dollar strength could drag EUR/USD down, better than expected and Macron’s growing lead over Le Pen should lend support to the currency.

eurjpy022817
Technically, today’s rally in EUR/JPY has taken the pair above the 23.6% Fibonacci retracement of the 2014 to 2016 sell-off to the 100-day SMA, a potential level of resistance. If the currency pair breaks above 119.40, we should see a smooth ride to 120. However if it fails below this indicator, support will be at the recent low of 118.25.

EURJPY Breakout or Fakeout?

EURJPY Breakout or Fakeout?

Chart Of The Day

EURJPY Breakout or Fakeout?

EUR/JPY registered gains for the sixth consecutive trading day as EUR/USD and USD/JPY powered higher. Today’s move was driven by the combination of stronger Eurozone and U.S. data. From Europe, Germany reported a service PMI revision of 50.9 beating the 50.6 expected. Composite PMI revisions also beat estimates, coming in at 52.8 vs. 52.7 expected. Eurozone retail sales also showed a smaller than expected decline, coming at -0.1% vs. -0.3% expected. Eurozone PMI Services PMI Revision data also beat estimates, reporting 52.2 vs. 52.1 expected. From the U.S., ADP and trade balance missed expectations but the only thing the market cared about was non-manufacturing ISM which hit its highest level in 11 months. The employment component of that report reached its highest since October 2015, paving the way for a solid non-farm payrolls report on Friday. So its no wonder that EUR/JPY is doing well and from a fundamental basis, the break above the 100-day SMA may be real.

On a technical basis the 100-day SMA in EUR/JPY sits at 116.03 and the currency pair ended the day right around this key level. It is too early to tell whether this is a clean break. For that to happen, we would need EUR/JPY to trade above the September high of 116.36. However the chance of today’s move becoming a real breakout is greater than a fakeout because the pair has also broken above the 61.8% Fib retracement of the 2012 to 2014 rally. But while fundamentals signal further gains, fading the rally with a stop just above the September high could be a low risk trade. Targets would need to be nimble since fading the rally would be counter to fundamentals. Another way to look at this is if EUR/JPY retraces back to 115.55/60,it may be worthy buy for another run above 116.

EURJPY – Breakout on Yellen?

EURJPY – Breakout on Yellen?

Chart Of The Day

One the best summaries of this week came from a tweet we saw today. It said simply,” Who cares what happened today, Yellen speaks tomorrow.” Certainly this week’s price action has been akin to watching paint dry as currencies have essentially remained at a standstill as traders await the signal from Fed Chair Yellen.

No cross has exemplified this state of suspended animation more than the EUR/JPY pair which has been in a 100 point range for the past 10 trading days. Tomorrow’s speech however could change all that. If Ms. Yellen once again fails to convince the market that a rate hike is coming USD/JPY is likely to tumble hard taking EUR/JPY along with it. On the other hand, if she finally sounds like she is ready to commit to tightening EUR/JPY could rally 100 points in a heartbeat. A break to the upside would take EUR/JPY through 114.00 and higher while a breakdown could push the pair as low as 110.00 over the next few days.

EUR/JPY – Ready to Tumble?

EUR/JPY – Ready to Tumble?

Chart Of The Day

The ECB meeting today offered little fresh information to the market, but Mario Draghi clearly stressed that the risk were still skewed to the downside and that council was open to further stimulus down the road if need be. That is likely to put downward pressure on the euro, especially if tonight’s flash PMI data misses estimates.

On the other side of the world, the BOJ has tried to make it abundantly clear that they will not engage in unconventional monetary policy known as “helicopter money” and that has taken the wind out of the sails of the USD/JPY rally.

All of this suggests that EUR/JPY is likely to have topped at the 118.00 level and may now drift towards 115.00 as risk aversion flows and weaker economic data exert their influence. The pair does not have any serious support until the 114.00 level while 118.00 looks to be solid resistance for now.

EURJPY – Topping Out?

EURJPY – Topping Out?

Chart Of The Day

EUR/JPY has enjoyed a fews days of rebound post the Brexit shock, but the risk sensitive currency cross may be reaching the top of its bounce. Tonight the market will get both the Tankan survey and the Chinese manufacturing PMI data which are likely to show further deterioration. In fact if the Chinese PMI prints below the key 50 boom/bust line for the first time in months its sure to trigger a drop in the pair as risk aversion flows would return.

But the yen part of the cross is not the only problem. The euro has been under selling pressure as well after reports that ECB may have to lower its credit standards for QE after the Brexit referendum as it simply does not have enough higher ranked credit to choose from. EUR/USD could slip to below 1.1000 if Asia session triggers further sell off in risk.

Technically EUR/JPY sees resistance at the 116.00 figure and support at 112.00 but it may run out of gas well ahead of those levels.

EUR/JPY Slipping Lower

EUR/JPY Slipping Lower

Chart Of The Day

EUR/JPY Slipping Lower

We are currently short EUR/JPY because May is generally a terrible month for the euro. Since 2005, the euro has fallen 8 out of the last 10 years during the month of May for an average of -2.97%. We are just beginning to see the decline in the currency. Selling EUR/USD outright is a good idea too but the uptrend remains strong. In contrast there’s no specific seasonality factor impacting USD/JPY. We are bearish USD/JPY because of recent disappointments in U.S. data and our view that even a strong non-farm payrolls report won’t push the Fed to raise rates in June. Any rallies in USD/JPY should continue to be sold. On a broader scale, there are many factors that could make the next few months difficult for investors and EUR/USD in particular. The U.K. referendum in June poses a major risk for all of Europe, the recent strength of the euro could curtail the region’s recovery while the continued impotence of central banks could make investors dubious of the global recovery. There may also be new elections in Europe with Spanish leaders failing to resolve a political stalemate. The migrant crisis fueled nationalism across the continent and is beginning to reshape all of Europe. Many major currencies including euro saw strong gains between early March and late April so a correction in May would not be natural. So between the negative trend for USD/JPY and significantly negative bias for EUR/USD, EUR/JPY should head lower.

Technically, EUR/JPY remains in a strong downtrend and while it may be at the lower end of the chart, there’s a small head and shoulders formation beginning to appear and we believe that EUR/JPY will make another run for 122.00. As long as the pair remains below 124.00, the downtrend remains intact and the door is open to additional weakness.

EUR/JPY Time To Step In?

EUR/JPY Time To Step In?

Chart Of The Day

Yen has been on fire gaining yet another 400 points this month as USD/JPY sliced through 110, 109 and even 108.00 levels dragging down EUR/JPY along with it. At some point the BOJ is going to react as the strength of yen will begin wreaking havoc with the nascent recovery in Japan.

Although intervention by BOJ is often reversed, the central bank may not be so timid this time as it tries to catch the late shorts flat footed. In the meantime euro continues to hold bid and will likely stay that way until Fed changes its posture. Therefore EUR/JPY could be set to explode on any short covering in USD/JPY. With the pair now holding near the 123.00 support a double bottom could be in the making.