USDJPY – Have We Hit Support?

USDJPY – Have We Hit Support?

Chart Of The Day

Its been a brutal day for risk as Dow dropped -500 points and Italian political drama upended the markets, but after vicious selloff markets are due for some reprieve. With Italian story now moving off to the sidelines as the country awaits new elections in a few months, the focus shifts to US data as the markets take a look at the first key report of the week -- the ADP employment release.

This week is unusual because all of the preliminary data actually follows the NFPs on Friday, so the ADP is the only clue to how strong the payrolls will be. If the job picture in the US continues to perform to expectation the 10Y yields should start to creep back towards 3.00% and USDJPY should follow in turn. The pair appears to have found some support in front of the 108.00 level and if it can hold the lows, a rally back towards 110.00 could be in store.

Has GBPUSD Found Support?

Has GBPUSD Found Support?

Chart Of The Day

Today, cable continued to probe the 1.3750 level as shorts tried to push it past the March lows. The pair has seen a stunning turn around as it lost more than 500 pips in the last 10 days and shows no signs of bottoming out. This week brings a slew of UK PMI data reports starting with tomorrow’s PMI Manufacturing data. The market is anticipating a slight decline to 54.9 but if the data prints considerably worse the pound is sure to slice through the 1.3700 figure.

On the other hand, an upside surprise would be a welcome relief to the bulls after so many days on one-way price action and could trigger a short covering rally back towards 1.4000 as traders reassess the risk of recession. For now, GBPUSD hangs at key support as data determines its fate.

EURGBP Breaks Key Support

EURGBP Breaks Key Support

Chart Of The Day

After more than a year EURGBP broke below the key.8600 support level which more of an indication of market’s disappointment in the ECB policy than its an overall bullish call on cable. Recent data from the region has consistently hinted that economic growth may have peaked and as we noted today, “EZ IP contracted by -0.8% versus 0.1% eyed in further evidence that growth in the region may have peaked. This puts the ECB in a precarious position as the central bank prepares for a taper of QE just as economic conditions may have deteriorated. This is likely to prevent the ECB from considering any normalization process for the foreseeable future regardless of how much the hawks on the council press for it.”

This view was borne out by the dovish ECB minutes which suggested that the council intends to keep rates at zero for the foreseeable future even as it proceeds with the taper. All of this dovish news helped push EURGBP to its lowest level in more than a year, but whether the pair remains below .8700 will be contingent on UK politics and monetary policy. If anything UK economy is in worse shape the EU’s and any rate hike by the BoE could only exacerbate the slowdown. Combine that with the fact that Brexit negotiations are still stuck on the Irish border issue and the EURGBP break could well be a fakeout that traps eager shorts trying to ride the momentum.

USDJPY – 113.00 is Key Support

USDJPY – 113.00 is Key Support

Chart Of The Day

USDJPY has been under pressure for the past several weeks, having failed to take out the 115.00 figure on multiple occasions. Furthermore, the pair is failing at its key correlation with 10-year bonds not rallying when yields go up and falling when they decline. That’s a warning light for dollar bulls as a breakdown in correlation often presages a decline in price.

Tommorrow the market will get a look at two key data points -- CPI and US Retail Sales. Both numbers are expected to be worse than the month prior. However, if they actually miss their forecast and turn negative, USDJPY will likely test the key support at the 113.00 level and a break there could lead to a much sharper selloff towards 110.00 as investors will begin to fear that US growth may have peaked.

For now, USDJPY remains in a tenuous uptrend, but it must hold the 113.00 level otherwise it will have formed a very ugly quadruple top and may drift all the way to 110.00 by year-end.

EURUSD – Can it Hold Support?

EURUSD – Can it Hold Support?

Chart Of The Day

After putting on a valiant fight for the past few days, the euro came under selling pressure again today testing the key 1.1700 support level. Although the market has tried to shrug off the issue of Catalan independence it continues to weigh heavy on the trader’s minds as the political situation in the region remains unresolved.

Meanwhile, the buck received a welcome boost from a rise in US yields today as fears that US labor markets would be severely impacted by the markets proved unfounded. Although the market is looking for drastically reduced payroll number tomorrow given the sweep of Irma and Harvey in September, the focus will be on the average hourly wages. If that data proves to be hotter than forecast the greenback is likely to rally further and EURUSD could fall below the key 1.1650 support

USDCAD – 1.3400 Support?

USDCAD – 1.3400 Support?

Chart Of The Day

The collapse of oil has been the main driver behind loonie’s relative weakness this week. Crude crumbled to $45/bll level despite tensions in the Middle East as supply continues to weigh on the market. Meanwhile Canadian economy has seen mixed results with a rebound in GDP data, but softer housing and Trade Balance numbers.

Tomorrow Canada will release it labor report which will be the main event risk in North American session. The market is looking for 11.5K gain but if the number comes in worse or even negative, the loonie could shoot for the 1.3600 figure. For now, 1.3400 is very support and the pair remains in buy the dip mode.

AUD/NZD – Near Term Support Levels

AUD/NZD – Near Term Support Levels

Chart Of The Day

AUD/NZD – Near Term Support Levels

We’re currently long AUD/NZD and thought it would be worthwhile to look at the chart from a shorter term basis. For the first time since mid-December AUD/NZD broke above the 20-day SMA. While there’s overhand resistance at 1.0480 (created by the 50 and 100-day SMA cross) the MACD is crossing to the upside and the 4 hour charts show support between 1.0400 and 1.0430.

Fundamentally AUD was the day’s best performing currency thanks to the rebound in gold prices and the slide in the U.S. dollar. The AU-NZ yield spread also moved significantly in favor of +AUD/NZD. Tonight Australia’s PMI services report is scheduled for release and if the PMI manufacturing index is a guide, the data should be stronger.

AUDUSD – Can Aussie Hold Support?

AUDUSD – Can Aussie Hold Support?

Chart Of The Day

Last night eco data out of Australia showed that the wage price index rose at 0.4% vs. 0.5% eyed while the yearly data rose only 1.9%. This was the weakest reading on record and suggested that consumer demand may be tempered. With wages and inflation muted, speculation is starting to heat up that the RBA may need to ease in near future.

This has put pressure on Aussie from all sides. A cut in rates would only accelerate the carry trade liquidation move which has been in full bloom ever since US yields have skyrocketed. A rate cut by the RBA would be like adding salt to the wound as it would compress the rate differential between the two currencies even further.

That’s why tonight’s AU employment data is so important. The market is looking for a rise of 20.3K jobs versus a fall of -9.8K jobs the month prior. But if the data surprises to the downside for the second month in a row, the Aussie could break the key .7450 support and fall out of it long held range to start a new downtrend move.

EURGBP – Support at 8900?

EURGBP – Support at 8900?

Chart Of The Day

The euro was shellacked last week post ECB presser while cable managed to hold its own causing EURGBP to drop 2 big figures off the highs. This week the price dynamics may reverse as UK eco data could sour the market on any recovery while the news out of the Eurozone could surprise to the upside.

With no progress on the political front the Brexit issues hangs over the pound like the sword of Damocles while the upcoming UK GDP figures could underscore the difficulty of the new economic regime as business sentiment turns very cautious. Meanwhile, in EZ we have already seen a strong rebound in PMI data that suggests growth in the core region is picking up pace. That should provide some support for the euro and ease any concerns about further accommodation from the ECB.

Technically the pair has strong support at .8880 on the hourly with deeper support at .8800 while the upside does not offer any serious resistance until .9200

USD/JPY – Will 104.00 Support Hold?

USD/JPY – Will 104.00 Support Hold?

Chart Of The Day

The correction in USD/JPY has been swift and brutal. As soon as the market realized that the proposed stimulus package may be a lot smaller than originally reported, the sold the pair with no mercy taking it down by two big figures before finally pausing at the 104.00 level.

Having now established support at the 104.00 figure the pair could head the other way if the FOMC meeting provide tailwind for the buck. Although no one anticipates any rate hikes just yet, the market will be keen to see any change in the language of the communique that could hint at a possible rate hike in September. The US data has been surprisingly resilient and that could lead the Fed to upgrade its assessment of the economy.

For now the 104.00 level is the key hold for the pair while the recent swing highs of 107.50 remain key resistance. A positive Fed release could send the pair towards a retest of those highs.

USDCAD – is 1.3200 Support?

USDCAD – is 1.3200 Support?

Chart Of The Day

Life for the loonie has certainly been interesting The pair has essentially been on a massive seesaw ride following the price of oil both down and up. With crude having bounced off multi-year lows USD/CAD has tumbled more than 12 big figures off the highs set earlier this year.

Now with crude more or less stabilized at $35/bbl the market may start to look lore closely at the fundamentals of Canadian economy. Tomorrow’s BOC meeting should provide plenty of fodder for traders with the central bank likely to present an upbeat picture claiming that the worst is behind for the Canadian economy.

That may provide some momentum for the loonie, but with pair already having corrected so far so fast, the move may not extend much as the 1.3200 level looks to be serious support for now

Has EUR/JPY Found Support?

Has EUR/JPY Found Support?

Chart Of The Day

EUR/JPY has been a strange beast lately. In the olden days the pair used to trade on pure risk flows rising when equities rallied and falling when they declined. Lately however the euro has been trading in the exact opposite direction as carry trade flows have turned into risk aversion currency and as a result EUR/JPY has been in a tug of war between a rising euro and a falling USD/JPY.

Of course tomorrow’s NFP report will be the key driver of trade for the pair, but there is good reason to think that payroll data meets or beats expectations EUR/JPY could rise. Stocks could weaken on fears that the Fed will be likely to jumpstart the tightening cycle but USD/JPY will likely ignore any equity selloff and will follow the bond markets which will take rates higher. Meanwhile euro will likely hold ground and may even rise if risk aversion flows accelerate and that in turn should keep EUR/JPY.

With the pair looking to have made a higher double bottom the technical pattern is set up for a bounce as well.