EURUSD – Triple Top?

EURUSD – Triple Top?

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Today’s ECB meeting faked traders out. The text of the statement was decidedly hawkish but the presser stressed the fact that ECB was concerned about low inflation, protectionist policies and only modestly bullish on growth.

The net takeaway from today’s event is that ECB is likely to taper in September, but will remain neutral for quite some time after that. The realization that ECB is still far away from normalization sent EURUSD tumbling more than 100 points off its session highs. The pair now finds itself carving out a clear triple top at the 1.2500 level and if tomorrow’s NFPs print to the upside could tumble towards 1.2200 over the next few sessions.

GBPUSD – Double Top or Fresh Highs?

GBPUSD – Double Top or Fresh Highs?

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Cable has stalled ahead of the 1.3600 figure since the start of the year failing to make fresh multi-month highs. The pair looks to be carving out a double top near the key 1.3500 figure, but the battle between bulls and bears is not over. A small retrace down to the 1.3300 level will still keep the uptrend intact.

In the meantime, however, a small correction appears to be due especially if US yields continue to rise and UK data starts to falter. Tomorrow’s Trade Balance is expected to miss and could be the catalyst for a move below the 1.3500 figure opening the way for a deeper correction to 1.3300. A break above 1.3600 however, will put a much more bullish structure on the chart paving the path to post Brexit highs above 1.3700

EURJPY is 130.00 the Top?

EURJPY is 130.00 the Top?

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For nearly the last month EURJPY has been stick at the 130.00 level and now the pair looks like it may be putting a long term top around that figure as upward momentum in euro appears to have stalled while USDJPY remains vulnerable to further sell-offs.

Today euro failed to make fresh highs and actually reversed in North American trade to fall below the 1.1800 level. This may be the first sign that the single currency is running out of gas as the anti-dollar rally has hit a wall at these levels.

Meanwhile, USDJPY has stabilized somewhat but remains vulnerable to further sell-offs especially if tomorrow’s ADP report prints worse than expected and sends the pair below the 110.00 level for good. All of this suggests that EURJPY may have peaked for now and that a correction to 128.00 is due over the next few days.

EUR/AUD Potential Top?

EUR/AUD Potential Top?

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EUR/AUD Potential Top?

There’s a potential top forming in EUR/AUD that could be confirmed by tonight’s Reserve Bank of Australia monetary policy announcement. The RBA is not expected to change interest rates but if they wanted to, they acknowledge the recent improvements in Australian data which would be exceedingly positive for the currency. Last night we learned that manufacturing activity accelerated and last month we saw improvements in the labor market, inflation and business conditions. The RBA is skeptical of the strength in the labor market (they think the data is volatile) but there’s no question that they have less to worry about in April compared to March. The last time the RBA met they expressed caution about the economy and the labor market but part of those concerns should be alleviated by recent reports. So if the central bank were to change their views it would be to include a tinge of optimism. The euro on the other hand doesn’t have much going on Tuesday. Emmanuel Macron is a shoe in at this stage to be the next French President so the uncertainty is removed which allows EURO traders to focus on the underlying performance of the region’s economy.

Technically, the daily charts clearly show a reversal in process in EUR/AUD. The recent rally stopped short of the 38.2% Fibonacci retracement of the 2012 to 2015 rally and we now expect the currency pair to make a run for the 200-day SMA at 1.4350.

USDCAD – Top  of the Range?

USDCAD – Top of the Range?

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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

AUD to 75 Cents?

AUD to 75 Cents?

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If you take a look at a recent chart of the Australian dollar, there’s no question that the currency is in the process of forming a top. Over the last 2 weeks, AUD/USD gradually descended from a high of 0.7750 to below 0.75 cents. 78 cents has been rock solid resistance for the Australian dollar since early 2016 and the currency pair continues to reject that level. Yet the decline in AUD/USD has been slow and AUD bears have been reluctant to call the recent move a top because of the Reserve Bank’s optimism. The Australian economy began showing pockets of weakness before the RBA met last month and while the central bank expressed continued concern about the complications of a strong currency, investors latched onto their brighter outlook for the global economy. But as the weeks passed, it is getting harder for the Reserve Bank to put on a brave face with economic data continuing to weaken. Last night, retail sales took an unexpected dip while manufacturing activity grew at a slower pace. We’ve compiled a table to show the extent of the changes in Australia’s economy since their last meeting in March and there’s been more deterioration than improvement. The RBA expressed specific concerns about the labor market and unfortunately the latest numbers provide greater cause for concern than optimism with the unemployment rate rising to its highest level in more than a year. The case can be made for less hawkishness from the RBA and that’s what we believe AUD/USD traders are waiting for, as it would imply that further easing is still on the table. If we are right and the RBA is less optimistic, AUD/USD could extend its losses to 75 cents. Technically , AUD/USD resistance is at 0.7650 with support at the 200-day SMA at 0.7550.

AUD/NZD 1.10 Top?

AUD/NZD 1.10 Top?

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AUD/NZD 1.10 Top?

1.10 is a big round number and it is tempting to call a top for AUD/NZD under this technically and psychologically significant level. On a technical basis, this also represents the 50-period SMA on the weekly chart but AUD/NZD is coming from a low base and could easily shoot to 1.12. Fundamentally, there are sound reasons why AUD is outperforming NZD. The Reserve Bank of Australia has been relatively optimistic and next week’s minutes should reflect that whereas the Reserve Bank of New Zealand has more to be worried about. The RBNZ meets next week and we think they will attempt to talk down the currency. 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. As a result, NZD could fall on RBNZ, which makes a failure at 1.10 far from certain.

NZD – Double Top at .7400?

NZD – Double Top at .7400?

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The kiwi has been a stealth rally since the start of the year but it may be finding tough resistance at the .7400 level. Last night the pair was pushed to a high of .7376 on the back of hotter than expected inflation data, but the days’ reversal should make bulls cautious ahead of the RBNZ announcement tomorrow.

The RBNZ is expected to keep rates on hold, but the market will look for any signs the central bank may be willing to cut rates further. Although inflation is picking up, the recent labor data was disappointing with wage growth particularly weak. On the other hand, the latest Dairy auction saw prices rise suggesting that demand for country’s principal export remains strong.

If the RBNZ is relatively sanguine, the kiwi could make another foray to the .7400 figure, but any move above that level would require further weakness in the buck.

Cable Double Top?

Cable Double Top?

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Cable saw a sharp reversal today after BOE Chief Mark Carney stated that the central bank will likely ignore any budding inflation and will keep the policy accomodative for the foreseeable future.

After several weeks of strong performance, cable is showing clear signs of relative weakness as traders are beginning to become concerned that the UK economy may have peaked. Tomorrow’s UK PMI Services will provide a clear clue as to the state of the UK economy. The market is looking for a small dip lower, but if the drop is more severe the pair could easily give up the 1.2500 figure and may even test 1.2400 if US NFPs print above 200K.

USDJPY – Top Made?

USDJPY – Top Made?

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Although conventional wisdom argues that the dollar rally is far from over, there are some signs that at least in the short term the upward momentum may be running out of gas. One good indication of such dynamic is when the price action diverges from the fundamentals as it did today when the better than expected GDP data and the spike in Consumer confidence failed to provide any lift for the pair and sent it below the 112.50 mark by end of New York trade.

Tomorrow the market will get a glimpse at the ADP data which is a key harbinger of the key NFP report due Friday. The market is anticipating an increase of 161K from 147K the month prior, but if the number misses, a steeper profit taking dive may take place sending USDJPY through the 111.50 support to a possible test of the 110.00 level.

EUR/USD – Where is the Top?

EUR/USD – Where is the Top?

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EUR/USD – Where is the Top?

The euro extended its gains against the U.S. dollar today on the back of a falling dollar and a stronger German employment report. The currency pair moved above 1.11 for the first time since October 12th. Germany’s labor market report was much stronger than expected but the main reason for the currency’s strength is short covering and concerns about holding U.S. dollars ahead of next week’s Presidential election. Unfortunately a hawkish Fed won’t enough to strike a bottom in the U.S. dollar and take the market’s focus off the political risks. There are only 4 more trading days before one of the most dramatic U.S. Presidential elections in recent history and the race is too close to call. This means uncertainty, which is never good for currencies and in this case, the U.S. dollar. If the EUR/USD’s price action was driven by fundamentals and yield spreads alone, we would be quick to say that these are great levels to sell but politics trumps economics and that should remain true into and possibly even after November 8th if a recount is demanded.

Technically the recent rally in EUR/USD has taken the pair near some very important resistance levels. The 50% Fib retracement of the March 2015 to August 2015 rally, the 50, 100 and 200-day SMA all sit right above current levels between 1.1090 and 1.1180. So EUR/USD either fails below 1.1150 and drops back to 1.10 or it makes a run to 1.1300.

AUDUSD – A Top in Place?

AUDUSD – A Top in Place?

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The Aussie was the worst performing currency in the G-10 universe today as it crashed for more than 100 points after the AU employment recorded a whopping -53K loss in full time jobs. As we noted earlier, “the overall report was not positive for the labor markets and suggests that some sort of slowdown in Australian is clearly occurring. Whether this surprising decline in employment growth will be enough to nudge the RBA off its neutral stance remains to be seen. Most analysts believe that the central bank will ignore the data unless there emerges a pattern of at least three months of sub-par growth.”

Meanwhile the pair has made clear triple top at the .7750 level and now becomes a sell the rally trade as it likely travels to the lower part of the range at the .7450 level over the next several weeks.