USDJPY – 106.00 in View?

USDJPY – 106.00 in View?

Chart Of The Day

Second day in a row that USDJPY is up as risk assets continue to rise but yields remain depressed. The pair has been so grossly oversold that some sort of rebound was due but for now the 106.00 figure remains formidable resistance.

Tomorrow the market will get a look at the final revision of US GDP which is expected to come in at 2.7% versus 2.5% original forecast. If the number meets or better yet rises towards the 3.0% level the upside in USDJPY could be substantial. Faster than expected growth in Q4 would suggest that 2018 growth could approach 3% and therefore push US 10 year yields above the key 3% mark. All of that would be positive for USDJPY and the pair could run as high as 107.00 as short covering flows kick in.

EURUSD Slides Back – 1.2200 in View

EURUSD Slides Back – 1.2200 in View

Chart Of The Day

The euro slid lower in NY session today ending on the lows of the day as it flirted with the 1.2300 level. There was no specific news to drive the currency lower, but the rise in US 10Y along with the fall in GE 10Y yields helped to push the pair lower and the overall tone in the trade suggests that the pair could tumble lower as the week comes to as close.

As we noted earlier, “The concerted effort by ECB officials to talk the euro down indicates the realization by policymakers that the persistently high exchange rate for the currency is having deflationary impact on price levels. And while ECB officials are not considering any overt intervention measures, the form of soft jawboning is clearly an attempt to slow down the rise of the euro and keep it below the 1.2500 mark.

By all measures, the euro should be lower as interest rate differentials between US and Europe continue to expand, but chaotic White House policy, muted inflation data and so far sub-par growth in 2018 has cast doubt on the ability of the Fed to follow through with its hawkish talk.

Still, the much more adversarial tone of the Trump administration towards trade has forced EZ monetary authorities to pay careful attention to exchange rates, as businesses on the Continent are becoming increasingly concerned about punitive measures by Trump, that why they are likely to talk the unit down even as it declines, hoping to push it to 1.2200 or below

EURCHF – 1.1400 in View?

EURCHF – 1.1400 in View?

Chart Of The Day

The equity sell-off is clearly washing over into FX as all risk off trades gained ground. Amongst them is EURCHF which is now trading at the 1.1400 figure for the first time in weeks. The 700 point sell-off in the Dow has sent flows into the Swissie and if the risk-off trades continue into the Asia session trade they will likely push the pair towards the 1.1400 level.

Although stock may be due for a bounce, the ugly selloff one day before the weekend could create panic amongst investors and could push the risk-off trades even further into the money. With no support until 113.50 EURCHF still has a way to fall.

EURJPY – 140.00 in View?

EURJPY – 140.00 in View?

Chart Of The Day

EURJPY posted its best reading in nearly two years today pushing through the 136.00 by morning US trade. The pair is signaling that market is looking for synchronous global growth that will tighten monetary policy everywhere but Japan allowing the pair to make a move towards the key 140.00 level over the next few weeks.

Today’s strong ADP data has the market thinking that NFPs will be solid as well, and if the number proves to be strong in both payrolls and wages USDJPY should verticalize well above the 113.00 level and pull EURJPY along with it, making the 140.00 target within reach.

GBPUSD – 1.3200 in View?

GBPUSD – 1.3200 in View?

Chart Of The Day

Cable saw a small selloff today in the wake of cooler than expected CPI readings, but the pair held key 1.3000 support and appears well on its way towards testing multi-month highs at the 1.3200 level.

Tonight is an off night for the eco calendar with nothing on the docket in either UK or North America, but on Thursday the pair will see the release of UK Retail Sales which is seen as a key barometer of UK consumer health. Retail Sales have been a major drag on the UK economy but the market anticipates a massive rebound. If the data meets forecasts -- it could be the catalyst to spur a further rally to take the pair towards the 1.3200 target as the week comes to a close

EURUSD – 1.1500 in View?

EURUSD – 1.1500 in View?

Chart Of The Day

The euro continues to be on a tear as ECB is clearly moving towards a taper sooner rather than later. Although ECB officials continue to warn that inflation is still subdued, they clearly see that the EZ economy is recovering and will likely provide guidance about beginning to tighten QE relatively soon.

The EURUSD, as a result, has shot higher despite the fact that US monetary policy makers also have a hawkish bias. At this point, the trade is in relative expectations. German Bund yields today hit a 1.5 year high and the yield differential between US rates and German rates continues to compress.

Tomorrow NFPs could trip euro longs, but only if the number shows blow out strength. Otherwise, the pair could shrug off any knee jerk reaction and if the numbers actually miss the forecast euro longs will no doubt press for the 1.1500 target as the day proceeds.

GBPUSD – Fresh Lows in View?

GBPUSD – Fresh Lows in View?

Chart Of The Day

Cable has been the big loser today after Governor Carney dismissed any notion of hiking rates anytime in the foreseeable future.

Speaking at the Mansion House, Mr. Carney stated that, “From my perspective, given the mixed signals on consumer spending and business investment, and given the still subdued domestic inflationary pressures, in particular, anaemic wage growth, now is not yet the time to begin that adjustment.

In the coming months, I would like to see the extent to which weaker consumption growth is offset by other components of demand, whether wages begin to firm, and more generally, how the economy reacts to the prospect of tighter financial conditions and the reality of Brexit negotiations.”

In addition to the dovish news from BoE, cable was hit by news that PM May is having trouble negotiating with the ultra-right DUP party and if those talks stall, the prospect of a Tory government could be in doubt which is sure to propel pound even lower.

Technically the pair would make a symmetrical bottom at the 1.2500 level, which was the breakout point at the time Ms. May called the snap election. With political and monetary news turning ever more negative cable is headed that way.

USDJPY – 109.00 in View?

USDJPY – 109.00 in View?

Chart Of The Day

USD/JPY continues to be under pressure as US yields sink lower. The benchmark 10 years is at 2.20% as the market increasingly begins to doubt the fact that the Fed will hike rates any further beyond the 25bp factored in for tomorrow’s rate hike.

Despite the generally hawkish posture of US monetary officials, US data has been woefully disappointing and the much-vaunted rebound in second half of 2017 is nowhere to be seen as growth continues to track at about 2% rate. The end result is that market expectations have gradually declined from 4 rates hikes this year to 3 to now only 2. The Fed funds futures project only a 42% chance of any additional rate hikes beyond the June hike expected this week.

Meanwhile, technically the pair is making a series of lower highs and could target a move towards 108.50 if the news tomorrow is dovish

EURUSD – 1.1000 and French Election in View

EURUSD – 1.1000 and French Election in View

Chart Of The Day

The EURUSD powered its way to fresh multi-month highs breaking above the 1.0950 level and rising all the way to 1.0985. The pair is within the striking distance of the key 1.1000 figure that it hasn’t seen since last year and could break it in Asia session trade.

Over the next 72 hours, however, the pair faces two very important event risks. Tomorrow’s NFPs and Sunday night’s French election results. Both could prove beneficial to the pair and seal its rise above the 1.1000 level. If the NFPs prove soft, especially on the wage front, the nearly universal assumption that the Fed will hike rates will come under doubt and yield differentials between Treasuries and Bunds could compress sending euro higher.

Then on Sunday, a solid Macron win would ensure the status of EU and will create another wave of relief buying in the pair. There is a risk that much of the good news has been priced in, and the EURUSD could see a sell the news dynamic later on the week, but for now all roads lead to the 1.1000 figure as sentiment looks solidly euro bullish.

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.

USDCAD – 1.2600 in View?

USDCAD – 1.2600 in View?

Chart Of The Day

The rise in oil back towards the $50/bbl level has put fresh life into USDCAD pair it inches its way towards the 1.2700 figure. But unless crude breaks above $50 and continues higher we doubt there is much further rally left in the pair.

The fundamentals of Canadian economy have continued to deteriorate as a result of the slump in oil prices and tomorrow’s CPI data and Retail Sales release are likely to confirm the downward trend. That should leave the BOC in its accommodative mode and keep a lid on any loonie strength. For now the 1.2600 level is firm support while 1.3000 is now new resistance for the pair.