EURCHF – 1.1400 in View?

EURCHF – 1.1400 in View?

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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.

USDJPY – 114.00 Too Much?

USDJPY – 114.00 Too Much?

Chart Of The Day

We saw an interesting reaction from USDJPY today. After much hotter than expected PPI data the currency pair actually sold off hitting a low of 113.45 before finding a bottom. When a currency pair sells off on strong positive news it’s usually a sign that the rally is tired.

After a relentless move higher that took it up more than 800 points in three weeks USDJPY may be finding some resistance at the 114.00 level as bulls run up against multi-month highs that could contain the move for a while.

Tomorrow the market will get a look at the key US Retail Sales number which is expected to rebound to 0.6% from -0.2% the month prior. US will also release the CPI figures which could confirm the inflationary pressures of today’s PPI report. If those two data points fail to push the pair higher then USDJPY may be in for a more serious corrective move towards the 112.00 figure. If the data provides a downside miss, it could show the market just how much support there is around the 113.00 level as shorts will no doubt try to press the pair lower.

EUR/USD Headed Above 1.1400

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EUR/USD Headed Above 1.1400

On a fundamental and technical basis, we believe EUR/USD is headed above 1.1400 this week. Fundamentally, there’s very little data on this week’s Eurozone calendar to alter the uptrend in euro. ECB President Draghi will be speaking but he’s made it clear that they are in wait and see mode because there’s still more stimulus in the pipeline with corporate bond purchases and TLTRO beginning this month. Fed Chair Janet Yellen spoke today and Friday’s surprisingly weak jobs number has made her less eager to raise rates in July. Many economists and investors expected Yellen to look beyond the terrible May jobs reports and repeat that rates will most likely rise in the coming months but instead of doing so, she recognized the disappointment and concern that the latest jobs number causes. She’s also worried about China and Brexit risks. So while the Fed is still thinking about tightening in 2016, a hike is definitely not happening in June and probably not in July either. The lack of supportive comments from Yellen should keep the dollar under pressure and take EUR/USD above 1.1400.

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Technically, EUR/USD has now broken above the 20, 50 and 100-day SMAs. It has also moved above the first standard deviation Bollinger Band into our “Buy Zone.” As long as the pair holds above 1.1300, it is poised for a move to its April highs near 1.1450. If it breaks below 1.1300 however, we could see a deeper correction towards 1.1200.

USD/JPY to 114.00?

USD/JPY to 114.00?

Chart Of The Day

The frenetic price action post FOMC today left both bulls and bears frustrated as the Fed left the statement almost unchanged but left open the door to possible rate hike in June, although Fed futures continue to discount that possibility assigning only at 19% chance of that happening.

The Fed officials themselves however are not nearly as dovish as the market, with Esther George actually dissenting and voting for a 25bp hike. The Fed understands that its credibility is at stake and that it must act sooner rather than later. That’s why despite the initially dovish interpretation USD/JPY held the 111.00 figure and remains relatively well bid.

Tonight however, the market will get another shock to the system as BOJ meeting presents its monthly policy action. Although few market participants expect the BOJ to make any dramatic moves, Japanese officials could push the pair higher if they suggest that they are open to the prospect of negative rate loans. Such a statement could push USD/JPY through the 112.00 barrier, but if the BOJ offers nothing new the pair could quickly revert to a test of 110.00