NZDJPY to Break 80

NZDJPY to Break 80

Chart Of The Day

NZDJPY to Break 80

The U.S. dollar shot higher after the Federal Reserve touted the improvements in the economy and upgraded their inflation outlook. This move helped the greenback erase some of its earlier gains but by the end of the NY session, the dollar faded from its highs. While it could continue to rise, we think USD/JPY gains will be limited compared to NZD/USD’s losses. NZD jumped as much as 1% on comments from Finance Minister Robertson who said nothing more than underlying economic indicators are “good.” The strength of the New Zealand dollar will catch up to the economy as it has and should continue to drive inflation lower. Exports rose strongly in December but are expected to suffer greatly in January on the back of currency strength. It is also far too soon to pick a bottom in the USD. Although we could see another 50 to 100 pip rally in the greenback versus ALL other major currencies, the selling pressure is still very strong. The global growth story, U.S. fiscal finances, selling of U.S. Treasuries and a gradual exit of easy monetary policy abroad are all reasons why the dollar could remain weak. The bottom line is that even if USDJPY extends its gains, we think NZDUSD will fall further, causing downward pressure on NZD/JPY.

Technically, the 4 hour chart for NZD/JPY is very bearish. The strong reversal candle earlier today suggests a correction that could take the pair as low as 80.00.

Will EUR/GBP Break 80 Cents?

Will EUR/GBP Break 80 Cents?

Chart Of The Day

Will EUR/GBP Break 80 Cents?

The traditionally slow moving EUR/GBP pair enjoyed strong gains today on the back of major sterling weakness. For the second day in a row, sterling was the worst performing currency. Part of the decline was due to risk aversion but weaker economic data also weighed on GBP. Consumer prices grew a less than expected 0.2% in the month of February. This modest increase left the year over year rate unchanged at 0.3%. Inflation is drastically undershooting the central bank’s 2% and while the recent rise in oil prices will ease some of the decline, this level of inflation growth will prevent the Bank of England from raising interest rates anytime soon. Meanwhile Brexit risks are rising. Chancellor Osborne and London Mayor Johnson will be speaking to Parliament on Wednesday and Thursday about the costs of Brexit and chances are the headlines won’t help the currency. At the same time, we don’t believe the Brussels attack will have a lasting impact on euro. As we saw in November and January of 2015, investors don’t allow terrorists to terrorize them for long. The euro fell only 3 cents after the shootings in November and primarily on expectation for ECB action. In January after the Charlie Hebdo attack, EUR/USD fell only 1 cent in the week that followed. It later collapsed but only because investors were positioning for ECB Quantitative Easing. Central bank expectations is what makes the current outlook for the euro different from 2015. No one expects the ECB to react to the latest attacks after having taken aggressive steps earlier this month and this means losses in the euro should be limited. European data is just beginning to turn positive and any pullback in EUR/USD should be limited to 1.1050. The Eurozone PMI reports were released early and they showed improvement in service and manufacturing activity. Although investor confidence weakened, German business confidence ticked higher, a sign that the ECB’s efforts are finally paying off.

Technically the recent rise in EUR/GBP has taken the currency pair within pips of its 1 year high of 0.7930, which happens to coincide with the 50 month SMA. Considering that the move also required a break above the 61.8% Fib retracement of the 2007 to 2008 rally, there’s a reasonable chance that this high will be broken and 80 cents will be tested. However a break above 0.8030 could be more difficult as this was where the currency pair peaked between August and November 2014. T is also the 38.2% Fib of the 2008 to 2015 decline.

Day Trading Signals April 14 – BK Trade Room Tally +80 pips

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EUR/USD+10

NZDJPY+10

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****NOTE we are going to trade C-Trade and Crowdfighter on 15 Minute rather than 5 minute delay on all pairs today***

  

  

   

  

Date Currency
Event
GMT Strategy
Apr 14-Tue USD/JPY US Retail Sales 12:30 C-Trade
Apr 14-Tue EUR/JPY US Retail Sales 12:30 C-Fighter

 

  

Last 24 hours Results
Crowd Fighter 
No Trade
 

 
C-Trade
No Trade 

 

  

CALENDAR CALLS

Here’s what we are looking for in tomorrow’s economic reports (April 14, 2015) – Good Luck Trading!

1. UK CPI (4:30AM ET) Bearish GBP — Potential downside surprise given strength of sterling and larger decline in BRC shop prices

2. Eurozone Industrial Production (5AM ET) Bullish EUR — Potential upside surprise given rise in German IP

3. US Retail Sales (8:30AM ET) Bullish USD — Potential upside surprise given pickup in spending reported by the International Council of Shopping Centers and Johnson Redbook 

EUR/GBP within 10 Pips of 80 Cents

EUR/GBP within 10 Pips of 80 Cents

Chart Of The Day

Fundamentals

EUR/GBP is now trading within 10 pips of 80 cents, a level that we have been watching carefully for the past week. Fundamentally, the currency pair should not be trading as well as it did on Friday. Both German and UK trade data missed expectations and this week, ECB President Draghi reminded us that they still plan to ease. In contrast, next week the BoE’s Quarterly Inflation Report will most likely show that policymakers are once again warming to the idea of earlier tightening. There’s been a lot of talk about the division within the Monetary Policy Committee. Some policymakers believe that it would be prudent to raise rates early to ensure that the process is smooth and gradual. Although the manufacturing sector is losing momentum and wage growth has been soft, the service sector is performing well, house prices remain high and spare capacity within companies is declining. As a result, policymakers can argue that rates should rise soon in order to avoid being caught behind the curve and forced to deliver a larger hike in the future that could threaten the recovery. If hawkish chatter makes it way into the report or the forecasts, it could set a bottom for sterling that should halt the rally in EUR/GBP.

Technicals

However based on the technical picture of EUR/GBP, the rally in the currency pair on Friday was very strong. Having broken above the former 1 month high of 0.7985, 80 would be too tempting not to test but even if EUR/GBP breaks through this level, gains should be limited to the June highs of 0.8035. If GBP/USD breaks back below 0.7925, then the uptrend would be negated.

Will EUR/GBP Break 80 Cents?

Will EUR/GBP Break 80 Cents?

Chart Of The Day

Fundamentals

After dropping to a 1 year low last month, EUR/GBP recovered strongly over the past 2 weeks. Despite the pullback on Monday, the currency pair is closing in on its 1 month high above 80 cents. Today’s retracement was driven purely by the relief rally in the British pound but whether or not EUR/GBP can extend higher will hinge on Tuesday’s PMI reports. Sterling is deeply oversold but data has been weak. If service sector activity slows alongside manufacturing, we expect EUR/GBP to test and eventually break 80 cents. However if service sector activity rebounds, it will trigger a much needed relief rally for sterling that could drive EUR/GBP back down to 79 cents. The euro on the other hand should be trading higher after Portugal’s bailout of Banco Espirito Santo. Given the rise in German and French consumer spending, tomorrow’s Eurozone retail sales report should show improvements lending support to the euro and by extension EUR/GBP.

Technicals

On a technical basis, EUR/GBP rose above the first standard deviation Bollinger Band, which is bullish for the currency and as long as the pair holds above 0.7945, the uptrend remains intact. Although 80 is a big round number, if EUR/GBP hits a 1 month high above 0.7985, it should be able to break this level and make its way towards 0.8050. If U.K. data surprises to the upside, then a much needed relief rally in sterling will drive EUR/GBP down to 79 cents easily.

Is EUR/GBP Headed Above 80 Cents?

Is EUR/GBP Headed Above 80 Cents?

Chart Of The Day

Fundamentals

After falling to a 1 year low earlier this month, EUR/GBP appears to have bottomed at 0.7915. The currency pair’s recovery was driven largely by the weakness in sterling and not the strength of euro. For the past week both currencies have been in consolidation mode but today, sterling dropped to a fresh July low, helping to solidify the recovery in EUR/GBP. There was no specific catalyst for the decline in sterling but the next 24 hours will be extremely important to EUR/GBP’s outlook. Not only is the U.K. consumer price report scheduled for release but the Bank of England’s Carney, Kohn, Taylor and Bailey will be testifying to the Treasury Committee on the June Financial Stability Report. If you recall investors were unimpressed by the central bank’s announcements in June and they will now be looking for hints of more action from the central bank. Recent U.K. data has been disappointing but overall the economy is doing well and the housing market remains strong, keeping pressure on policymakers to take additional action. If inflationary pressures pick up and policymakers suggest that rates could increase this year, sterling could resume its rise versus the EUR, sending the currency pair pack to its July lows. However if inflation slows and the BoE downplays the need for tightening, 80 cents will be the near term target for the currency. The German ZEW survey is also scheduled for release but the bigger driver of EUR/GBP flows should come from U.K. event risk.

Technicals

Taking a look at the daily chart of EUR/GBP, the currency pair has risen above the first standard deviation Bollinger Band, which is a signal of a potential bottom. If tomorrow’s economic reports drive sterling lower, the next stop for EUR/GBP should be 8030, the resistance zone from late June. However if EUR/GBP breaks 7915, there is no support until 7755.