EURUSD – Ready to Break 1.2200?

EURUSD – Ready to Break 1.2200?

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EURUSD has flirted with 1.2200 support for several days now. The level is critical as it represents a quadruple bottom all the way from 2017.
There are however good reasons to think that the pair may ready to break that key support level.

As US rates are climbing through the 3% level the ECB is getting left further and further behind. IFO economists predicted today hat German GDP would increase at 0.4% versus 0.6% rate of Q4 which is consistent with the latest PMI reading from the EZ.

The news is likely to keep ECB firmly neutral in its monetary policy stance on Thursday and the single currency could see further weakness if President Draghi suggests that the central bank many not consider tightening rates until well into 2019. 

If 1.2250 is given, the shorts will target 1.2000 as the next level of decline.

Will EURCAD Break 1.58?

Will EURCAD Break 1.58?

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Will EURCAD Break 1.58?

All of the major currencies sold off against the U.S. dollar today but the Canadian dollar was unusually resilient in the face of sharply lower oil prices and reports of significant gaps between the U.S. and Canada from Canadian NAFTA negotiator Verheul. The only explanation is the prospect of stronger Canadian GDP tomorrow. Retail sales and trade activity improved significantly in the month of January, pointing to a faster growth. If GDP surprises to the upside, the best currency pair to trade could be EUR/CAD because Eurozone data has weak and the ECB has been slow to adjust their forward guidance.

Technically, EUR/CAD has fallen back below the 20-day SMA and is now poised for a move down to the March low of 1.5760.

USD/CAD – Will it Break 1.28?

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USD/CAD – Will it Break 1.28?

The best performing currency this past week was the Canadian dollar, which rose more than 1.5% against the greenback. This move drove USD/CAD from a high of 1.3125 down to a low of 1.2825. The loonie’s gains were sparked by a sharp rebound in oil prices, stronger Canadian data and reports that the Trump administration dropped its demand that all vehicles made in Canada for export contain at least 50% U.S. content. According to Friday’s reports, Consumer price growth accelerated significantly in the month of February with the year over year rate rising to 2.2% from 1.7%. Retail sales growth overall fell short of expectations but excluding autos, demand rose more than expected by 0.9%. This bodes well for next week’s January GDP report, which should show growth strengthening at the start of the year.

On a fundamental and technical basis, USD/CAD appears positioned for a move below 1.28. Technically, it closed the day below the 20-day SMA for the first time in 7 weeks. 1.2800, the March 12 low is a natural support level but the decline should extend further as primary support hovers closer to 1.27. This is where the 100-day SMA, 23.6% fib retracement of the 2016 to 2017 decline and the 38.2% Fib retracement of 2011 to 2016 rally converge.

USD/CAD Eyes 1.27 Break

USD/CAD Eyes 1.27 Break

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USD/CAD Eyes 1.27 Break

The Canadian dollar is in focus tomorrow with retail sales scheduled for release. USD/CAD has been trending higher for the past few days, hitting 1.2685 in the process. Although it failed to extend its gains to 1.27, that target could be breached if retail sales turn negative. Economists are looking for zero growth but according to the wholesale sales, demand weakened significantly towards the end of the year. Like the Eurozone, Canada’s economy isn’t doing terrible but the strength that we saw for most of 2017 began to fade towards the end of the year. Softer retail sales would take USD/CAD to its next resistance level of 1.2725 (the 200-day SMA). Beyond that, the next stop should be the 50-week SMA near 1.2840. If USD/CAD rejects 1.27 or the 200-day SMA, a pullback should take the pair below 1.26.

NZDJPY to Break 80

NZDJPY to Break 80

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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/USD Break 1.20?

Will EUR/USD Break 1.20?

Swing

One of the best performing currencies today was the EUR/USD. The euro found support from the ECB economic bulletin that described the “euro area economic expansion to be solid and broad-based across countries and sectors.” They also said “underlying inflation is expected to rise gradually over the medium term.” U.S. data was weaker with the trade deficit rising rather than narrowing as economists predicted, putting pressure on the greenback. Although manufacturing activity in the Chicago region accelerated jobless claims ticked higher. All of these factors helped to drive EUR/USD above 1.1950, capping a year of solid gains.

On a technical basis, 1.20 is the next level to watch. There’s a very good chance EUR/USD will make it to that target rate and possibly even settle between 1.20 and 1.21. Momentum is certainly on the side of euro bulls and after a period of consolidation, we usually see a 3 to 5 day rally.

AUDJPY – Can it Break Through 87.00?

AUDJPY – Can it Break Through 87.00?

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Australian employment shocked the market with yet another stunning gain yesterday. Australia generated 61K new jobs versus 19K eyed as the unemployment rate remained steady at 5.4% while participation rate climbed to 65.5% from 65.1% the month prior. The news caps an incredibly strong year for jobs in the Australian economy which saw employment expand at 3.2% pace in 2017. Furthermore fully 80% of the jobs have been full-time jobs suggesting that broader GDP growth should remain sound for the foreseeable future.

Over the past few months, the Australian economy has been dogged by weak Retail Sales, muted inflation, and sagging housing prices all of which have weighed on demand and have kept the RBA firmly in neutral territory. But the solid pace of job growth stands as a strong counterpoint to the recent soft data and should translate into better demand into the start of 2018.

At the same time, US data is also showing strong gains as US Retail Sale blew past expectations today rising 1%. Although that has not translated into strength in USDJPY just yet, the market will have to respond sooner rather than later especially if US data continues to improve. That puts AUDJPY on pace to target 87.00 over the next several days.

Will EURUSD Break 1.17?

Will EURUSD Break 1.17?

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Will EURUSD Break 1.17?

The EUR/USD fell every day this past week despite generally healthy data. Although part of this could be attributed to the rise in the U.S. dollar, the single currency is also pressured by Germany’s political troubles and a dovish central bank. The last time the ECB met, they cut their asset purchase program but said rates would remain at current levels well past end of QE, which means October 2018. Despite improvements in the labor market, manufacturing and service sector activity, we don’t expect the central bank to change their views and a reminder of their dovish stance could extend the slide in EUR/USD below 1.17, or have little impact on the currency. Either way, we don’t expect the euro to rally on the back of the rate decision.

Technically, the weekly charts show that the next level of support for EUR/USD below 1.1750 is 1.1660 followed by the November low of 1.1550. If EUR/USD rises back above the 20-week SMA, then its probably headed back to 1.19

EUR/CAD to Break 1.50, Head Towards 1.49

EUR/CAD to Break 1.50, Head Towards 1.49

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EUR/CAD to Break 1.50, Head Towards 1.49

For the Canadian dollar, all of the past week’s losses were recovered in one day on Friday on the back stronger than expected GDP and employment numbers. It was the best day for the loonie in more than 8 months and a large part of that has to do with how these reports will impact the Bank of Canada’s economic assessment next week. With more than 79K jobs added in the month of November, Canada experienced the strongest period of job growth in 4 years. Full time and part time work increased, driving the unemployment rate to its lowest level to its lowest level since February 2008. While GDP growth slowed in the third quarter, the robustness of the labor market and stronger than expected GDP growth in September completely overshadowed the report. The Bank of Canada has less to worry about in December than in October because everything from retail sales, to the labor market, housing market, manufacturing activity, trade and oil prices improved since the last meeting. The only area that deteriorated was inflation. While that is also a big focus for the BoC, we expect the Canadian dollar to trade higher into and possibly following the rate decision. We think its strength will be particularly pronounced against the euro which continues to struggle with political troubles. . German Chancellor Angela Merkel wants to form a coalition government with the Social Democrats but the leader of the SPD party denied talks.

Technically, EUR/CAD collapsed on Friday and such a strong move generally has continuation. At minimum we expect EUR/CAD to break 1.50 and hit 1.4960 but the sell-off could easily extend to the 50-day SMA near 1.4900.

USDJPY – Can it Break 115.00?

USDJPY – Can it Break 115.00?

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USDJPY made an impressive reversal today rising above the 114.00 level in morning NY trade. The pair is being seesawed by US political news as market try to absorb the impact of new tax reform proposals. For now, it’s not clear if the tax legislation will indeed be stimulatory to the economy, but market’s focus will turn to tomorrow’s NFP and wage data.

The forecast is for a very large rebound in jobs after a hurricane leaden September. However, analysts may be overestimating the rebound and the market could be setting itself for disappointment. Although US data has been generally strong there is little indication that job growth surged this month.

The miss could take USDJPY once again below the 113.00 level and set up a triple top in the pair as the 115.00 level once again proves to be a cement ceiling. If however, it breaks the 115.00 level USDJPY could be on the way to a new uptrend.

Will AUDUSD Break 78 Cents?

Will AUDUSD Break 78 Cents?

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Will AUDUSD Break 78 Cents?

The new week will also be an important one for the Australian dollar with a Reserve Bank monetary policy announcement on the calendar along with retail sales, the trade balance and PMIs. The Australian dollar has traded lower ahead of the rate decision as investors anticipate more cautiousness from the central bank. This would be a departure from RBA Governor Lowe’s view back in September when he said lower rates would add to risk in household balance sheets, sending AUD/USD sharply higher. However data has taken a turn for the worse over the past month with consumer and business confidence falling, GDP growth slowing, inflation expectations declining and service sector activity slowing. Copper and iron ore prices have also fallen sharply and China is slowing with Standard & Poor’s recent downgrade. There’s very little for the RBA to be excited about and for this reason they could emphasize the challenges that the economy faces over the prospects for growth. If that’s the case, AUD/USD will extend its losses but if they focus on their expectations for a gradual pickup in activity and rise in inflation, AUD/USD could find its way back towards 80 cents.

Technically, 78 cents is a very significant support level. Not only is there horizontal trendline support on the daily chart but the weekly chart shows the 20-period SMA and the 23.6% Fibonacci retracement of the 2011 to 2015 decline right around the same level. So if AUDUSD drops below 0.7780, we should see a much deeper correction down to 0.7650. However if it holds that level then the pair should find its way back above 79 cents.

Will USD/JPY Break 111?

Will USD/JPY Break 111?

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The mighty dollar’s persistent strength is the biggest story of the day. The greenback’s broad based gains can be attributed entirely to the upward drift in Treasury yields and President Trump’s promise of lower corporate taxes. Paul Ryan got the market excited this morning when he said their goal is for tax reform to become law by the end of the year. The Trump Administration had many setbacks but this is one area where the President should receive widespread Republican support because it is the party’s best hope for a major legislative accomplishment before next year’s midterm elections. According to the House Ways & Means Chairman Brady, more details on their tax reform plans will be released on September 25th. So far, the market has been skeptical because the plan has been vague and while its still unclear how much progress has been made, setting a specific date to share more information gives investors hope which can go a long way. It helped investors shrug off the softer than expected producer price report that showed inflation growth rising less than expected in the month of August. Tomorrow’s consumer price report should be stronger with Hurricane Harvey driving up gas prices last month. However today’s move has taken the dollar to important resistance levels versus euro and yen that would be a perfect place for a profit taking or corrections.

Technically, today’s rally in USD/JPY stopped right at the 50-day SMA and 2nd standard deviation Bollinger Band. So it either fails here or hits the 100-day SMA / 38.2% Fib retracement of the June to December rally near 111.15. Either way, there’s significant resistance above current levels. If USD/JPY pulls back, it should find initial support at 110.