USDJPY – Heading to 110.00?

USDJPY – Heading to 110.00?

Chart Of The Day

USDJPY cannot hold its gains. Despite a dovish BOJ, despite a budget deal in DC, despite US yields trading well above the 2.50% on the benchmark 10 year, the pair remains in sell the rally mode.

As we noted this morning,”The FX markets remain skeptical about Fed’s gradual tightening program given the persistent state of turmoil in DC and the prospect of further trade tensions between the US and the rest of the world. NAFTA talks begin today and they will be seen not only as a barometer of trade relations in North America but as a harbinger of US trade policy going forward. Yesterday’s tariffs against solar panels and washing machines may have been the first salvo in the Trump administration’s war on trade and the FX market appears to be reflecting the general investor angst over this course of action.”

Tomorrow the market will get a smattering of 2nd tier US housing data, but the focus of the market will be on technicals levels. The longer the bears control the field of play, the more likely it will be that 110.00 will be run.

GBP/USD – Heading to 1.3000?

GBP/USD – Heading to 1.3000?

Chart Of The Day

After nothing but rallies in August and early September, cable has started to drift lower as UK economy appears to be on the verge of contraction. Today. UK Construction PMI printed at 48.1 versus 51.1 eyed as it plunged below the 50 boom/bust line for the first time since September of last year.

With 2 out of 3 UK PMI gauges missing their mark this week, the focus will turn to tomorrow’s UK PMI Services report which is the most important of them all. With services comprising nearly 80% of UK economic activity the market will watch for any large deviation from expectation. The forecast for Services PMI is 53.3 and any sharp decline towards 50 is sure to stoke worries that UK economy may be on the verge of tipping into a contraction.

The slowdown in growth comes at a particularly difficult time for BOE which is grappling with higher than target inflation and the uncertainty of Brexit. If UK economy does begin to show serious signs of a slowdown, the BOE will be hard pressed to raise the rate in such an environment putting further downside pressure on cable.

For now, the upside is capped by the 1.3450 level while on the downside 1.3200 looks vulnerable. If that level goes the shorts will move their target towards the key 1.3000 support.

EURUSD – Heading for 1.1700?

EURUSD – Heading for 1.1700?

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Mario Draghi tried. He really did. But the market would just not buy his dovish talk. The fact of the matter is that the Eurozone recovery is in full bloom and the ECB is definitely heading for a taper as it tries to normalize monetary policy after years of extraordinary measures.

Meanwhile, on this side of the Atlantic, attempts by the Fed to reassure the market that further rate hikes are coming look increasingly dubious as US data continues to disappoint. The odds of another rate hike by the end of the year have fallen below 50% and today’s weak Philly Fed numbers did not help matters.

Tomorrow the econ calendar is barren, but euro bulls having broken through the key 1.1600 level are emboldened to challenged the multi month highs at 1.1719

Kiwi – Heading to 7500?

Kiwi – Heading to 7500?

Chart Of The Day

Fundamentals

Not all is well in the land of the Hobit as New Zealand’s export sector so heavily dependent on milk exports is seeing the price of milk continue to decline. Today Fonterra the milk conglomerate announced its forecast for 2015 and prices are expected to fall by -13%. That is not good news for the New Zealand economy and is likely to keep RBNZ on the sidelines for the time being. As a matter of fact the RBNZ which clearly wants to see the currency lower may even hint that it may be open to a rate cut if growth slows down materially. All of this is likely to pressure the kiwi further and could send the unit towards 7500 in the near future.

Technicals

NZD/USD now finds itself testing the recent lows at 7650 and a break of 7600 would open a run towards the key 7500 support . The pair has very heavy resistance at the 7900 level and does not break its bearish bias until it can clear that barrier.

AUD/JPY – Heading to 100.00?

AUD/JPY – Heading to 100.00?

Chart Of The Day

AUD/JPY – Heading to 100.00?

Fundamentals

The Australian dollar hit 4 year lows today and the pain for longs may not be over. RBA Assistant Governor Lowe suggested that the central may consider lowering rates if it felt that the economy would slow materially over the next few quarters. Certainly the rapid deceleration of growth in China is starting to weigh on the prospects of Australian growth and the latest rate cutting move by the PBOC can be viewed more as a sign of weakness rather than strength for Australia. Meanwhile, despite positive US data USDJPY has failed to rally and has in fact started to correct off the 119.00 highs. Any disappointment in US data can taken as a sign for profit taking and could push AUD/JPY to a quick retest of 100.00 over the next few days.

Technicals

Techincally AUDJPY pair has turned in a major reversal off the 102.00 level and now targets 100.00 as the near term support. A break there opens up a run to 98.00 while only a close above 102.00 negates the bearish bias.

AUD/JPY – Heading for 100.00?

AUD/JPY – Heading for 100.00?

Chart Of The Day

Fundamentals

The remarkable events of Friday with BOJ opening up the floodgates of more QE created a massive rally in yen crosses and that rally may continue into this week especially if US and Chinese data remain supportive. If US data shows that expansion continues at a steady pace the case for policy divergence becomes even stronger and USD/JPY is likely to push higher. In the meantime the Aussie will hold its own especially if Chinese data shows that Asia’s biggest economy continues to expand as well. Monday’s Chinese Manufacturing PMI data as well Tuesday’s RBA rate decision could reinforce the fact that Australian rate will remain steady and that could create fresh flows in AUD/JPY taking the pair to 100.00

Technicals

The pair is now facing the key resistance at 99.00 which if it fails would create a double top in the pair. A break through 99.50 however would put it on a path towards the key 100.00 mark.

NZD/JPY – Heading to 86.00?

NZD/JPY – Heading to 86.00?

Chart Of The Day

Fundamentals

The kiwi has recovered slowly but steadily ever since the pair hit 7700 on intervention fears a few weeks back and has now come back all the way to 7900. The general decline in US rate expectations has been a help, but the relatively upbeat data out of Asia has been a support as well. This week the pair will see ANZ business confidence and RBNZ Rate statement report on Wednesday and while its likely that Governor Wheeler will reiterate that the kiwi remains overvalued he is unlikely to make further threats of intervention for the time being. Meanwhile USD/JPY was taken down a notch today on weaker housing data but tomorrow’s Durable Goods and Consumer Confidence reports should provide a boost for the pair. Taken together that means that 86.00 may be in view.

Technicals

Technically NZD/JPY has set a higher double bottom which is a bullish sign and if the pair can hold above 85.50 then 86.00 would come into view. On the downside support lies at 84.50 with much deeper support at 83.0

USD/JPY – Heading to 110.00?

USD/JPY – Heading to 110.00?

Chart Of The Day

Fundamentals

The ultimate dollar bullish view is expressed through the USD/JPY pair and it has been in an uptrend for the better part of three months as it tries to challenge the 110.00 barrier – a level it has not seen since 2008. The move higher in USD/JPY is predicated on strong US growth thesis and the assumption that the Fed will begin hiking rates soon. Tomorrow we are going to get a good idea of just how strong the US economy is when ADP prints its estimate for September payroll data. Although the ADP report often varies from the actual NFP reading, an estimate that shows less that 200K growth is likely to be taken badly by the market as traders will begin to assume that we have two bad jobs months in a row. A string print however could power USD/JPY through the 110.00 level even before the Friday payroll data as traders will anticipate good results.

Technicals

USD/JPY faces a formidable challenge at the 110.00 level with topmost resistance coming in at 2008 top of 110.65 a break beyond that opens up a run to 112.00 while a correction finds support at 108.50

GBP/CAD – Heading to 1.8000?

GBP/CAD – Heading to 1.8000?

Chart Of The Day

Fundamentals

The topsy turvy price action in USD/CAD on Friday was the result of the geopolitical shock from the possible prospect of more fighting in Ukraine. But assuming the tensions do not boil over int a full blown war the news from Russia is likely to have little long term impact on the pair. Meanwhile the revised labor data from Canada that hit earlier in the day showed a much more positive picture with job increasing by twice the originally expected amount to 40K. That means that the Canadian economy is finally benefiting from the broader North American recovery and should help boost the loonie. On the other hand cable continues to suffer as interest expectations from UK begin to shift further out. Next week brings UK CPI data and if it remains cool it will only provide further reason to push cable lower which means that GBP/CAD could target 1.8000 barrier.

Technicals

GBP/CAD is now nearing the bottom of its recent range and a move through 1.8100 would put 1.8000 squarely in view. On the upside only a move through 1.8400 relieves downside bias.

AUD/NZD – Heading for Fresh Lows?

AUD/NZD – Heading for Fresh Lows?

Chart Of The Day

Fundamentals

Over the next 24 hours all attention in the currency market will turn to the Asia Pacific region as the two commonwealth economies take center stage. On Wednesday New Zealand may become the first developed economy to raise rates in more than 3 years. The RBNZ has been promising to hike rates for nearly 6 months and tomorrow the moment of truth will arrive as the central bank is expected to hike rates by 25bp. However, the more important point will be whether the RBNZ then confirms that it will commence the full tightening cycle rather than just doing a one-off policy move. If RBNZ does hint that rates will increase steadily then the kiwi is likely to push higher and test the yearly highs a speculative capital moves into the unit. Meanwhile later in Australia the market will get a glimpse of the AU labor data which is expected to rebound from last month’s weak showing. However, if the Aussie number disappoint and the RBNZ remains hawkish then the AUD/NZD could be headed for fresh yearly lows.

Technicals

The key level of support in AUD/NZD is the 1.0500 level and if the pair breaks below that figure it could target 1.0300 as the next level for the shorts. On the other hand a break abouve 1.0700 would suggest that a bottom is in place and the pair could head higher to test the 1.0900 figure.