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On Tuesday Dollar/Yen increased sharply with 100 pips, not matching the negative Interbank sentiment at under -50%. The currency couple appreciated from 76.71 to 77.73 yesterday, closing the day at 77.65. This morning the Dollar is correcting against the Yen, but still moving within yesterday's range for now. On the 1 hour the trading is still caught in a range, while on the 3 hour chart the downward channel has turned into quiet trading. Break above yesterday's top and nearest resistance 77.73 would encourage further recovery of the Dollar. Immediate support is yesterday's bottom at 76.71, and consistent break bellow it could strengthen the Yen further down towards next target 75.80. Today are Japan BoJ meeting announcement, Leading and Coincident indicators composite index, Machinery orders, Current account, and Trade balance, at 3:30, 5, and 23:50 GMT respectively. Quotes are moving bellow the 20 and just above the 50 EMA on the 1 hour chart, indicating short term bearish and medium term slim bullish pressure. The value of the RSI indicator is negative and declining, MACD is positive and descending, while CCI has crossed down the 100 line on the 1 hour chart, giving overall light short signals.
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GBPUSD looks to be showing a perfect Gartley pattern with the D wave target being 1.5520. The pair should then turn to the upside Inside the D leg (4hr chart) we can see that GBPUSD has pushed down to 161.8% projection (1.5951). We now look to be correcting in a small sub wave (4) before the next sell off.
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The first trading session of the week was perfect reflection of market sentiment for the EURUSD pair. The current week started with an aggressive move on the upside, fueled by the Swiss National Bank comments which ended exactly on the important 1.4280 level. This move was highly unexpected. The greenback erased all of its losses and more, managing to rise above the 1.4000 level and breaking the psychological barrier on the downside. The move continued after the fundamental ISM-report, which significantly exceeded analysts' expectations. As expected the equity market showed a positive reaction to the data, but the correlation did not sustain and the dollar continued to rise. There is therefore a strong argument that the euro has lost too much ground against the USD.
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EURGBP - Having halted its recent weakness on Tuesday and following through higher in early trading today, risk continues to build up to the upside. This leaves the possibility of a return to the 0.8885 level on the table with a break of here setting the stage for further strength towards the 0.9083 level, its Jun 01'2011 high. Further out, resistance lies at the 0.9150 level, its Feb'2010 high followed by its channel top at 0.9230. Its daily RSI is bullish and pointing higher supporting this view. On the other hand, the risk to this analysis will be a return below the 0.8732 level, its Sept 06'2011 low. A clearance of there will target the 0.8643 level and next the 0.8610 level, its May 26'2011.
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Triggered by the persistent fear of another global recession and further fueled by the recent negative news from the European debt crisis and the U.S. economy, many investors refuge more and more in supposedly secure currencies. As a result of this development, currencies like the JPY and the CHF are so overvalued that it has already led to a significant weakening of the domestic economic activity of these countries. In addition to the Bank of Japan, now the Swiss Central Bank (SCB) is following and pulling the emergency brake with flushing the international financial markets with additional liquidity. Thereby Swiss Central Bank Chief Philipp Hildebrand defined the target of a maximum exchange ratio of 1.20 against the EUR. The SCB was forced to take this step by the growing risk of deflation and the persistent complaints from exporters, as well as sales declines in tourism and retail. Leading market analysts welcomed this intervention in the hope of stabilizing the financial markets, although critical voices were raised. The unlimited flooding of the markets with CHF could prove to be a boomerang, because the ballooning of the CHF amount could accelerate the inflation. Nevertheless, this approach is considered as powerful signal to the markets and speculators.
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On Tuesday Pound/Dollar resumed decreasing strongly after the morning climb with almost 290 pips, in line with the negative Interbank sentiment at almost -26%. The Cable depreciated from 1.6208 to 1.5920 yesterday, closing the day at 1.5940. Today the British Pound is trading quietly, with movements within yesterday's range for the time being. On the 1 hour chart the downward channel is intact, while on the 3 hour chart quotes are moving within wide range. First resistance is yesterday's peak at 1.6208. Break above it should extend the bullish movement further towards 1.6341. The nearest support level is yesterday's bottom at 1.5920. Going bellow it should extend British Pound's reduction further down towards next downward objective 1.5800. Today are UK Industrial production and Manufacturing output, both at 08:30 GMT. Quotes are moving just above the 20 and bellow the 50 EMA on the 1 hour chart, indicating short term slim bullish and medium term bearish pressure. The value of the RSI indicator is positive and declining, MACD is negative and tranquil, while CCI has crossed up the 100 line on the 1 hour chart, giving overall light long signals.
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Trades in a near-term corrective mode after yesterday's spike to the levels just under 1.4300 and sharp fall through 1.4000 zone, 18 July low / 200 day MA, to extend losses to 1.3970 so far. Bounce on overextended near-term conditions is under way, with initial barrier at 1.4120, 20 day MA on 4-hour chart and possible extension towards 1.4170, near Fib 38.2% of 1.4548/1.3970 decline, where a lower top is anticipated to maintain wider picture bearish tone. Below 1.3970 to focus 1.3950, with extension to key level at 1.3836 not ruled out.
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The 50 EMA managed to halt the upside move, to reverse to the downside again, although we witnessed a test of levels just above 125.00, but the pair dipped quickly below the level without acquiring any four-hour closing above; this is a negative sign, where stability below 123.20 minor support may extend the downside movement.
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The classic support levels mentioned in our previous report around 1.3970 stopped the pairs negative momentum, and supported the pair to rebound to the upside. Consolidation above this level could support the pair to enter another upside wave, while stability above the exponential moving average 200 at 1.4110 should confirm our positive outlook. A breach of 1.3910 and stability below it could negate our expectations for today, where the pair could extend the downside movement.
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Initial profit taking in Cable Tuesday was sharply reversed and this week's decline continued. The market has now corrected more than 78% of the rise from Julys low but with intraday signals for sentiment at oversold extremes Asia has seen some profit-taking develop. This rally is likely to be a temporary one but going into the European morning the outlook is mildly positive.
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The combination of continued concerns around the euro area, a better US non-manufacturing ISM and the fallout from the SNB intervention in EURCHF helped push the USD higher yesterday, but we are approaching key levels here that are likely to prove hard to break in the short run. 76 in the USD index wasn't broken in June and was only briefly breached in July, and given the lack of real underlying enthusiasm for the USD except, it seems likely to remain hard to break, especially if the slightly better risk tone towards the end of yesterday's trading persists. But it remains hard to see a sharp decline in the USD in the short run, given the perceived problems elsewhere.
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The risk event in the BoJ interest rate policy meeting passed with rates holding between the 0.0% and 0.10% range.The currency markets than pushed up the Japanese Yen. We see JPY-strength across the board. It seems like the meeting concluded with the prospect of QE in Japan on the table, or other types of stimulus that would weaken the strong currency. Exports are being suppressed by the such a strong yen. However, the market continues to flow towards CHF. Perhaps this was a delayed reaction to the SNBs capping of CHF. Since the BoJ did not have match the aggressiveness, the flood gate opened
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The EURUSD spiked higher yesterday on SNB intervention to weaken the Franc against the Euro, hit 1.4280 but the bullish momentum was short lived and whipsawed to the downside, bottomed at 1.3972 and touched the lower line of the major bullish channel (white) as you can see on my daily chart below. Price is still in a bearish correction phase since the fall from 1.4939, but the fact that the bullish channel still hold so far might limit the bearish pressure for now and my hourly chart bias is neutral with hourly CCI in neutral zone. Immediate resistance remains around 1.4120. A clear break above that area could trigger another bullish pullback testing 1.4200 - 1.4250/80 area but as long as price stays below 1.4280 - 1.4300 I still prefer a bearish intraday scenario at this phase. However, a clear break above 1.4300 could stop the bearish correction phase as the lower line of the bullish channel has been touched and further bullish run resuming the major bullish scenario can be expected. On the downside, a clear break and daily close below the bullish channel and 1.4000 - 1.3950 area could be a threat to the major bullish scenario since the bullish run from 1.1875 at least targeting 1.3800 region
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EUR/USD: Euro is currently trading at 1.4030 levels. The Euro continues to trade weak vs. the greenback on concerns that Euro zone debtcrisis will spread after German factory orders declined yesterday indicating further weakness in Euro zone. Looking ahead German Industrial Production m/m data is expected better. Support is seen at 1.4000 levels (psychological support) while resistance is seen at 1.4138 levels (200 days daily EMA). Exporters can cover short term exposure at 65.50 while importers can cover exposure at 64.00 levels and below. EUR/INR is likely to trade in the range of 64.30 – 64.90 levels today. Short term: Bearish. Medium term: Bearish. Target 1.4000 levels achieved.
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On Tuesday Euro/Dollar jumped on good EU GDP, but later decreasead with over 300 pips, losing more than it gained. The European currency depreciated from 1.4284 to 1.3971 yesterday, matching the negative Interbank sentiment projection at bellow -4%, closing the day at 1.3994. This morning the Euro is trading quietly against the Dollar, and within yesterday's range for now. On the 1 hour chart the downward channel looks good, while on the 3 hour new downward channel has emerged. Break above the nearest resistance and yesterday's top at 1.4284 may trigger further strengthening of the Euro. Going bellow today's bottom and first support at 1.3971, however, would confirm continuation of the bearish trend, towards next objective downwards 1.3856. Today's focus is on Germany Industrial production at 10 GMT. Quotes are moving in line with the 20 and bellow the 50 EMA on the 1 hour chart, indicating short term neutral and medium term bearish pressure. The value of the RSI indicator is neutral and calm, MACD is negative and quiet, while CCI is in line with the 100 line on the 1 hour chart, giving overall neutral to light short signals.
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EUR/USD closed lower on Tuesday and the low-range close sets the stage for a steady to lower opening on Wednesday. Stochastics and the RSI are bearish signalling that sideways to lower prices are possible near-term. If it extends last week's decline, August's low crossing is the next downside target.
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The SNB's move to fix the floor for Euro-Swiss at 1.2000 created extreme volatility in the markets yesterday. Dollar-Swiss (0.8585) saw a sharp 10% rise after the news and it is trading strong just below 0.8600. It can rise further to 0.8800-50 if it can retain this momentum. Euro (1.4029) tanked from its high of 1.4281 to test its important Support at 1.4000 and is trying to bounce back from there. The broader picture remains bearish, but it has important Support in 1.4000-3960 region which might hold. Dollar-Yen (77.40) has risen well above 77 and it can test 78.00-30 in the coming sessions/days. The Euro-Yen Cross (108.60) failed rise past 110 yesterday, but it is finding Support at 108. Might be ranged between 108-110 for some time.
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Yowser Needless to say the downside is over for now. However, I feel we'll not get that far higher today with the 0.8663 area providing potential for a correction lower - and possibly modestly deep. Therefore, watch that resistance carefully and if it caps I feel there is room for losses back below 0.8570 and then a steady, but choppy decline through 0.8537, 0.8490-00 and back to the 0.8438 corrective low. Overall I feel this should reach 0.8341-82 minimum but there is risk for 0.8275-0.8314
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EUR/USD Today's support: - 1.3950(main), where correction is possible. Break would give 1.3928, where correction also may be. Then follows 1.3905. Break of the latter would result in 1.3872. If a strong impulse, we would see 1.3857. Continuation will give 1.3826.
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