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AUD/USD Fails at $1.0000; USD/JPY Loses Grip on ¥102.00

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ASIA/EUROPE FOREX NEWS WRAP

After explosive gains the past two days that saw the Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) higher by approximately +1.50%, a slight breather is in order and that is exactly what’s transpiring today. But for the Australian and New Zealand Dollars, the rest of the majors are trading within a +/-0.09% band against the greenback, with the British Pound and the Japanese Yen – two of the harder hit currencies at the end of last week – leading the pack.

In regards to the USDJPY, we have our first official rejection of ¥102.00, just two days after 100.00 cracked (and that took several weeks). Commentary from the G7 meeting was roundly supportive of Japan’s policies, with the Japanese envoy declaring victory upon leaving London, gleefully noting that no G7 member was opposed to the country’s aggressive and fiscal easing policies that have sent the Yen lower by -20% to -30% against the other major currencies. If the Yen continues to weaken at its current pace, the G7 is likely to change its tune – but for now, there’s little exogenous pushback.

With respect to the Australian Dollar’s continued struggles, further soft data out of China overnight paved the way for further weakness, as the AUDUSD had rallied back to $1.0000 in the minutes before the significant April data were released. Despite Retail Sales meeting expectations, the miss in Industrial Production fueled further concerns that the commodity “supercycle” may be ending. I remain bearish and short AUDUSD following the RBA’s historic rate cut last week.

Taking a look at European credit, it appears profit taking is driving peripheral yields higher after a strong Italian bond auction this morning, levying little negative feedback on the Euro. The Italian 2-year note yield has increased to 1.338% (+7.4-bps) while the Spanish 2-year note yield has increased to 1.645% (+4.9-bps). Similarly, the Italian 10-year note yield has increased to 3.956% (+6.9-bps) while the Spanish 10-year note yield has increased to 4.261% (+8.0-bps); higher yields imply lower prices.

RELATIVE PERFORMANCE (versus USD): 10:45 GMT

GBP: +0.07%

JPY: +0.06%

CHF: +0.05%

EUR:-0.03%

CAD:-0.09%

NZD:-0.23%

AUD:-0.54%

Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): -0.02% (+1.48%past 5-days)

ECONOMIC CALENDAR

AUDUSD_Fails_at_1.0000_USDJPY_Loses_Grip_on_102.00_body_Picture_1.png, AUD/USD Fails at $1.0000; USD/JPY Loses Grip on 102.00

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TECHNICAL ANALYSIS OUTLOOK

AUDUSD_Fails_at_1.0000_USDJPY_Loses_Grip_on_102.00_body_x0000_i1028.png, AUD/USD Fails at $1.0000; USD/JPY Loses Grip on 102.00

EURUSD: An Inside Day is being formed after Friday produced a continuation of the break of the uptrend off of the March and April lows. Price has been sustained below $1.3000, with the 200-DMA at 1.2985/90 serving as intraday resistance. Should price close below the late-April swing low at 1.2950/60, there is light support in play until the 50% Fibonacci retracement off of the July 2012 low and February 2013 high at 1.2875/80.

AUDUSD_Fails_at_1.0000_USDJPY_Loses_Grip_on_102.00_body_x0000_i1029.png, AUD/USD Fails at $1.0000; USD/JPY Loses Grip on 102.00

USDJPY: Last week I said: “I like USDJPY higher now that US data has started to improve, and a move above 99.95 would warrant a long entry in the pair for a quick move towards 102.00.” The break of 99.95 has led to a sharp move up into the mid-101.00s, and at the time of writing, the pair had surged above 102.00 earlier today. With the Bullish Ascending Triangle in play and 102.00 reached, I’m now looking for a small pullback before the march towards 103.50 begins. I’m bullish and long from 99.95 and 100.19.

AUDUSD_Fails_at_1.0000_USDJPY_Loses_Grip_on_102.00_body_x0000_i1030.png, AUD/USD Fails at $1.0000; USD/JPY Loses Grip on 102.00

GBPUSD:The GBPUSD has slid sharply since the Bank of England’s policy meeting on Thursday, falling below the mid-April swing highs at 1.5400/20. Ascending channel support off of the March 12 and April 4 lows is at 1.5350/75 and has held up thus far. It is worth noting that the RSI uptrend that’s supported the rally since early-March has failed, and that additional failure below the 47 level (a floor in April) suggests that a new leg of weakness may be emerging.

AUDUSD_Fails_at_1.0000_USDJPY_Loses_Grip_on_102.00_body_x0000_i1031.png, AUD/USD Fails at $1.0000; USD/JPY Loses Grip on 102.00

AUDUSD: The AUDUSD continues to falter as market participants remain focused on the renewed easing cycle that the RBA has entered. Between the RBA’s rate cut on Tuesday and the decision to lower the 2013 growth and inflation forecasts on Friday, the AUDUSD has held below $1.0000 despite several attempts to reclaim the psychologically significant figure today. I’m bearish and short from 1.0150.

AUDUSD_Fails_at_1.0000_USDJPY_Loses_Grip_on_102.00_body_x0000_i1032.png, AUD/USD Fails at $1.0000; USD/JPY Loses Grip on 102.00

SP 500: No change as a potential Bull Flag forms: “The headline index remains strong although there is some theoretical resistance coming up (this is unchartered territory, so forecasting price relies heavily on valuations, mathematical relationship, and pattern analysis). As first noted in mid-April, 1625 should be a big figure where sellers come in: channel resistance off of the February 25 and April 18 lows (drawn to the April 11 high) aligns neatly with the 100% Fibonacci extension off of the December 28 (fiscal cliff) and February 25 (Italian election) lows. It’s hard to be bearish risk right now, but it is worth noting that the divergence between price and RSI continues, suggesting that few new hands are coming into the market to support price (recent volume figures would agree).”

AUDUSD_Fails_at_1.0000_USDJPY_Loses_Grip_on_102.00_body_x0000_i1033.png, AUD/USD Fails at $1.0000; USD/JPY Loses Grip on 102.00

GOLD: No change: “Price has rebounded nicely following the dramatic sell-off in the beginning of April, yet remains contained by the crucial 61.8% Fibonacci retracement at 1485/90. This “Golden Ratio,” if achieved with a weekly close above, would suggest that a major bottom is in place, setting up for a rally back towards 1565/70 at a minimum. If the US Dollar turns around, however (as many of the techs are starting to point to), then Gold will have a difficult gaining momentum higher.”

— Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

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Analys från DailyFX

EURUSD Weekly Technical Analysis: New Month, More Weakness

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What’s inside:

  • EURUSD broke the ‘neckline’ of a bearish ‘head-and-shoulders’ pattern, April trend-line
  • Resistance in vicinity of 11825/80 likely to keep a lid on further strength
  • Targeting the low to mid-11600s with more selling

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Coming into last week we pointed out the likelihood of finally seeing a resolution of the range EURUSD had been stuck in for the past few weeks, and one of the outcomes we made note of as a possibility was for the triggering of a ’head-and-shoulders’ pattern. Indeed, we saw a break of the ’neckline’ along with a drop below the April trend-line. This led to decent selling before a minor bounce took shape during the latter part of last week.

Looking ahead to next week the euro is set up for further losses as the path of least resistance has turned lower. Looking to a capper on any further strength there is resistance in the 11825-11880 area (old support becomes new resistance). As long as the euro stays below this area a downward bias will remain firmly intact.

Looking lower towards support eyes will be on the August low at 11662 and the 2016 high of 11616, of which the latter just happens to align almost precisely with the measured move target of the ‘head-and-shoulders’ pattern (determined by subtracting the height of the pattern from the neckline).

Bottom line: Shorts look set to have the upperhand as a fresh month gets underway as long as the euro remains capped by resistance. On weakness, we’ll be watching how the euro responds to a drop into support levels.

For a longer-term outlook on EURUSD, check out the just released Q4 Forecast.

EURUSD: Daily

EURUSD Weekly Technical Analysis: New Month, More Weakness

—Written by Paul Robinson, Market Analyst

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You can follow Paul on Twitter at@PaulRobinonFX.

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Euro Bias Mixed Heading into October, Q4’17

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Euro Bias Mixed Heading into October, Q4'17

Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.

EURUSD: Retail trader data shows 37.3% of traders are net-long with the ratio of traders short to long at 1.68 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.07831; price has moved 9.6% higher since then. The number of traders net-long is 15.4% lower than yesterday and 16.4% higher from last week, while the number of traders net-short is 0.4% higher than yesterday and 10.5% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.

— Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

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British Pound Reversal Potential Persists Heading into New Quarter

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British Pound Reversal Potential Persists Heading into New Quarter

Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.

GBPUSD: Retail trader data shows 38.2% of traders are net-long with the ratio of traders short to long at 1.62 to 1. In fact, traders have remained net-short since Sep 05 when GBPUSD traded near 1.29615; price has moved 3.4% higher since then. The number of traders net-long is 0.1% higher than yesterday and 13.4% higher from last week, while the number of traders net-short is 10.6% lower than yesterday and 18.3% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current GBPUSD price trend may soon reverse lower despite the fact traders remain net-short.

— Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, please fill out this form

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