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US Dollar Retreats Ahead of Bernanke; USD/JPY Set to Break ¥100

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ASIA/EUROPE FOREX NEWS WRAP

The USDJPY imploded overnight, slipping by over one percent and testing prices under ¥100.00, as the continued streak of improved Japanese data has investors reconsidering their stance on the Bank of Japan. Volatility in the USDJPY couldn’t be more appropriate, given what’s due ahead on the economic docket into the end of the week.

Later today, the Fed’s June 18 to 19 meeting Minutes will be released, which will only be market moving insofar as there is a vocal minority apparent – one that seeks to extend QE3 or one that seeks to taper immediately. While the Minutes would normally garner more attention, the big Fed event on the day is Chairman Bernanke’s speech in Boston on economic policy shortly after the closing bell. The speech is entitled “The First 100 Years of the Federal Reserve: The Policy Record, Lessons Learned, and Prospects for the Future,” meaning there is scope for discussion on future policy.

Considering that Fed officials have been on the defensive since the June FOMC meeting – and the chairman himself has yet to opine – it wouldn’t be surprising to hear Chairman Bernanke utilize dovish rhetoric, if only to serve as a counterweight to the recent uptick in borrowing costs. With the Fed set to balance its tone, the BoJ on Thursday will provide the ammunition to see the USDJPY selloff into the end of the week as long as a hold prevails. This may be the last BoJ meeting marked by inaction, as the Japanese diet elections over the coming days will cement power with the pro-easing/Abenomics camp, which should pave the way for more accommodative policies in the fall.

Read more: June NFPs Support Taper Case, US Dollar – Light Data Week Ahead

Taking a look at European credit, weaker peripheral credit has fueled the EURJPY selloff, although pressure on the Euro is quite limited. The Italian 2-year note yield has increased to 1.580% (+5.7-bps) while the Spanish 2-year note yield has increased to 2.008% (+9.4-bps). Similarly, the Italian 10-year note yield has increased to 4.469% (+6.2-bps) while the Spanish 10-year note yield has increased to 4.815% (+9.7-bps); higher yields imply lower prices.

RELATIVE PERFORMANCE (versus USD): 10:55 GMT

JPY: +1.11%

AUD: +0.49%

CHF: +0.38%

EUR:+0.33%

GBP:+0.28%

CAD:+0.25%

NZD:+0.22%

Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): -0.47% (+0.57%prior 5-days)

ECONOMIC CALENDAR

US_Dollar_Retreats_Ahead_of_Bernanke_USDJPY_Set_to_Break_100_body_Picture_1.png, US Dollar Retreats Ahead of Bernanke; USD/JPY Set to Break 100

See the DailyFX Economic Calendar for a full list, timetable, and consensus forecasts for upcoming economic indicators. Want the forecasts to appear right on your charts? Download the DailyFX News App.

TECHNICAL ANALYSIS OUTLOOK

US_Dollar_Retreats_Ahead_of_Bernanke_USDJPY_Set_to_Break_100_body_x0000_i1028.png, US Dollar Retreats Ahead of Bernanke; USD/JPY Set to Break 100

EURUSD: No change as price flirts with a HS breakdown:“Risk should be contained to the June 25 high at $1.3150, looking for a break below 1.2970 to yield a move towards 1.2770/800.” 1.2807 printed to the downside before price rebounded this week, and the rejection of the 76.4% Fibonacci retracement at 1.2902 (price fell short at 1.2897 today) suggests that selling pressure remains strong. A close below 1.2800 tentatively triggers the broader Head Shoulders pattern, whose measured move points to a return to the June 2010 lows near 1.1875.

US_Dollar_Retreats_Ahead_of_Bernanke_USDJPY_Set_to_Break_100_body_x0000_i1029.png, US Dollar Retreats Ahead of Bernanke; USD/JPY Set to Break 100

USDJPY: No change from Tuesday: “The rejection of the 76.4% Fib retracement at ¥101.35/40 (May high to June low) is only a near-term setback, as the break off of the late-May to mid-June correction in the pair completed the last week of June. Furthermore, a run to RSI resistance should be accompanied by price accompanying higher towards 102.40/60. Looking to buy dips as long as 99.00/25 is held.”

US_Dollar_Retreats_Ahead_of_Bernanke_USDJPY_Set_to_Break_100_body_x0000_i1030.png, US Dollar Retreats Ahead of Bernanke; USD/JPY Set to Break 100

GBPUSD: No change: “Big picture: the GBPUSD broke the uptrend off of the 2009, 2010, and 2012 lows, signaling the beginning of a greater selloff towards 1.4200. Any rallies in the pair look to be sold; price could climb to 1.5290 (50% Fib March low to May high) on a rebound now that the GBPUSD has broken through RSI trend support off of the March 12 and May 29 lows. Price has undercut key Bear Flag support off of the March 12 and May 29 lows; and now the move towards 1.4200 appears to have begun.”

US_Dollar_Retreats_Ahead_of_Bernanke_USDJPY_Set_to_Break_100_body_x0000_i1031.png, US Dollar Retreats Ahead of Bernanke; USD/JPY Set to Break 100

AUDUSD: No change: “Fresh selling has provoked an even steeper decline in the AUDUSD, with the pair falling towards the 38.2% Fibonacci retracement off the 2008 low to the 2011 high at $0.9141. While fundamentally I am long-term bearish, it is worth noting that the most readily available data shows COT positioning remains extremely short Aussie. Bullish divergence on the daily chart has formed once more, suggesting that consolidation or perhaps a small rally back towards 0.9330/420 is due; or another quick, sharp drop is necessary to clear the technical discrepancy.”

US_Dollar_Retreats_Ahead_of_Bernanke_USDJPY_Set_to_Break_100_body_x0000_i1032.png, US Dollar Retreats Ahead of Bernanke; USD/JPY Set to Break 100

SP 500: No change: “A brief reprieve at 1635/40 (23.6% Fib Feb low May high, 61.8% Fib May high June low [blue line]) proved only a near-term stumbling block, and now price finds itself on its way towards mid-June swing highs and the 76.4% Fib retracement (May high June low) at 1655/60.”

US_Dollar_Retreats_Ahead_of_Bernanke_USDJPY_Set_to_Break_100_body_x0000_i1033.png, US Dollar Retreats Ahead of Bernanke; USD/JPY Set to Break 100

GOLD: No change “Gold has fallen into the 10/20 RSI support region, where price has held on numerous probes lower ultimately producing a short-term rally. More recently, daily RSI has only dipped into this region in mid-February and mid-April…Basing just below $1200/oz shouldn’t be dismissed, as at 1189.91 lies the 100% extension of March high/April low/April high move, as well as the 61.8% extension of the October high (post-QE3 announcement)/April low/April high move at 1192. It should be noted that the rally off of Friday’s low has produced a maximum of +7.36% so far, eclipsing the rebound seen from late-May to early-June, when Gold rebounded by +6.36%.”

— Written by Christopher Vecchio, Currency Analyst

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

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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