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Aussie and Kiwi Rebound Alongside Gold; EUR/USD Above $1.3100

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ASIA/EUROPE FOREX NEWS WRAP

Risk appetite is on the mend on Tuesday, with the SP 500 moving rebounding higher overnight in futures, following higher the commodity currencies and Gold (back near $1400.00/oz after hitting a multiyear low at $1325.00/oz) in what has proven to be an exciting session. Earlier this morning, shortly after the European open, the European currencies were at their daily lows, but despite a stream of weak data from both the Euro-zone (German ZEW Survey (MAR)) and the United Kingdom (Consumer Price Index (MAR)), the Euro and the Sterling are trading back above $1.3100 and $1.5300 against the US Dollar, respectively.

The rallies taking place in the Australian and New Zealand Dollar run counter to the developments that propelled their dramatic sell-off yesterday (which saw the AUDUSD fall from 1.0523 to as low as 1.0289, and the NZDUSD fall from 0.8581 to as low as 0.8377). Certainly, in light of the Reserve Bank of Australia’s April meeting Minutes released last night, the fundamental backdrop is once again becoming negative for at least the Australian Dollar. The RBA indicated that it could cut rates further, and that the Aussie “remained high,” pushing government debt higher (yields low) but the Aussie unchanged.

The Euro’s gains today are quizzical for many given the weak data out, but there was one item that crossed the ticker worth mentioning that could be pegged as the catalysts for the rally. First, the EU parliament voted in favor of implementing Basel III law, which would force banks to adopt higher tier 1 capital ratios (and thus bolster their balance sheets). If banks are stronger, sovereigns are less exposed to the crisis, and in time, the self-fulfilling feedback loops ends. This, I believe, was the end goal of Eurogroup President Jereon Dijsselbloem’s commentary regarding Cyprus several weeks back.

Taking a look at European credit, peripheral yields are roundly mixed, lending neither help nor harm to the Euro on Tuesday. The Italian 2-year note yield has increased to 1.447% (+0.5-bps) while the Spanish 2-year note yield has decreased to 2.080% (-0.1-bps). Likewise, the Italian 10-year note yield has increased to 4.306% (-2.3-bps) while the Spanish 10-year note yield has decreased to 4.714% (+0.5-bps); higher yields imply lower prices.

RELATIVE PERFORMANCE (versus USD): 10:45 GMT

NZD: +0.89%

AUD: +0.59%

EUR: +0.56%

CHF:+0.40%

CAD:+0.30%

GBP:+0.17%

JPY:-1.11%

Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): +0.01% (-0.04% past 5-days)

ECONOMIC CALENDAR

Aussie_and_Kiwi_Rebound_Alongside_Gold_EURUSD_Above_1.3100__body_Picture_7.png, Aussie and Kiwi Rebound Alongside Gold; EUR/USD Above $1.3100

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TECHNICAL ANALYSIS OUTLOOK

Aussie_and_Kiwi_Rebound_Alongside_Gold_EURUSD_Above_1.3100__body_Picture_6.png, Aussie and Kiwi Rebound Alongside Gold; EUR/USD Above $1.3100

EURUSD: No change: “The pair has stalled at the 38.2% Fibonacci retracement from the Jul’12 low to the Feb’13 high at 1.3075, which presented a point of pause as expected, given that price has surged to its highest level in over a month. Last week we warned that technical divergence seen on the daily chart could lead to a pullback if not sideways price action, so I am near-term neutral with a tentative bias to buy a dip. Should the EURUSD regain traction, the 1.3245/3325 zone (80-pips) should be substantial resistance above, where prices consolidated above in late-December then failed to push through following the inconclusive Italian election results. Declines should be supported by the 8-EMA at 1.3050.”

Aussie_and_Kiwi_Rebound_Alongside_Gold_EURUSD_Above_1.3100__body_Picture_5.png, Aussie and Kiwi Rebound Alongside Gold; EUR/USD Above $1.3100

USDJPY: Yesterday I said: “After the USDJPY cleared the descending trendline off of the March 12 and March 20 highs, at 95.00/15, price sky rocketed right up to the topside rail at 99.30/55…While topside risks are still in play…price action or a move to fill the week’s opening gap are possible. Accordingly, dips into 97.50 and 96.60 are look to be bought on pullbacks.” An Evening Star candle cluster – a bearish reversal pattern – materialized on Friday, with further downside pressure today. Accordingly, I’m watching 96.60 as the ideal level to begin building longs again.” 96.60 has held, and price has rebounded back to 97.85.

Aussie_and_Kiwi_Rebound_Alongside_Gold_EURUSD_Above_1.3100__body_Picture_4.png, Aussie and Kiwi Rebound Alongside Gold; EUR/USD Above $1.3100

GBPUSD: Yesterday I said: “While the Bearish Rising Wedge move proved to be a fake out, an upward sloping channel has materialized off of the early-March lows. Recent price action from last Thursday suggests a pennant may have formed on the 1H and 4H time frames, with a test of 1.5440 due by Monday. I remain long-term bearish, but for now, I am neutral.” Price did not achieve 1.5440 yesterday and closed below 1.5320, making it likely that the ascending daily RSI trend dating back to the early-March low breaks, opening up the floor for a downside move towards 1.5245/50 and 1.5135/50.

Aussie_and_Kiwi_Rebound_Alongside_Gold_EURUSD_Above_1.3100__body_Picture_3.png, Aussie and Kiwi Rebound Alongside Gold; EUR/USD Above $1.3100

AUDUSD: On Monday I said that “Failure ultimately ensued thanks to the weak batch of Chinese data, and now the AUDUSD finds itself already back at support for the bullish structure that’s been developing since early-March. Channel support off of the March 4 and April 8 lows at 1.0390/400 is crucial, as another rejection at 66 in the daily RSI suggests that another period of weakness could be beginning.” 1.0390/400 cracked, and the uptrend in daily RSI broke as well, with the 8-/21-EMA structure compressing and close to flipping bearish. I’m neutral, but looking short now.

Aussie_and_Kiwi_Rebound_Alongside_Gold_EURUSD_Above_1.3100__body_Picture_2.png, Aussie and Kiwi Rebound Alongside Gold; EUR/USD Above $1.3100

SP 500: Is the top in? A dramatic sell-off yesterday dropped the SP 500 below the crucial 1570/75 area, former swing highs as well as the ascending trendline support off of the late-December and late-February swings lows – coincidentally the pre-fiscal cliff deal low and the post-Italian election low. We’re in a bit of “no man’s land” here, with either a close back above 1570/75 necessary for a retest of the highs, or a close below 1530/35 to signal weakness towards and below 1500.

Aussie_and_Kiwi_Rebound_Alongside_Gold_EURUSD_Above_1.3100__body_Picture_1.png, Aussie and Kiwi Rebound Alongside Gold; EUR/USD Above $1.3100

GOLD: No change: “The major support zone from the past 18-months from 1520 to 1575 gave way with fervor last week, as the combination of weak fundamentals (financial institutions scrambling for cash in Europe after Cyprus) and broken technicals produced the ideal selling climate. Precious metals in general have gotten hammered, and Gold has fallen back to the mid-March swing lows near 1380/85. A weekly close below 1430 this week leaves the possibility of a bigger dip towards 1305.”

— Written by Christopher Vecchio, Currency Analyst

To contact Christopher Vecchio, e-mail [email protected]

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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Analys från DailyFX

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 [email protected]

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 [email protected]

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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