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Japanese Yen Rebounds After BoJ

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ASIA/EUROPE FOREX NEWS WRAP

High beta currencies and risk-correlated assets are consolidating on the day (AUDUSD: -0.06%; NZDUSD: +0.19%; USDCAD: -0.02%) ahead of major headline event risk scheduled before the start of the US trading session on Friday. Of note, the Japanese Yen is the top performer, which isn’t really a surprise considering that the Bank of Japan didn’t make any material changes to its current policies; instead, it promised to continue to expand its monetary base without issuing any specific details.

With the USDJPY declining away from ¥100.00 for the time being, the big question now is: what can provoke the pair to turnaround now that traders are cutting down on their short Yen positioning? The US 1Q’13 GDP print is the perfect catalyst that could produce a major reaction and finally produce a break of the elusive 100.00 level.

The US economy is expected to have grown by +3.0% annualized in the 1Q’13, from +0.4% in the 4Q’12, which comes as a bit of a surprise considering that US politicians produced ill-timed and poorly thought out policies in order to unnecessarily trim the country’s budget deficit (research has increasingly shown that austerity before “booms” or “peaks” in the business cycle can be counterproductive). Accordingly, in light of the payroll tax increase and the budget sequestration in March, I find the expectation for a print above +3.0% unlikely. Nevertheless, should it materialize, we should see the first print in USDJPY above 100.00 since April 2009.

Taking a look at European credit, sovereign debt in Europe is mixed overall with little deviation from the open, which fits neatly in with the narrative of the Euro being unchanged on Friday. The Italian 2-year note yield has decreased to 1.274% (-1.3-bps) while the Spanish 2-year note yield is unchanged at 1.884%. Likewise, the Italian 10-year note yield has increased to 4.067% (+1.9-bps) while the Spanish 10-year note yield has decreased to 4.241% (-2.8-bps); lower yields imply higher prices.

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RELATIVE PERFORMANCE (versus USD): 10:40 GMT

JPY: +0.58%

NZD: +0.19%

CHF: +0.12%

GBP:+0.11%

CAD:+0.02%

EUR:0.00%

AUD:-0.06%

Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): -0.14% (-0.49% past 5-days)

ECONOMIC CALENDAR

Japanese_Yen_Rebounds_After_BoJ_Will_US_1Q13_GDP_Revive_USDJPY_body_Picture_7.png, Japanese Yen Rebounds After BoJ - Will US 1Q'13 GDP Revive USD/JPY?

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TECHNICAL ANALYSIS OUTLOOK

Japanese_Yen_Rebounds_After_BoJ_Will_US_1Q13_GDP_Revive_USDJPY_body_Picture_6.png, Japanese Yen Rebounds After BoJ - Will US 1Q'13 GDP Revive USD/JPY?

EURUSD: The pair continues to cling to the $1.3000 figure, consolidating beneath the 8- and 21-EMAs for the fourth consecutive day. With an ECB rate cut being priced in for next week, traders are looking for a catalyst to revive selling: the US 1Q’13 GDP print fits the bill. Yesterday’s Inverted Hammer and today’s tempered price action suggest that a strong growth reading out of the US could revive EURUSD bears and see the pair back towards its 200-DMA at 1.2940/45.

Japanese_Yen_Rebounds_After_BoJ_Will_US_1Q13_GDP_Revive_USDJPY_body_Picture_5.png, Japanese Yen Rebounds After BoJ - Will US 1Q'13 GDP Revive USD/JPY?

USDJPY: No change: “There are two possible outcomes here: a Bearish Double Top below 100.00; or a Bullish Ascending Triangle.” I also noted that “with the daily RSI uptrend intact, I am partial to the bullish outcome, which is reinforced by price remaining supported by the 8-EMA, now at 98.85/90. The Hammer yesterday at the 8-EMA bolsters the bullish case as well.” However, price has traded below the 8-EMA, and the diagonal support for the Bullish Ascending Triangle has given way amid a break in the daily RSI uptrend. Accordingly, the USDJPY appears ripe for a pullback, which could be provoked by a weaker than expected US 1Q’13 GDP reading.

Japanese_Yen_Rebounds_After_BoJ_Will_US_1Q13_GDP_Revive_USDJPY_body_Picture_4.png, Japanese Yen Rebounds After BoJ - Will US 1Q'13 GDP Revive USD/JPY?

GBPUSD: The GBPUSD is finding modest follow through (no doubt tempered ahead of the US 1Q’13 GDP print), pushing closer towards 1.5500 now that mid-April resistance at 1.5410/15 cracked yesterday. If the ascending channel range is to continue to play out, a run towards 1.5550 shouldn’t be ruled out. Declines should be supported in the near-term by 1.5340 (8-EMA) and 1.5285/90 (21-EMA).

Japanese_Yen_Rebounds_After_BoJ_Will_US_1Q13_GDP_Revive_USDJPY_body_Picture_3.png, Japanese Yen Rebounds After BoJ - Will US 1Q'13 GDP Revive USD/JPY?

AUDUSD:Mid last week the 8-/21-EMA structure flipped bearish amid the breakdown in the RSI uptrend, coinciding with the rally off of the March 4 and April 8 lows. Fundamentally speaking, amid declining base metals’ prices and poor data out of China, it is our preference to sell the commodity currencies. Technically speaking, it is worth noting that the AUDUSD failed to find follow through on the potential basing pattern, a three day cluster of “Doji-Hammer-Doji.” Now, with back-to-back Inverted Hammers (bearish reversal candles) forming on the daily chart, alongside bullish retail sentiment, we find that it is possible that AUDUSD makes a run towards the yearly lows just above 1.0100.

Japanese_Yen_Rebounds_After_BoJ_Will_US_1Q13_GDP_Revive_USDJPY_body_Picture_2.png, Japanese Yen Rebounds After BoJ - Will US 1Q'13 GDP Revive USD/JPY?

SP 500: No change: “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.”

Japanese_Yen_Rebounds_After_BoJ_Will_US_1Q13_GDP_Revive_USDJPY_body_Picture_1.png, Japanese Yen Rebounds After BoJ - Will US 1Q'13 GDP Revive USD/JPY?

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 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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