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Euro, Pound Prices Weaken on Italy Woes. USD/JPY Uptrend at Risk?

Euro, Pound Prices Weaken on Italy Woes. USD/JPY Uptrend at Risk?

Daniel Dubrovsky, Strategist

Asia Pacific Market Open – Euro, British Pound, Italy Woes, USD/JPY

  • Euro and British Pound prices weakened on Italy woes as European stocks declined
  • US Dollar got a lift from risk aversion and a speech from Fed Chair Jerome Powell
  • AUD/NZD long still in play while USD/JPY uptrend may be at risk on bearish signal

We just released our fourth quarter forecast for the Japanese Yen in the DailyFX Trading Guides page

Following Tuesday’s Asia Pacific trading session, the Euro and British Pound experienced pronounced declines against their major peers. This occurred as Italy’s head of the lower house budget committee Claudio Borghi noted that the country would be able to resolve its problems with its own currency. Deputy Prime Minister Luigi Di Maio then said that the government is not willing to exit the Euro or the EU.

Reassurance from the leader of the Five Star Movement (Di Maio) offered little respite for Euro prices though as he reiterated that they will not be backing down from their 2.4% budget deficit target. One that could be rejected by the European Commission. Most EU benchmark stock indexes gapped lower, offering a lift to the anti-risk Swiss Franc and Japanese Yen. The US Dollar capitalized on losses in EUR & GBP.

There was a pickup in equities towards the latter half of Tuesday’s trading session as the S&P 500 gapped higher, but gains were paired as the index ended the day little changed. The US Dollar edged cautiously to the upside as Fed Chair Jerome Powell spoke at the NABE conference in Boston. Mr. Powell backed ongoing gradual hikes for an ‘extraordinary’ economy. DXY closed at its highest since August 24th.

Wednesday’s APAC trading session contains a rather quiet economic calendar docket, leaving sentiment the primary driver for FX and stocks. After yesterday’s status quo RBA rate announcement, we still remain long AUD/NZD as the RBNZ remains relatively dovish compared to its Australian counterpart. Meanwhile the EUR/USD short opportunity remains on standby as we closely watch the Euro’s reaction on key support.

USD/JPY Technical Analysis – Bearish Engulfing

In our Q4 Japanese Yen forecast, we highlighted a critical resistance barrier that could have prevented the dominant uptrend from March resuming. That barrier has been breached at 113.06 but now a bearish engulfing candlestick pattern has formed at the most recent peak. While this may be a precursor to a reversal, confirmation of one would be needed via a daily close under the near-term rising support line.

USD/JPY Daily Chart

Euro, Pound Prices Weaken on Italy Woes. USD/JPY Uptrend at Risk?

US Trading Session

Euro, Pound Prices Weaken on Italy Woes. USD/JPY Uptrend at Risk?

Asia Pacific Trading Session

Euro, Pound Prices Weaken on Italy Woes. USD/JPY Uptrend at Risk?

** All times listed in GMT. See the full economic calendar here

FX Trading Resources

--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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