Currencies Finding Renewed Bids in Early Monday Trade; Kiwi the Exception
While the Euro remains under mild pressure in early Monday trade, with the single currency underperforming across the board, all other major currencies have done a good job of gaining back some ground against the Greenback. The official resignation of Egyptian President Mubarak on Friday has helped to re-infuse risk appetite back into the markets and this in conjunction with higher global equities have contributed to the currency rally.
Even the Yen has found some fresh bids on the back of these latest developments, with some not as bad local GDP also contributing to the reversal in USD/JPY. Elsewhere, the Australian Dollar has regained its footing, with some better than expected housing finance data helping to fuel the relative strength. Meanwhile, the Canadian Dollar which was already a strong outperformer in Friday trade, has managed to retain its bid tone in light of the broader currency buying. But not all of the commodity bloc has been in demand on Monday, with Kiwi standing out as a relative underperformer following a much weaker than expected retail sales print. This has opened the door for some heavy cross related buying in AUD/NZD.
Looking ahead, the economic calendar for the remainder of the day is anemic, with the only notable release coming in the form of Eurozone industrial production (0.0% expected) at 10:00GMT. There are absolutely no economic releases scheduled in North America, with the only attention coming from Fed Dudley who is slated to speak at 15:00GMT. US equity futures and commodities are tracking marginally higher in Monday trade thus far.
EUR/USD:The latest rallies have stalled out well ahead of 1.3860 with the market finding some resistance by an ideal right shoulder top in the mid-1.3700’s ahead of the latest sharp setbacks. From here, the risks are tilted to the downside, with Friday’s break and close back below 1.3570 triggering the H&S topping formation and opening the door for a fresh downside extension towards the 1.3200 area over the coming days. Any rallies should continue to be well capped ahead of 1.3700 with only a break back above the figure to give reason for concern.
USD/JPY: The market continues to remain extremely well bid on dips below 82.00, with the latest surge back above 83.00 really encouraging longer-term recovery prospects and opening the door for a potential break of key topside resistance by 84.50 over the coming days. Longer-term cyclical studies certainly suggest that the market could be poised for a major bullish reversal and we would look for a break and weekly close back above 84.50 to help confirm outlook. A break back below 82.00 would concern, while ultimately, only a back below 81.00 would negate.
GBP/USD: The market looks to have once again found a meaningful top by the 1.6300 barrier, with the latest setbacks resulting in a series of daily lower tops. From here we look for a break and close back below 1.6000 to confirm bias and accelerate declines back towards 1.5750 over the coming sessions. A daily close back above 1.6200 would give reason for concern, while ultimately only back above 1.6300 negates.
USD/CHF: Although the longer-term market remains under some intense pressure with the latest declines stalling just shy of the late 2010 record lows at 0.9300, inability to establish fresh record lows followed by a break back above 0.9500 leaves us constructive with our outlook from here. Next key topside barriers come in by 0.9785 and we now look for a weekly close above this level to accelerate gains and open a fresh upside extension back above parity and towards 1.0070 medium-term resistance from December 2010. Any setbacks from here are expected to be well supported ahead of 0.9500.
Written by Joel Kruger, Technical Currency Strategist
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