EU Ministers Set to Reconvene; Aussie Minutes Fail to Signal Immidiate Hike
Volatility in the early week remains quite subdued as most of the major currencies continue to consolidate their respective moves from the previous week. We have however been seeing some offers emerge in the Yen, with USD/JPY breaking back above 81.00 on stop buying and M&A related activity. Elsewhere, the RBA Minutes were released and failed to indicate any need for an immediate rate hike at the upcoming meeting. This initially opened some mild Aussie selling, before the antipodean was able to regain its footing into Europe and find renewed bids on the back of some broader USD offers.
Moving on, the EU finance ministers will reconvene on Tuesday to discuss the long term solution for Greece. Although restructuring and rescheduling has been ruled out to this point, suggestions by EU Juncker for “re-profiling” of Greek debt have been better received. Nevertheless, the vagueness of the “re-profiling” terminology leaves the door open for much discussion and does not bode well for any near-term solutions, which could weigh more heavily on the Euro.
Looking ahead, there is a healthy batch of data due out on Tuesday which includes; UK CPI and DCLG house prices, Eurozone and German ZEW, US housing starts and industrial production. US equity futures and commodities prices consolidate their latest moves and trade relatively flat into European trade.
EUR/USD: The break and weekly close below key medium-term support at 1.4155 in the previous week now suggests that deeper setbacks are ahead with the market contemplating a potential drop below 1.4000. Next key support comes in by 1.4020 (28Mar low), while rallies towards 1.4400-1.4500 should be aggressively sold into. Only a daily close back above 1.4500 would negate. In the interim, we remain on the sidelines and await a clearer entry signal.
USD/JPY: After undergoing a fairly intense drop off from the 85.50 area several days back, the market looks to have finally found some support by the bottom of the daily Ichimoku cloud and could be in the process of carving out some form of a base. Look for setbacks to continue to be well supported in the 80.00’s with only a close back below 79.50 to give reason for concern. From here we see the risks for a fresh upside extension back towards the recent range highs at 85.50 over the coming days.
GBP/USD: The market is starting to give way, with the price now dropping back below the 50-Day SMA to warn of additional declines over the coming sessions. Look for deeper setbacks below 1.6000, with any rallies now expected to be well capped ahead of 1.6400. Ultimately, only back above 1.6520 gives reason for concern.
USD/CHF: Starting to show signs of basing off of the recently established record lows by 0.8550, with the market putting in a solid bullish close for two consecutive weeks and breaking back above the previous weekly high. Next key resistance comes in by 0.9000 and a break above will further confirm recovery structure and open the door for a move back towards a medium-term lower top at 0.9340. Look for any intraday setbacks to be well supported above 0.8700 on a daily close basis. Ultimately, only a daily close back below 0.8700 delays and gives reason for concern.
Written by Joel Kruger, Technical Currency Strategist
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