Currencies Remain Under Pressure into Early Week; Technical Outlook
The fallout from the aggressive risk liquidation seen in Friday trade has rippled into the early week and markets remain under pressure as fear of contagion in the eurozone intensifies. The question of whether Greece will receive its next tranche of Eur8B is the key focus, and the added news that the country will miss budget deficit targets that were set out just a few months ago, despite a wave of austerity, has not helped matters. With markets once again on the move, we will get right into the technicals to provide a quick update of the outlook for the major currencies.
EUR/USD: The market remains under intense pressure and the latest corrective price action has now officially come to an end with a fresh lower top confirmed at 1.3690 following the drop to multi-day lows below 1.3360. This should open the door for a measured move downside extension towards our next objective by 1.3000 over the coming sessions, with only a break back above 1.3690 to delay outlook and give reason for pause.
USD/JPY:This is a market that looks like it trying very hard to establish some form of a base after recently setting fresh record lows just under 76.00. Although the downtrend remains intact and has been fairly intense, longer-term studies welcome the prospects of the formation of a material base and shift in the overall structure. Price action over the past several days has been confirming, with the market very well supported in the 76.00’s and unable to extend the downtrend to fresh record lows. From here, we look for the establishment back above the 50-Day SMA to reaffirm our recovery outlook and accelerate gains towards next key resistance by 80.25 further up. Ultimately, only a daily close back under 76.00 delays.
GBP/USD: The latest corrective price action has stalled out by 1.5715, and it looks as though the market could be in the process of carving a fresh lower top ahead of the next downside extension back below 1.5325 over the coming sessions. Below 1.5325 should then accelerate declines back under 1.5000, but in the interim, look for any rallies to be well capped ahead of 1.5700, with only a break back above to delay outlook and give reason for pause.
USD/CHF: Although daily studies are showing overbought and warn of the potential for a short-term corrective pullback, the recent daily close back above the 200-Day SMA is significant and now opens the door for the next upside extension towards 0.9500 further up. Medium-term and longer-term studies still show plenty of room for upside ahead, while the short-term outlook also remains constructive above 0.8645. Ultimately, only back under 0.8645 delays short-term outlook and would open the door for a more sizeable corrective decline. Still, even at that point, buying into dips would be the preferred strategy.
--- Written by Joel Kruger, Technical Currency Strategist
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