Euro Puts in Bullish Weekly Close to Open Fresh Upside Extension
- Euro puts in positive weekly close; fresh upside ahead
- Yen finds renewed bids; but should be once again well offered
- China HSBC PMIs improve; help to supportive risk off dips
- Sarkozy takes hit in weekend election; weighs on Euro
- Aussie producer prices much softer; increases chances for rate cut
We have seen a fairly quiet start to the week, with most currencies consolidating recent gains against the buck. However, Friday’s bullish close in the Euro above 1.3215 does now open the door for fresh upside over the coming sessions back above 1.3300. Meanwhile, the Yen has been the one standout in Monday trade, with this currency reversing course and finding renewed bids. USD/JPY has broken back below Friday’s low to end a sequence of consecutive daily higher lows. Nevertheless, any setbacks in this major could be limited, and the improved overnight China HSBC Flash PMIs have helped to support pullbacks.
Moving on, the fallout from the French election could factor in to Monday trade, with incumbent Sarkozy putting a poor showing over the weekend. Elsewhere, Australian PPI data came in much softer than expected earlier today, and the commodity currency has been a relative underperformer on the back of this news. The development increased the likelihood of a rate cut at the upcoming meeting. The producer price results now set the stage for the more important CPI release due tomorrow.
EUR/USD: The latest round of setbacks have stalled ahead of some key multi-week support by 1.3000 and from here we still can not rule out risks for additional consolidation above 1.3000, before considering bearish resumption. Friday’s close above 1.3215 opens the door for additional gains over the coming sessions but ultimately, any rallies towards 1.3400 should be well capped. A break and daily close back under 1.3000 is now required to put pressure back on downside and accelerate declines to the early 2012 lows at 1.2660.
USD/JPY: The latest pullback from the 2012, 84.20 highs was viewed as corrective and it looks as though the market has finally found some solid support ahead of 80.00. The setbacks have stalled by the top of the daily and weekly Ichimoku clouds and we look for the formation of a fresh medium-term higher low somewhere around 80.00 ahead of the next major upside extension back towards and eventually through 84.20. Overall, this is a market that has undergone a major structural shift in recent months and we now see the pair in the early stages of a longer-term up-trend. Ultimately, only a weekly close back under 78.00 would negate. Any dips towards 80.00 should therefore be used as formidable buy opportunities.
GBP/USD: The recent break back above 1.6000 now opens the door for fresh upside towards the October 2011 peak at 1.6165. However, any additional gains beyond 1.6165 should prove hard to come by, and we once again see risks for a bearish reversal in favor of renewed weakness back down towards key support by 1.5800. A break and close below 1.5800 will then accelerate declines. Ultimately, only a weekly close above 1.6165 would negate underlying bearish bias.
USD/CHF: Our core constructive outlook remains well intact, with the latest setbacks very well supported by psychological barriers at 0.9000. It now seems as though the market could be looking to carve a fresh higher low, and we will be watching for additional upside back towards the recent range highs at 0.9335 over the coming sessions. Above 0.9335 should accelerate gains towards the 2012 highs by 0.9600 further up. Ultimately, only back under 0.9000 delays and gives reason for pause.
--- Written by Joel Kruger, Technical Currency Strategist
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