USD/JPY Breaks Back Below 82.00 to Open the Door for Further Weakness
EUR/USD:The bearish reversal day from Friday has now been negated with the market racing back above 1.3700. While we would not get overly bullish at current levels, a break and close back above 1.3760 should open the door for a fresh upside extension towards 1.4000 into the mid-week. However, inability to establish above 1.3760 would suggest that price action is somewhat exhausted and could set up an inter-day double top formation, with the neckline coming in by Monday’s 1.3570 low. As such, the preferred strategy is to stand aside for now until a clearer signal presents.
USD/JPY: The market appears to be locked in some consolidation with clear directional bias not easily determined. The latest rally has stalled out by the Ichimoku cloud top to suggest that the pressure still remains on the downside for now. A daily close back below 82.00 should accelerate declines and expose the multi-year lows from 2010 just ahead of 80.00, while back above 83.70 will relieve downside pressures and shift structure back to the topside. In the interim, we remain sidelined and await a clearer signal.
GBP/USD: The market has been very well bid since reversing sharply in the previous week, with the rally now totally negating any short-term bearish sentiment following the break back above 1.6060. From here, there is scope for fresh upside towards 1.6200, but we do see some solid resistance that comes in by the 1.6100 figure in the form of the October highs and a 78.6% fib retrace off of the Nov-Dec move. As such, our preferred strategy is to look to sell into rallies towards 1.6150 on Tuesday in anticipation of yet another topside failure above the 1.6100 barrier. A daily close back above 1.6100 would however concern and expose a full retracement back towards the November peak at 1.6300.
USD/CHF: Overall price action is certainly concerning for our longer-term basing outlook with the market dropping to fresh record lows by 0.9300 thus far. However, cyclical studies are showing oversold and any additional declines below 0.9300 are not seen as sustainable. Look for the current setbacks to be well supported on a close basis above 0.9400 (see 78.6% fib of record Dec low to Jan high), with a fresh higher low sought out ahead of the next major upside extension beyond 0.9785.
Starting to hear of potential interest to buy USDs into any additional weakness, but there are still a number of large accounts looking to sell the buck across the board. We have been hearing of option barriers by 1.4000 in Eur/Usd.
Written by Joel Kruger, Technical Currency Strategist
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