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Euro Comes Under Pressure Into Final Session of Week; USD Poised for Gain

Euro Comes Under Pressure Into Final Session of Week; USD Poised for Gain

2011-05-20 11:56:00
Joel Kruger, Technical Strategist

Markets have been very quiet for much of the day, although we would expect to see things pick up a bit in North American trade. The Euro had initially been well bid above 1.4300 overnight, but could not hold onto gains and quickly reversed course to trade back down towards 1.4200. A widening of Eurozone peripheral bond spreads, a concerning piece on the Greek situation in the WSJ, and an admission from the Bundesbank that German growth was likely to ease somewhat, were all seen driving the market lower.

Relative Performance Versus the USD Friday (as of 11:45GMT)

  1. NZD +0.40%
  2. GBP -0.06%
  3. JPY -0.09%
  4. CAD -0.19%
  5. AUD -0.19%
  6. CHF-0.43%
  7. EUR -0.64%

Elsewhere, BOJ Shirakawa talked about both the negatives and longer-term positives of a strong Yen, following the as expected decision by the BOJ to leave policy on hold. Economic data did not really factor into price action, with only a firmer German PPI reading on the calendar. Meanwhile, Canada inflation data has come out in early North America, with the Canadian Dollar starting to sell off more aggressively on the back of the softer inflation reading.

Looking ahead, the only other economic releases for the day come from Canada retail sales set for release at 12:30GMT and Eurozone consumer confidence shortly after. On the official circuit, Fed Dudley and SNB Danthine are scheduled to speak. Comments from the Swiss central banker should be watched closely after talk of concern over the strength of the Franc has once again been making the rounds. US equity futures have dipped into negative territory, while commodities trade flat.


morning_slices_body_Picture_5.png, Euro Comes Under Pressure Into Final Session of Week; USD Poised for Gain


morning_slices_body_eur.png, Euro Comes Under Pressure Into Final Session of Week; USD Poised for Gain

EUR/USD: The corrective rally out from 1.4050 continues with the market breaking back above 1.4300 thus far. However, any additional gains from here should limited, and we would be looking for the formation of a fresh lower top in favor of the next major downside back below 1.4050. Ultimately, only a daily close back above 1.4500 would delay. A daily close below 1.4200 on Friday would help to confirm negative outlook.

morning_slices_body_jpy2.png, Euro Comes Under Pressure Into Final Session of Week; USD Poised for Gain

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.

morning_slices_body_gbp2.png, Euro Comes Under Pressure Into Final Session of Week; USD Poised for Gain

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.

morning_slices_body_swiss1.png, Euro Comes Under Pressure Into Final Session of Week; USD Poised for Gain

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

If you wish to receive Joel’s reports in a more timely fashion, email jskruger@dailyfx.com and you will be added to the distribution list.

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