Euro Clears Stops Above 1.3150 in Calendar-Light European Session
- Euro continues to chop around; no clear directional bias
- Talk of heavy right hand side fix demand in Euro attributed to overnight rally
- More Fed speakers on docket
- Fed Beige Book due later today
The data light overnight calendar left markets trading on broader global macro flows and themes. With little in the way of any new developments, price action remained quite choppy. The Euro did however manage to break above Tuesday’s highs, clearing stops by 1.3150. The technical break could now open the door for additional gains over the coming sessions into the 1.3200-1.3300 area. While we saw no specific fundamental catalyst for the upside break, there was a good deal of talk of some right hand side fix related demand in the amount of 5 yards.
Relative performance versus the USD Wednesday (as of 11:00GMT)
Risk correlated assets were also well bid on the session, with US equity futures recovering nicely and setting the stage for an upbeat and positive session of trade in North America. Looking ahead, more Fed speak is due on Wednesday, and if the comments are anything like the ones we saw yesterday, the buck could once again find bids as Fed officials continue to shun the possibility for additional monetary policy accommodation. Also due out on Wednesday is the Fed Beige Book which will offer even more insight into direction of Fed monetary policy.
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 a shorter-term bounce back towards the 1.3200-1.3300 area, before considering bearish resumption. Ultimately however, any rallies towards 1.3300 should be very well capped, while a break and close back under 1.3000, would accelerate declines.
USD/JPY: The market continues to correct from the recent 2012 highs established at 84.20 several days back, and risks still exist for additional setbacks into the 79.00-80.00 area before considering a bullish resumption. Overall, our outlook is highly constructive and we see the pair in the process of carving a longer-term base ahead of the next major upside extension into the 85.00-90.00 area. We would therefore expect to see the shaping of a fresh medium-term higher low over the coming days. Ultimately, only below 78.00 delays outlook and gives reason for concern.
GBP/USD: Failure to establish any fresh momentum on the recent break above 1.6000, followed by an aggressive bearish reversal, now suggests that the market could finally be looking to carve a top in favor of a more significant decline over the coming sessions. Look for a break and close below next support at 1.5800 to reaffirm outlook, while back above 1.6065 would be required to negate.
USD/CHF: Our core constructive outlook remains well intact, with the latest setbacks very well supported by psychological barriers at 0.9000. It now looks 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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