– Overall, the general tone is quite cautious, with many now looking ahead to key data releases this week out of the US, China and New Zealand, while also being focused on earnings season and fiscal developments in the Eurozone and UK. All of these are factors that could sway investor sentiment in either direction, and we would expect volatility to pick up substantially over the next 48 hours. Technically, price action suggests that whatever the results this week, the market will look to interpret the developments as net USD
bullish. The Euro
has stalled out by some major trend-line resistance, while currencies like the Yen
seem to have found some strong resistance against the buck as well. Meanwhile, the USD Index confirms, with this market also bouncing off of critical medium-term support. While signs of USD strength against the regional currencies are not as obvious, we favor USD buying against these currencies as well, with prices at attractive levels for USD bulls on a cyclical basis.
Despite the continued downside pressure to fresh 2010 lows below 9.50, longer-term technicals show room for plenty of corrective upside. We do not recommend buying at current levels, but would instead wait for a dip to 9.40 to look to buy, or waiting for a bounce and looking to buy an upside break beyond 9.55. Any additional downside from current levels should be limited.
A very well defined bear channel dating back to mid-2009 looks to have finally been violated, with the market rallying sharply back above 8.00 and suggesting that a key low has been set down by 7.67, in favor of additional gains over the medium-term back towards the 8.40-50 area. We would recommend looking for opportunities to buy below 8.00.
Remains under pressure since breaking down from a head & shoulders top that could now project additional weakness over the coming days into the 7.30’s. Nevertheless, we continue to maintain a broader bullish outlook here and would recommend looking to take advantage of any oversold interday studies, to look to establish a meaningful long.
This market has yet to break down through the neckline of its head and shoulders top and continues to consolidate above 6.30 despite the broader USD declines. As such, our overall outlook remains constructive with an eventual rally seen back above 6.73 over the coming weeks. Only a close below 6.30 gives reason for concern.
Has been in an impressive bull channel since mid-March, with the market rallying to the 9.80 area ahead of the latest minor pullback. Look for some additional weakness over the coming days, with a fresh channel higher low now sought out in the 9.50 area, ahead of the next upside extension beyond 9.80.
Although the market remains under pressure and appears to be consolidating just over its yearly lows, the cross has also managed to impressively hold above the 13.50 figure on a close basis. Look for a close back above 14.00 this week to confirm basing and open a fresh test of the recent range highs by 14.50 further up.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
If you wish to receive Joel's reports in a more timely fashion, e-mail firstname.lastname@example.org and you will be added to the "distribution" list.
If you wish to discuss this topic or any other feel free to visit our Forum page