Talking Points:
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- Thursday of this week brings three events that could have big implications for price action across markets. We looked at each of those in this morning’s Market Talk, and during this webinar, we got more in-depth by looking at extrapolated setups around each event.
- The first market that we looked at was USD/JPY, as a significant support break of the 110.00 level took place earlier in the day, and this can be evidence of safe-haven flows driving into the Yen ahead of Thursday’s batch of event risk. Given the potential for extreme USD-volatility around the James Comey testimony on Thursday morning, we looked elsewhere for Yen plays.
- EUR/JPY has two support zones that could open the door to bullish setups. The ‘S1’ zone of support runs from 121.67-121.95, while the ‘S2’ zone of support straddles the 120.00 psychological level between 119.90-120.32.
- GBP/JPY meanwhile, has broken below a significant level of 141.59; and this can open the door to bearish continuation approaches going into Thursday.
- We then moved over to look at the Euro around this Thursday’s ECB meeting. The Euro is stronger as growth has continued running high, leading to the idea that the European Central Bank may be nearing the end of their stimulus outlays. Despite the continued dovish comments from Mario Draghi, the Euro continues to run-higher; and this can open the door for a ‘buy the dip’ setup around Thursday’s ECB meeting, much as we saw around the bank’s April rate decision.
- For topside Euro plays, EUR/JPY may have a more amenable setup, particularly if the support zone from 121.65-121.95 can come into play.
- We also looked at the prospect of bullish continuation setups in EUR/AUD around the 1.5000 level of support.
- EUR/NZD could be attractive for Euro-weakness plays.
- EUR/GBP is working with the resistance side of a recent range; and given some of the nearby swing-high points of resistance, the door can be opened for bearish plays in the pair.
- We then moved over to Sterling ahead of Thursday’s U.K. elections. GBP/USD has been working within a 400-pip area after the Theresa May fueled-breakout of April on the announcement of early elections. Thursday’s event can propel price action on either side of this zone, at which point a directional bias could be assigned.
--- Written by James Stanley, Strategist for DailyFX.com
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