Last week ended with quietly as the non farm payroll data failed to inject very little volatility into the currency markets as FED governors reiterated that low interest rates would probably be around for a very long time. This lack of activity continued yesterday as forex markets continued to trade against the backdrop of very thin fundamental news with much the same likely again today.
EUR/USD
A third consecutive doji cross candle on the weekly chart continues to emphasise the re-basing that is currently taking place at present as the euro vs dollar looks to create a platform of support. It is interesting to note that the low of all three week is identical suggesting that we may well see a short squeeze higher in due course, possibly to re-test the underside of resistance at USD1.3855 and beyond. Any short term reversal higher would also run into resistance from all four moving averages above, in particular the 40 week and 200 week so do not expect any rally to last very long as the longer term outlooks remains heavily bearish for the time being. Little to add to the daily chart which simply confirms this consolidating period for the eurodollar.
USD/JPY
Last week’s candle on the dollar yen weekly chart managed to close higher but failed to break above both the 9 and 14 week moving averages confirming once again the bearish tone of the pair at present. With Japan coming to the end of its financial year the current sideways price action may continue for the next period and with the 40 week moving average providing additional pressure seems set continue in a relatively narrow range. The daily chart merely confirms this view with the pair sliding lower in the short term and bouncing off the 200 day moving average which, to date, has prevented previous rallies from gaining any momentum. Friday’s wide spread up candle ran into resistance from the 40 day moving average and this short term recovery now seems to have run out of steam once again, so expect to see a move lower on the daily chart in due course.
USD/CHF
As always the dollar swiss is an inverse mirror of the eurodollar and now looks increasingly weak with 1.09 representing the ceiling of current resistance. Last week’s candle on the weekly chart was, once again, a doji shooting star which is a third consecutive bearish signal suggesting a move lower is now imminent. There is little to add to the daily chart analysis and any move lower may well re-test support at the 40 day moving average and possibly even the 200 day.
GBP/USD
The pound dollar closed on the weekly chart with a small hammer candle suggesting that we could see a bounce higher in the medium term but with the current price action still well below all four moving averages the outlook for cable remains heavily bearish. On the daily chart the pair confirm this bearish picture with both Friday’s and Monday’s candles running into resistance from the 9 and 14 day moving averages above and with all four averages continuing to point lower expect to see a further decline in due course. In the interim we may see some re-basing around the USD1.48 price region.
USD/CAD
Last week’s wide spread down candle on the dollar to cad weekly chart pushed the pair lower and back towards USD1.02 once again. The high of the week failed to hold above the shorter term moving averages which provided solid resistance to any recovery once again. Should we see the 1.02 price level breached then parity beckons in the medium term and possibly a deeper move as a result. On the daily chart prices are attempting to consolidate in the 1.0250 area where we have seen previous reversals and we could well see a repeat of the price action of late January as a result. However, any move higher is likely to be short lived with the deep price congestion above providing solid resistance to any recovery for the US dollar against the loonie.
GBP/CHF
The pound swiss remains bearish with last week’s candle closing marginally lower but still well below all four moving averages. With the price action at 1.61 we are now moving below, and away from, potential support in this area and this could indicate a deeper move in prospect, possibly as far as 1.5 in the medium term. On the daily chart prices continue to struggle and break through the 9 day moving average which “put the brakes” on last week’s attempted rally and also capped yesterday’s attempt to move higher.
GBP/JPY
The pound yen continues to slide lower on the weekly chart, weighed down by all four moving averages, and despite last week’s minor rally the pair remain heavily bearish at present. In the medium term expect to see 130 achieved and should this be breached then a steeper fall to 120 becomes increasingly likely. In the short term on the daily chart the 14 day moving average continues to prove a strong barrier to any recovery and with today’s price action breaching the 9 day moving average expect a re-test of 132 in due course.
AUD/USD
The Aussie dollar managed to break and hold above all four moving averages last week ending with a narrow spread up candle which was pushed higher on the back of the interest rate hike from the RBA. Given that we are now above this technical level and have also cleared the psychological .90 price point expect to see a re-test of the .9260 region in due course with good support coming from the 40 week moving averages. On the daily chart this bullish sentiment is repeated with the 9 day moving average now crossing above both the 14 day and 40 day averages and providing solid support to the recovery. A break above 0.9260 should then provide a substantial platform for the bullish trend to break out.
AUD/JPY
The Aussie yen continues to consolidate in a narrow trading range with last week’s candle merely
continuing the pattern of the past few months as the pair remain rangebound between 78 and 85. Whilst the pair closed above three of the four moving averages this has little significance to the tight bunching of the otherwise important indicators. The daily chart echoes this analysis with Monday’s price action once again running into resistance at 82.50 and moving lower as a result. In the short term we may see an attempt to rally higher given that we are currently trading above all four moving averages but the current technical picture is very messy.
CAD/JPY
The cad vs yen also remains range bound stuck between 82.50 and 90 to the upside. Last week’s wide spread up bar reversed the losses of the previous week with a break and hold above both the 9 and 14 week moving averages. Only a clear breakout above 90 will signal that the current consolidation has come to an end.
NZD/JPY
Another carry trade favourite which in common with many other yen cross currency pairs is currently consolidating sideways in a narrow trading channel. For this pair the key levels are 61.50 to the downside and 69.50 to the upside and a move through either of these prices will indicate a breakout from the current sideways channel.
EUR/GBP
The euro pound closed marginally higher last week ending with a narrow spread up candle but with a deep upper wick suggesting a degree of bearish sentiment is currently evident in the market. To the upside .9250 remains our interim target and should this be achieved then a break and hold above this level could signal a much stronger rally to re-test 0.96 and above. On the daily chart all four moving averages continue to provide strong support with both Friday and Monday finding an excellent platform at the 9 day moving average. With short term resistance now ahead at .9150 prices may struggle at this level but the medium term outlook remains bullish, particularly given Sterling current woes.
EUR/CHF
Not a normal chart which continues to trade in a bizarre fashion and one which I have rarely seen before. Stay out.
EUR/YEN
The euro yen remains heavily bearish in tone (despite positive equity markets) and last week’s small rally did nothing to change the medium term outlook for the pair. With all four moving averages pointing firmly lower and with the 9 week moving average in particular presenting a significant barrier expect to see a deeper move in due course, possibly as far as 115 in the longer term. On the daily chart the 40 day moving average is the key indicator to watch and with current price action failing to breach the 124 level then once again we can expect to see a deeper move to re-test 120 and below in the short term.
Dollar Index
The dollar index weekly chart continues to hover around the 200 week moving average with the last three candles sitting neatly on the indicator itself. With the 9 week and 14 week now crossing above the 40 this should provide the bullish momentum required but given the indecision that is clearly evident we could expect to see a short term move lower in the medium term. Longer term the outlook for the US dollar remains bullish.
VIX
The VIX continued to slide lower last week opening on Monday at 19.5 and ending the week at 17.25 as equity markets rose with a consequent reduction in fear. The key levels remain at 15 which we are now approaching and any reversal here will send equities lower as a result but should this level be breached then we may see a re-test of the 9.5 low of January 2007 when the S&P 500 was happily marching up towards 1500.
Oil
Sentiment on the weekly oil chart remains firmly bullish following the break above all four moving averages of three weeks ago and with 82.50 now the defining price level a break above here should open the way to $85 a barrel and $88.75 in due course.
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