Euro

There was plenty of volatility before and after the NFP on Friday last but the only outcome has been a further weakening of the Yen. US Treasury yields rose significantly on rumours prior to the jobs-data release and this helped USD/JPY reach new trend highs at 88.48. The jobs number was seen as something of a perfect storm for risk trades, close to expectations but not good enough to dissuade the Fed from QE activity, and therefore the Yen crosses rallied in post-data trade.

Today should be fairly quiet in Asia with very little on the economic calendar. Most attention will be on the Yen and comments from the new Japanese PM Abe in the weekend press where he started to lay out very aggressive plans for weakening the Yen and beating deflation.

We need to look to the USD/JPY weekly chart (see chart) to find the next big technical resistance level but it is an important one. The 38.2% retracement of the big fall from 110.60 to 75.60 comes in just below 89.00 and this level should be respected. The market is of course very long already so decent sized pullbacks are possible at any time and the important levels to watch will be those that attract ‘trailing stops’. I’m guessing that they will now start below 87.30.
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EUR/JPY is also in a very steep uptrend but with a top now formed on the daily chart below 116.00, (see chart) retracements are certainly possible. Even a modest pullback to the 21-day MA would take us back to 111.00 so I prefer the sell-rally strategy intraday with stops clearly above 116.00. Much will depend on how the market reacts to the Abe comments from the weekend.
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EUR/USD still looks modestly constructive overall (see chart) but short-term moves will depend a lot on what happens in EUR/JPY. If the cross suddenly starts to
retrace then EUR/USD could easily fall back towards 1.2800 without endangering the medium-term outlook. Keep your trading hat on here and don’t get carried away with big fundamental views, as we will remain at the mercy of cross flows and sentiment.
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The same applies to AUD/USD, which is stuck in a 1.0350/1.0550 holding range while the markets try to figure out whether it’s Asian growth, risk sentiment, interest rates or something else it should be focussing on? Once again, range trading is still the best option here.

The GBP and CHF aren’t really moving away from the EUR to any great degree so everyone will remain a Yen trader for now!

Good luck today.