Higher stockmarkets overnight will give risk sentiment a positive lead during the Asian trading session. After failing to consolidate its break below 1.0200, the danger for the AUD/USD would seem to be a topside short-squeeze and EUR/JPY may also gather enough momentum to test previous lows at 122.50.
The recent EUR/USD sell-off looks to be losing momentum and with Sovereign bids ahead of the psychologically important 1.3000 level, it’s not surprising to see some buyers emerging after a 700 pip fall. Obviously there is quite considerable scope for a bullish retracement (see chart) but again much of what happens in Asia will depend on EUR/JPY.
EUR/JPY looks like it has put in an interim top and is currently in retracement mode with a target at the 38.2% pull-back level near 117.20 (see chart). The Nikkei is likely to get a boost today from higher overseas markets and this should underpin JPY-crosses sentiment during Asian trade. Resistance levels start at prior lows near 122.50.
USD/JPY is back trading near its previous important support level at 92.25 and similar to the crosses, the bull trend is retracing and the question we need to answer is for how long and how far this retracement will go for. I still prefer the sell-rally play with an interim top in place near 94.50.
AUD/USD finally breached a large barrier at 1.0200 after some exceptionally high turnover but with more heavy support seen at 1.0150, in the form of barriers and Sovereign interest, the dip below 1.0200 was short and sharp. Stick to range trading mode here with edges at 1.0150/1.0350 but the danger on the day would seem to be to the topside. There is a raft of minor economic data which shouldn’t have any major effect.
EUR/CHF has bounced nicely off trendline support at 1.2125 but should hit solid resistance at previous lows near 1.2260.
Cable is still trying to close last Friday’s “Moody’s” gap to 1.5250 and is supported by option interests ahead of 1.5050.
Good luck today.