More soft data, (D/G,Friday) undermines the US$ ahead of Wednesday's FOMC Meeting.

More soft data from the US, this time the Durable Goods Orders, undermined the dollar at the end of last week and appears to give the Fed further reason to be cautious about raising rates at any time in the near future. This week’s highlight will be the FOMC Meeting and rate decision, but no change looks likely in rates until September at the earliest, and only then if we see a pick-up in the economic numbers. The Eurogroup meeting achieved very little on Friday apart from kicking the whole issue out to the new deadline for Greece to come up with their economic reform package, now on May 25. The FOMC aside, the other main points to watch this week will be on Central Bank policy decisions by the BOJ (Wed) and RBNZ (Thur) as well as Provisional Q1 GDP data from the US (Wed) and CPI and Jobs data from the EU and Germany (both Thur).

EUR/USD: 1.0868

The dollar finished the week under further pressure from the release of more soft US data, this time being turn of the Durable Goods Orders to disappoint, following on from the recent lukewarm data on retail sales, employment and housing starts. While the headline number rose strongly, to 4.00% in March (v expectation of 0.8%), ex-transport orders dropped to -0.2% (v expectation of +0.7%) and came on top of a 2.2% downgrade of the previous month, not making for a good look ahead of this week’s FOMC Meeting.

The Euro group meeting got nowhere with regards to solving the Greek debt issue apart from kicking the whole thing down the road for another month. The new deadline for the Greek Government to produce a detailed list of economic reforms, in order to receive further funding, will be May 25. Ahead of that,  the next big test is on May 12 when Greece is due to repay a Eur 750 million loan to the IMF. Eurogroup president Jeroen Dijsselbloem said after the meeting in Latvia that “time is running out”  to secure the new bailout terms amidst general dissatisfaction with the progress in Greece.

Elsewhere, the German IFO business climate rose to 108.6 in April, above expectation of 108.4, while the outlook soured a little, with the Expectations Gauge, falling to 103.5, below the expectation of 104.5.

The week will both begin and end relatively quietly, but there will be plenty of action in the middle, with Wednesday being the peak interest when the FOMC Meeting is held. No change is expected  in policy this month (no press conference is scheduled), and given the soft data that has been coming from the US it looks as though June can also be ruled out for any possible rate hike, which for the time being, would appear to keep any further dollar strength in check.  The Fed, has made it clear that any rate hike will be data dependant, with inflation and employment being the main points of focus. Should they disappoint following Wednesday’s meeting, then September will be a more likely outcome for any move in rates.

Technically, the Euro made it to 1.0900 on Friday and further gains look possible, where the next hurdle would be the Fibo resistance at 1.0911 (76.4% of 1.1034 /1.0461). Above this may be tricky today, but further gains would see the Euro head on towards 1.0954 (7 Apr high) and then to the 1.1034 pivot, above which would put any thoughts of an immediate return to the downtrend on hold.

Back to the downs side, bids will arrive at 1.0800 and then at 1.0760 (100 HMA) and at 1.0740 (200 HMA). Below 1.0700, which is looking rather unlikely in the near term, would head to the minor double bottom at 1.0660/65 and then to minor Fibo levels at 1.0645 and 1.0600, below which would then take another look at the congestion ahead of 1.0500.

With the 4 hour and daily indicators looking positive, buying dips and looking for a break of 1.0900 seems to be the near term plan. The DXY (see report) is not a good look for dollar bulls right now, so keep stops tight, as a run to 1.1000/50 would not surprise in coming days, possibly after the Fed sits on its hands and does nothing on Wednesday.

Economic data highlights will include:

M: US Markit Services/Composite PMI’s, Dallas Fed Mfg Business Index

T: Case Schiller House Price Index, Consumer Confidence, Richmond Fed Mfg Index

W: German Retail Sales, EU Consumer Confidence, Economic Bulletin, German Provisional CPI, US Provisional Personal Consumption/Expenditure, GDP, Pending Home Sales, FOMC Meeting/Interest Rate Decision

T: EU/German Unemployment, EU CPI, US Personal Consumption/Expenditure, Jobless Claims, Personal Spending/Income/Consumption Expenditure

F: Labour Day.

Meta Trader – AxiTrader    EUR/USD: 4 Hour

USD/JPY: 118.90

US$Jpy broke lower from its tight range near 119.50 following the release of the soft US data, breaking  and closing below 119.00, close to the lows of 118.82.

While the shorter term indicators point to further losses, the dailies are flat and therefore I suspect that further choppy trade looks likely, albeit with a mild downside bias.

The initial support levels to watch is right here at the daily cloud base at 118.90, which lies just ahead of Friday’s low. A break of this would then open the path for a run towards last Monday’s low at 118.52 below which, the next  support levels to watch, are at the 26 March low (118.32), the Fibo support at 118.20 (61.8% of 115.85/122.02) and at 118.00, but below which there is not too much to provide support until 117.30 (76.4%).

The topside is going to find trouble getting back to 119.50 or Friday’s high of 119.65 in the short term, and for now, rallies towards this area look to be a sell opportunity.

Further out the points to watch remain unchanged. A sustained break of 120.00, would open the way for a rally towards 120.35 (daily cloud top), 120.85 (13 Apr high) and 121.00. As we said before, although unlikely to be seen yet, a topside break of 121.00 would open up the 20 March high at 121.20, the consolidation area at around 121.50 and the 10 March high at 122.02. If/when this level can be overcome, the way would open up for a run towards the 15 July 2007 high at 122.42, and in the longer term, the target of 124.13 (17 June 2007 high) would appear on the horizon but will take time.

The major event of the week will be the BOJ Meeting on Wednesday, although no change in policy is expected. Later in the day the FOMC Interest Rate Decision will be released.

Economic data highlights will include:

M:

T: Japan Retail Trade

W: BOJ Interest Rate Decision

T: Industrial Production, Foreign Bond/Stocks Investment, Housing Starts, BOJ Outlook Report

F: Japan CPI, Japan Mfg PMI..

Meta Trader – AxiTrader    USD/JPY: 4 Hour

GBP/USD: 1.5187

Cable performed strongly on Friday, surprisingly so, given the uncertainties raised by the prospect of a hung parliament at the upcoming election (7 May). With little data of consequence from the UK this week, some choppy trade can be expected as all eyes focus on political events.

Technically Cable has risen to meet the strong resistance offered by the combination of the major Fibo level (23.6% of 1.7191/1.4565) and the 100 DMA at 1.5190. This is currently holding, but Cable appears to be making a topside break above the top of the long term descending channel, and a break of 1.5200 would trigger stops, potentially taking it towards 1.5269 (5 March high) and then to 1.5315 (76.4% of 1.5551/1.4565).

The downside will find bids at 1.5120 (channel top) and at 1.5100, below which would then see a return towards minor support at 1.5080 and 1.5060, ahead of the Fibo support at 1.5040 (23.6% of 1.4565/1.5191), but which for the time being appears out of reach.

Although Cable looks well underpinned right now, I would not want to be long as we approach the elections as the turn around in the event of a hung parliament could be very sharp once it becomes clear that there is likely to be economic chaos as the various parties try and promote their own very different agendas.

Economic data highlights will include:

M:

T: UK Provisional Q1 GDP

W:

T:

F:

Meta Trader – AxiTrader     GBP/USD: 4 Hour

USD/CHF: 0.9531

US$Chf was largely left out of the action on Friday, and closed more or less unchanged, after a range of 0.9509/0.9573.

There is no change in the outlook, where, on the downside, another decline would test 0.0.9500 and then 0.9480, where the 200 DMA may well continue to hold the dollar up, but below which would head towards the 3 April low at 0.9453. Below here would see an acceleration towards 0.9400 and to the 20 Feb low at 0.9370, although this is some way off yet.

A turn higher will find offers at Friday’s high and then at 0.9590 (100 DMA) above which will see a return to the 0.9600/0.9700 band, but seem unlikely in the short term.

Meta Trader – AxiTrader    USD/CHF: 4 Hour

AUD/USD: 0.7821

The Aud performed strongly on Friday, briefly almost regaining the 17 April high at 0.7842 (Friday high 0.7840) after the release of the soft US data, before closing at 0.7820.

The line in the sand is therefore drawn at 0.7840/45, above which would trigger stops and open the path for further gains towards 0.7884 (26 March high), 0.7904 (25 March high) and to the trend high at 0.7937. While the indicators do point higher, it may find further gains a bit of a struggle today in the absence of any data and ahead of a speech tomorrow morning from RBA Governor Glen Sevens, who may well take the opportunity to talk the Aud lower once again.

The downside will now find support at 0.7800 and then at the 100/200 HMA’s which are closing at around 0.7750. Below there will find bids at 0.7725 and 0.7700/10.

Further out, below 0.7700 would head to the week’s low at 0.7682, ahead of the minor Fibo supports at 0.7665 and 0.7620. If/when we ever head back below 0.7600, decent support would lie at 0.7575, 0.7550 and at the trend low of 0.7532 (2 April low). Below this, the RBA’s line in the sand at 0.7500 will provide stronger support but a break of which would open up the way to 0.7414 (Oct 2010 low).

Look for a choppy session. Use 0.7785/0.7845 as a guide, while waiting for the words of wisdom tomorrow from Mr Stevens.

Further out, with a May rate cut still in the wind, the upside for the Aud maybe somewhat limited.

Economic data highlights will include:

M:

T: RBA Glen Stevens Speech

W:

T: Private Sector Credit

F: AIG Manufacturing PMI, PPI, China Official Mfg/Non Mfg PMIs..

Meta Trader – AxiTrader    AUD/USD: 4 Hour

NZD/USD: 0.7584

The Kiwi was unable to join in the gains seen elsewhere against the US$ on Friday and closed unchanged at 0.7580. The RBNZ comments last week indicating that no rate hike is being considered did not help the cause but neither did the large short AudNzd positioning, waiting for a break down through parity.  Having seen a low of 1.0036, the cross had rallies strongly to reach 1.0310, squeezing the shorts badly.

The RBNZ Meeting will take place on Thursday, with their  interest rate decision to be released just 3 hours after the FOMC result, although at this stage is seems unlikely that we should expect any action from either central bank.

Technically things remain the same as Friday.

The immediate resistance is again seen at 0.7600/10 and 0.0.7625 where the 100/200 HMAs are crossing). Above this could then see a squeeze back to minor levels at 0.7635 and at 0.7655. Above here looks unlikely today, but further gains would see a run towards 0.7700 and back to the 0.7740 trend high.

The downside will find buyers at 0.7565 (100 DMA), which could act as a medium term pivot and at the Thursday/Fridays lows at around 0.7540. Below 0.7530 (38.2% of 0.7175/0.7742) would run towards 0.7500 and 0.7460 although at this stage such a move seems unlikely.

Look for more choppy action close to current levels but with a mild downside bias.

Economic data highlights will include:

M:

T:

W: NZ Trade Balance, ANZ Business Confidence

T: NZ Interest Rate Decision, Building Permits

F:.

Meta Trader – AxiTrader    NZD/USD: 4 Hour

EURJPY: 129.25

EURJPY: 129.25 the cross traded with a choppy but overall positive bias last week in making a higher low (127.44) and higher high 130.10 and looking as though 130.00 could come under pressure again in the next few days. If so, then beyond here would target 130.40 (daily cloud base) and 130.85 (weekly Tenkan) above which would want to take another look at the 24 March high, at 131.50, and the 18 March high at 131.70.

The downside will see bids at the daily Kijun (128.80) and then at the Tenkan (128.05). Buying dips seems to be the plan.

Meta Trader – AxiTrader     EURJPY: Daily

GBPAUD: 1.9400

GBPAUD: The cross  had another volatile ride last week, in trading a range of 1.9096/1.9455 before finishing pretty much in the middle, much the same as the previous week, albeit slightly higher. The short term movements remain very difficult to pick and further choppy trade either side of the 100 DMA (1.9236) may be the outcome this week, although the daily momentum indicators do seem to be picking up a slightly positive bias. Rising trend support is containing the downside, currently at 1.9150, but a break of which could take the cross back to 1.9000 and possibly to 1.8826, the low of 4 weeks ago. Below this, the base of the channel and the 200 DMA are at 1.8650. The topside will see sellers once more at 1.9460, above which would test the top of the channel, currently at 1.9520. Overall trading the wide range of 1.9000/1.9520 seems to be the plan once again, with a stop and reversal in the case of a break of either side.

Meta Trader – AxiTrader     GBPAUD: Daily

EURGBP: 0.7155

EURGBP: 0.7155. The cross had a volatile week within a 0.71216/0.7230 range and more of the same would seem to lie ahead. The approaching UK election and the ongoing  issues in Greece are front and centre of attention so event risk is the order of the day. I would not be too married to a position in either direction, but would tend to play the range, using 0.7100/0.7250 as a guide, or within that, 0.7115/0.7215. Keep stops tight on either side of the larger range in case of a larger directional move on the back of some political event/statement..

Meta Trader – AxiTrader     EURGBP: Daily

NZDJPY: 90.25

NZDJPY: This has been an interesting cross recently and remains so after having apparently made a false break to a new trend high of 92.40 before reversing sharply at the end of the week to close right on the 200 DMA at 90.25. With the daily indicators having once again turned lower  a break of the rising trend support at 89.85 could signal deeper losses towards the 100 DMA at 89.00, below which could see an acceleration towards 87.00, although this seems a while away yet.

A return to the topside would see sellers at the 100/200 HMAs at 90.90 and at 91.20. Selling into strength towards there levels with a SAL above 91.50 seems to be the plan.

Meta Trader – AxiTrader    NZDJPY: Daily

DXY: 96.85

After a choppy week, the DXY turned sharply lower once again on Friday, after the weak US data, and finished just above the week’s lows of 0.9675. The momentum indicators, (as per the charts, below) are looking increasingly negative and it would seem that for the time being the dollar is going to remain under pressure for a while to come.

Beneath the minor rising trend support at 96.75 would see a run towards the recent lows of 96.32 ( 6 April) and 96.17 (26 March), below which there is not too much to prop the index up until 95.48 (23 Jan high) and  95.34 (23.6% of 78.90/100.39). This area (95.30/50) acted as strong resistance on the way up and if seen should provide decent support on the way back down although if broken, the DXY could feasibly head back towards strong support at 94.30/35 (38.2% of  84.47/100/39 and the 100 DMA).

The topside will now see nearby sellers at 97.00, above which would head back into the choppy consolidation area where minor Fibo resistances will arrive at 97.53 (23.6% of  99.98/0.9675) and at 98.00 (38.2%). Further out 98.75 (61.8%) and 99.22 (76.4%) will provide levels to watch ahead of 100.00.

Although looking somewhat distant right now, targets beyond 100 remain unchanged at  100.39 (13 Mar high) and at 101.77 (61.8% of 121.02/70.69) a break of which would head towards the March 2003 high at 102.15. In the longer term the Jan 2003 high at 103.20 would come into view but right now looks as though it will take a while to get there.

The bigger picture outlook remains unchanged in that that the lower price action from the 100.39 trend high is seen as part of a larger consolidation pattern. Below  96.32 (6 April low) and the 95. 35/50 band could be seen as the third leg of a pattern that extends possibly to the 94.30 area, although in the long term the dollar’s  up trend is expected to resume, eventually back to and well beyond the current peak at 100.39.

Meta Trader – AxiTrader    DXY: Daily

DXY: Weekly.