FX Update: Retracing one's steps

Commodity dollars continue to crumble
No major support in NZDUSD until 0.58
USDJPY could be preparing to break bearish

Key FX developments today:

The USD traded mixed, travelling sideways to weaker against the rest of the G4 currencies but pulling stronger against the very feeble commodity dollars. In this shece, tge kiwi slipped to new lows for the cycle against the US dollar and the AUD was also weak ahead of tonight's European Central Bank meeting.

The NOK and SEK were likewise weak as the market rewarded the most liquid currencies and punished the least liquid among the G10 amid weak risk appetite . Trading ranges for the day, however, were relatively modest t relative to the bigger bouts of volatility seen last week.

It was a quiet day with few developments worth noting on top of the "notes of interest" in the FX Board PDF.

Charts: EURUSD

Note that rather than focusing on the flat line level in EURUSD, the market fixated instead on the 61.8% Fibonacci retracement for support on Friday near 1.1155. The resistance now is perhaps at 1.1300 near the 200-day moving average, though the Fibonacci retracement of the selloff wave is perhaps a more credible resistance level, starting with 1.1370, but particularly the 61.8% at 1.1500.

Charts: USDJPY

As with EURUSD, USDJPY seems to be focusing on the classic 61.8% Fibonacci retracement that is common at major trend breaks. So this makes 121.80 the local focus, and then the 122.50-area Ichimoku cloud if risk appetite continues to mount a comeback.

But the level of damage inflicted by the recent selloff may leave us trendless at best and at risk of a second major bear wave (for a three-wave correction) if market confidence fails to return.

Such a move might focus on 112.60 if we have found a local top already on this bounce (and if we use a 100% projection of the first down wave).

Charts: NZDUSD

NZDUSD has slipped to new lows for the cycle with few points on the open white space below offering notable support, particularly if risk appetite sours further.

The next Fibonacci level of note here is the 76.4% of the huge wave from the global financial crisis lows coming in at around 0.5800. Note that this was the level that found support back in early 2009 and also coincides more or less with the rising trendline in a few months.

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