Janet Yellen’s testimony to Congress painted a slightly dovish picture, citing the need for flexibility, with the Fed unlikely to be in any hurry to raise rates, at least for the next couple of meetings or until they see further improvements in unemployment, inflation and the global growth outlook. The markets have been choppy, sending the US$ a bit lower and equities higher. More choppy trade looks to be in store today in the absence of any data, although both Yellen and Mario Draghi will be speaking, as will the BOE’s Carney. A bit of data from Australia will be the Asian focus, with the HSBC China manufacturing data being the highlight, but that aside there is not too much to go on, with China still out for the NY celebrations.
EUR/USD: 1.1337
Janet Yellen was cautious and slightly more dovish than the market generally expected in her testimony to Congress today, indicating that while the global economy remains weak, inflation remains below target and certain aspects of the domestic job market still have room for improvement, rates are likely to remain on hold and the need to be “patient”, is still required. In other words we should not expect a rate hike at the next couple of meetings, or until the data improves.
Elsewhere today, the EU did approve the deal with Greece to extend the terms bailout for another 4 months on the grounds that Greece meets certain conditions. This is just kicking the can down the road and eventually it will end in tears, I suspect.
Today is rather thin on the ground for data, although both Mario Draghi and Janet Yellen will again be speaking. Yellen has already said her bit as far as the market is concerned and Mario Draghi is not speaking on any market related topic but will be worth keeping an eye on.
Technically, the Euro has done little to change the technical picture after seeing a 1.1287/1.1357 range.
On the topside, the 100/200 HMA’s are at 1.1355/75 and will provide the initial resistance ahead of yesterday’s peak at 1.1395. A break of 1.1400 would see a return towards last Friday’s 1.1428 peak, above which the Euro could then potentially squeeze on towards Thursday’s session high of 1.1449, where we have a minor double top. The Fibo resistance at 1.1437 (23.6% of 1.2570/1.1097) will again be a hurdle but if the Euro can make a sustained run above it, then beyond 1.1450, we could head towards, the Feb 7 high of 1.1485 and possibly on to 1.1500. If we were to see a move beyond 1.1500, then we would get a run towards the 3 Feb peak at 1.1533 above which would see further sellers at the nearby Fibo resistance at 1.1542 (76.4% of 1.1679/1.1097) and then maybe towards 1.1600 (daily Kijun) and on to 1.1655 (38.2% of 1.2569/1.1097). If seen, such a rally could be seen as a potential sell opportunity, with a SL left on all short positions to be left above the 21 Jan high of 1.1680.
The downside is building strong support in the 1.1280/90 area and is backed up by the Fibo support at 1.1260 (61.8% of 1.1097/1.1533), but a break of which would head towards further bids at 1.1220 and 1.1200. Below there would see a run towards the trend lows (1.1097) and eventually beyond towards 1.1000 and lower.
Given the lack of data, expect another range trade day and again use 1.1280/1.1360 as a rough guide.
Economic data highlights will include:
Mario Draghi Speech, Janet Yellen testifies to Congress, US New Home Sales Change
Meta Trader – AxiTrader EUR/USD: 4 Hour
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USD/JPY: 118.84
The dollar climbed to a session high as Janet Yellen began speaking, only to reverse sharply back to the recent support in the 118.75/80 area as her slightly more dovish tone came to the fore.
While the indicators are generally flat, further choppy trade at close to 119.00 looks to be the most likely outcome.
Technically, apart from making a brief 2 week high, there is little change. The 100/200 HMA’s are converging at around 118.95, and in the short term we seem unlikely to travel too far from here. The daily Tenkan (119.35) will continue to be resistance but a break of which would see the dollar head towards 119.50 and back to the session high at 119.83. Beyond here, we could see another squeeze beyond 120.00 and on to the 11 Feb, 120.46 high, although unlikely to be seen today.
On the downside, below today’s 118.75 low, the next point to watch will be at the the daily Kijun (118.60) Fibo support at 118.40 (61.8% of 117.17/120.46), below which would head back to the recent 118.23 low ad to the daily cloud top, now at 118.07. Below 118.00 would then head back into the previous 117/118 consolidation area and could even see the chance of a move towards the 116.40 area, mentioned above, although right now this looks over the horizon.
Meta Trader – AxiTrader USD/JPY: 4 Hour
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GBP/USD: 1.5455
Sterling is pretty much unchanged today after the BOE’s testimony to the UK Parliament offered little new to go on and made no impact, and after trading a 1.5401/1.5476 range there is not too much to add.
Technically, Cable has again tested, but has so far been able to overcome the Fibo resistance at 1.5473 (23.6% of 1.7191/1.4950), which has proved a hurdle too far in recent weeks. If this level can be successfully taken out, then look for further gains to 1.5500, above which it all gets rather messy given the previous consolidation in the 1.5500/1.5620 area, and any upward momentum could begin to slow. The daily cloud top is at 1.5525 which should prove a hurdle to further gains as will the top of the descending channel, currently at around 1.5580 and the 100 DMA, sitting just above 1.5600.
Back to the downside, there is minor support at 1.5430 ahead of the 100 /200 HMA’s seen at 1.5420/1.5402 and then the rising trend support seen at around 1.5345, which coincides with the Fibo support (23.6% of 1.4985/1.5478) and should prove strong.
Below this would then revisit the 17 Feb low at 1.5320. Although unlikely to be seen today,1.5300 would provide the next support ahead of the Fibo level at 1.5295 (38.2% of 1.4987/1.5479)..
Meta Trader – AxiTrader GBP/USD: 4 Hour
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USD/CHF: 0.9494
US$Chf is pretty much unchanged today after a range of 0.9468/0.9522 and still holds the rising trend support.
As before, I would still leave this pair alone for a while. A break of the rising trend support, as per the chart, could yet trigger stops to take the dollar lower towards 0.9370 (20 Feb low) where it may be a buy, although below there it could head back to Fibo support at around 0.9250.
Meta Trader – AxiTrader USD/CHF: 4 Hour
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AUD/USD: 0.7822
The Aud has had another volatile session but has remained within the recent range, but looking as though a test of the topside could lie ahead.
After selling off to 0.7740 in Europe, triggered by the lower NZ inflation outlook from the RBNZ, it has since bounced around and ended up by spiking higher, to reach 0.7826, following Janet Yellen’s testimony.
The short term charts are looking a bit more positive, although there is still plenty of interest to sell the Aud ahead of 0.7850 and the Aud may well have some of the steam taken out of it if the data due today is soft, particularly the flash China Mfg PMI (previous 49.5). A reading above 49.5 would see a a squeeze to higher ground, spooking some of the shorts.
Technically, despite today’s volatility, no new ground has been broken.
On the topside, there is still plenty of interest to sell the Aud at 0.7835/45 area, near the minor descending trend resistance, ahead of 0.7850, beyond which will want to take a look at the 6 Feb top at 0.7876, which should be strong resistance. Above here could see a run towards 0.7895 (23.6% of 0.8794/0.7625) and then to the 50% pivot of 0.8230/0.7625 at 0.7925. Above this could then see a run back towards the Fibo resistance at 0.7995 (61.8% of 0.8230/0.7625) for a more sustained look at 0.8000, beyond which would trigger a serious amount of stops with the potential for a run towards 0.8100, although I don’t really see it happening.
On the downside, minor supports are seen at the 100/200 HMA’s at 0.7800/0.7790, a break of which may see the Aud back at 0.7775 and possibly at the session low at 0.7740 (daily Tenkan), although this seem unlikely today. Below there, 0.7720/25 will be the next support ahead of 0.7700, a break of which would then head to minor support at 0.7665/70 and possibly on to last Thursday’s session low of 0.7643.
In the longer term trading from the short side remains preferred, although today it may be worth waiting to see if we get a squeeze above 0.7850/70 before doing so.
Economic data highlights will include:
Chinese NY, Australian Construction Work Done, Wage Price Index, HSBC flash China Mfg PMI.
Meta Trader – AxiTrader AUD/USD: 4 Hour
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NZD/USD: 0.7477
The Kiwi took a hit following the release of the lower inflation expectation figures and fell from above 0.7525 to a session low of 0.7420, before a decent recovery late in the US session, to finish at around 0.7480.
The short term charts now look rather noncommittal as they attempt to break back above the recent rising trend support which will now act as short term resistance. Currently sitting right on this level, further gains would see another attempt to regain 0.7500 (200 HMA), 0.7515 (100 HMA) and possibly the session high at 0.7533. I would be surprised to see the Kiwi up here today, but if wrong, and the Kiwi does head higher, then look for another run up to 0.7550, where plenty of sellers are supposedly lined up, and then to the trend high at 0.7573. Above this, the Kiwi could then advance to the 22 Jan high at 0.7582 will be the next stop ahead of 0.7600 and the Fibo resistance at 0.7615 (61.8% of 0.7889/0.7175). Beyond this would open up 0.7618 (5 Jan low) and then 0.7689 (15 Jan low), ahead of the next Fibo resistance at 0.7718(76.4%).
Back to the downside, 0.7450 and the session low at the Fibo support at 0.7421 (38.2% of 0.7175/0.7573), the next target will be the 13 Feb low at 0.7410 and then 0.7400.
Below 0.7400, which currently looks a little unlikely, would head back to minor Fibo supports 0.7375 and 0.7325 (50/61.8% of 0.7175/0.7573). I don’t really see it down here for a while, but if wrong, further bids would arrive at the 12 Feb session low at 0.7313 and then again at 0.7300.
Further out, below 0.7300 would see a run towards minor supports at 0.7250 and 0.7225, and then further out we could then be in for another test of 0.7200 and the trend low of 0.7185. Below this there is little support to be seen until the spike low at 0.7115 (17 Mar 2011) and even further out, I think we are eventually headed towards 0.6962 (38.2% of 0.3900/0.8842) and possibly to the 200 Month MA at 0.6538. Don’t get excited; this is still a long way off.
Given the absence of any data today, a day of consolidation close to current levels would not surprise.
Meta Trader – AxiTrader NZD/USD: 4 Hour
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