Saxo Team of Analysts - HK
Saxo Capital Market HK Ltd
Post-NFP USD bull trend weakens
GBPUSD could be primed for a move towards 1.46
Rate spreads suggest NZD remains overpriced
Key FX developments today
The spike in USD strength after Friday's nonfarm payrolls data generally failed to carry through into the Asian and early European sessions today, as EURUSD consolidated back toward 1.0800 briefly and USDCHF even nipped parity before bouncing again.
But the greenback found sellers around key levels, keeping the USD bulls tactically happy.
USDJPY found additional upside early on, even as the USD was consolidating elsewhere. The JPY weakness, however, faded later in the day as risk appetite came under pressure in the early New York equity trading session.
Interesting to see JPY responding to risk-off when at the same time we have interest rates poking higher.
Looking ahead
We held key tactical levels in most USD pairs, so now it is about seeing follow through higher for the greenback from here to new highs for the cycle (with discomfort for bears if today's USD supports are taken out).
Charts: GBPUSD
There were few technical developments on the day today, but we will highlight GBPUSD where we have key UK data (earnings and employment) on Wednesday, as sterling, has been trying to play the pro-cyclical Bank of England/Federal Reserve correlation game since the strong US data on Friday.
This is a bit surprising, given the dovish blast from BoE governor Mark Carney and company last week in what was likely an attempt to stave off excess sterling strength versus the euro.
After Wednesday, we'll see whether the scenario here in GBPUSD remains one of a choppy descending channel or an inverted head-and-shoulders scenario targeting 1.4600 eventually.
We prefer the latter scenario, though strong UK data could put a squeeze on fresh shorts.
Charts: NZDUSD
The technical trigger here is a bit more clearcut than elsewhere, as AUDNZD action today has criss-crossed the 200-day moving average and NZDUSD has recently found support near the 61.8% Fibo retracement.
It feels like the technical interest in kiwi trades could be more significnat than elsewhere given these types of triggers for a view. Australian versus New Zealand rate spreads suggest that the kiwi is more mispriced (on the strong side, i.e., AUDNZD should theoretically trade higher and the NZ/US rate spread has touched new lows for the cycle. A break of the sub-0.6500 area supports here could quickly open up for a test of the cycle lows just below 0.6250.
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