The highlights from overnight were that US CPI came in slightly below expectations, UK employment improved slightly and the CAD outperformed the other majors in relatively thin trade. It will be another quiet day on the Asian economic calendar.
EUR/USD triggered stop-loss sell orders below 1.2310 in early European trade and fell sharply to 1.2260 before consolidating. The EUR had been trying to turn around against the AUD and the JPY but both were rejected quite sharply and the market is obviously still uncomfortable about holding EUR longs against any other currency. EUR/GBP fell in early London trade after the UK job data and EUR/CAD was the stand-out in North American trade, and the downtrend looks to be back in control there (see chart). There is important EUR/USD intraday support at 1.2240 and a break below that level targets 1.2140; overall bias tending towards bearish again.
EUR/CAD daily chart
USD/JPY did poke its head above 79.00 just before the US CPI data, which came in marginally below expectations. Nonetheless US yields are still trying to edge higher and if they continue to do so, then this will drag USD/JPY higher. The rates market probably won’t do much until Bernanke’s Jackson Hole speech on August 30th so USD/JPY will likely stay in tight ranges. Corporate sellers now reported at 79.10 with stop-loss buyers above 79.15; bids are now solid at 78.55/60.
EUR/JPY is still stuck in its wide consolidation range between 95.80 and 97.80.
AUD/USD tried to force its way lower in early European trade but when EUR/AUD failed to convincingly break above 1.1780 and started to retrace, the AUD bears started to cover. The strong CAD move also encouraged AUD short covering. Interbank dealers report good sized buying interest near 1.0435. Initial short-term technical resistance lies at 1.0515 (see chart).
AUD/USD H2 chart
Regardless of what happens overnight, the CAD seldom moves during Asian trade and today is likely to be no exception.
I’ve read one report of increased demand for the GBP at today’s London fix and if that report seeps through the market then we could see the GBP edge higher ahead of that event. Short-term support-resistance parameters lie at 1.5665/1.5700.
Good luck today.