There was a concerted attempt by the JPY contrarians to drive EUR/JPY lower during the second half of the Asian session and into early Europe, but very solid bids in EUR/USD near 1.3020 soaked up all of the selling pressure and EUR/JPY returned to its opening levels near 115.10 when bears started covering their shorts.
Today should be a fairly quiet day and once again it will be EUR/JPY that the market watches closest. Australian trade data will only shift the market if it’s well away from the market consensus at – AUD2.3 billion.
EUR/JPY will open at the same level as yesterday morning and bulls will not be too dissuaded by yesterday’s actions which are manifesting themselves on the hourly chart in a wedge formation (see chart), normally a continuation pattern. I’m expecting a fairly quiet session between 114.40/115.40 with a bullish bias still in place. On a more medium term basis, I still feel this pair is in for a sharper retracement at some stage and I will look to sell into exhaustive spikes above 116.50 looking for a 400/500 pip pullback.
USD/JPY is also holding on to its bullish bias but if short-term support at 87.60 breaks (see chart), then we may see some trailing stops triggered. Resistance on the day starts at 88.20 and similarly any breaks above reported barriers at 88.50 will see the top-pickers bailing out.
EUR/USD is in classic range-trading mode where it is dominated by action in the crosses, most notably EUR/JPY but EUR/AUD and EUR/CAD are also attracting plenty of turnover. The bids we reported yesterday at 1.3020 in EUR/USD proved to be very solid indeed and solid offers are also being reported at 1.3160/70. Stick to range trading this pair until some fundamental shift happens.
The AUD may attract some volatility today if the trade data is well away from expectations but don’t get your hopes up too high. Range trading is also the likely outcome for the next few days (1.0450/1.0540ish). Local Aussie dealers say that the buyers currently hold the stronger cards particularly with US asset managers looking to buy dips. As we know, if risk sentiment suddenly shifts then this AUD bias will shift very quickly as well.
Elsewhere on the order front, buy orders are reported in USD/CAD at .9780/.9800 and sell orders are reported in cable 1.6190/1.6205.
Good luck today.