It’s taken the FX market a while to accept the lead which it’s been getting from the debt market, but the tide now seems to have turned and the EUR is rising across the board. The speculative market is still covering some longer-term short positions so we may have a long way to go before the market gets long; in other words we could be in for some significant gains in coming weeks if the sentiment stays bullish.
EUR/CHF was the big mover overnight and many of the big macro players will start chasing this pair higher if it really starts moving. There’s no real point in looking to technical analysis which shows a horizontal line on long-term charts and a vertical line on short-term charts. Buying dips is definitely my preferred play but I will look to book some interim profit if we reach 1.2650, which is the 38.2% retracement of the big down-move to 1.0000.
EUR/JPY has steadied below 120.00 and it may well sit back and have a consolidative rest and allow ther crosses some share of the limelight. The 4-hour chart is trying to form an interim top near the important psychological level of 120.00 and there seems to be scope for a possible retracement towards 116.00 (see chart).
USD/JPY is beginning to look ripe for a sharp correction. If EUR/JPY starts consolidating and the EUR remains bid against the other majors, then we will see USD/JPY fall quite quickly. Remember the Yen has also moved incredibly quickly against the other majors over the last few months so I’m expecting CHF/JPY, GBP/JPY and AUD/JPY to start retracing pretty hard.
EUR/USD was remarkably quiet overnight prior to the Bernanke speech, trading in a 50 pip range whilst the entire focus was on the crosses. I expect to see a gradual rise in EUR/USD in coming weeks, and I’m looking at a potential 1.3250/1.3550 type range with a definite buy-dips bias.
AUD/USD is consolidating below 1.0600 and stops are building again above 1.0605 as the market tries to pick a top. The relatively positive news out of China is the biggest factor at play at the moment and the market has been ignoring some very poor domestic data. Once the data out of China turns sour, watch for a big move lower in the AUD (although possibly more of a cross play?).
Cable and USD/CHF are dependent on events in the crosses.
Good luck today.