It’s easy with hindsight to say that Friday nights rally in the EUR was exhaustive in nature, but that is now how it looks. Overall demand for the EUR remains quite solid so I suspect that we are currently entering a period of consolidation/retracement in the EUR crosses, when severely overbought technical indicators can finally start to unwind.
The AUD should have a busy day with the RBA rate decision (no change expected so focus on the statement), trade and house price data, and the HSBC China services PMI (51.7 last time). The ranges are solidly set between 1.0350/1.0550 in AUD/USD and I would suggest trying to avoid trading mid-range. Main flows will again come from EUR/AUD and AUD/JPY.
EUR/JPY was again the leader overnight but this time it undid all the gains from Friday last. Initial support comes in at 123.15 (see chart) and yesterday’s highs at 127.00 should prove tough to overcome for the rest of this week. I prefer a bearish bias in the short term whilst further profit taking emerges but buying deep medium-term dips still seems like the logical play.
USD/JPY peeked above 93.00 in early European trade but a wave of selling in EUR/JPY finally took its toll. The Japanese market is reportedly very long of pairs like USD/JPY so further losses are certainly possible today. Initial support is at 92.10 but there are stronger levels near 91.40 (see chart) with resistance now at 93.20.
EUR/USD will find strong technical support 1.3410/30 (see chart) and buying any dips towards these levels, in line with the recent trend, is the most sensible strategy. I’d plan for some extended volatility here, so 100 pips either way, and not look for any bearish entry levels until 1.3615/25.
EUR/GBP was another pair to completely undo the big rally from Friday night. Overall the bull trend is in play but deeper dips are still possible. Cable is trading a 1.5670/1.5870 range and playing the edges here makes the most sense to me.
EUR/CHF has retraced to the 61.8% of the 1.2070/1.2565 rally at 1.2270 whilst USD/CHF is in neutral gear near .9100.
Good luck today.