USD/JPY
The USD/JPY continues to struggle, heading beneath our 1st tier downtrend line. The currency pair briefly traded below the psychological 95.00 level today, but bulls quickly came to the rescue. However, the fact that the USD/JPY dipped below our 1st tier uptrend line is a negative sign for the near-term. At least we haven’t seen a high volume selloff and volume seems to be on the decline. Therefore, we could see a temporary bottom soon, likely above March 19 lows. On the other hand, we could see an accelerated movement to the downside if March 19 lows don’t hold. Fortunately for optimists, these lows are still fairly out of reach, leaving the possibility of a near-term turnaround in the mix. Hence, the next few trading sessions could prove to be critical to the USD/JPY’s uptrend.
The USD/JPY has been trending lower the last week as analysts caution of overbought conditions in U.S. equity markets. The currency pair seems to be under more downward pressure than the S&P futures, possibly indicating an oncoming selloff in U.S. equities. On the other hand, with the Carry Trade mute, investors could be hinting at a recovery in the U.S. economy with the Japanese economy lagging behind. Either way, the momentum remains to the downside in the USD/JPY for the near-term, and we’ll have to see a reversal to the upside on sizable volume for the currency pair to change course. That being said, the medium-term outlook is still bullish unless the aforementioned supports collapse.
The resilience of the USD/JPY’s uptrend will likely be determined by U.S. equities. Are we witnessing profit taking in equities, or are U.S. markets in for a second round of pain? The currency pair is getting close to testing its limits and it will be interesting to see how the USD/JPY holds up over the next few trading sessions.
Fundamentally, we find supports of 95.04, 94.83, 94.50, 94.14, and 93.89. To the topside we see resistances of 95.40, 95.69, 96.05, 96.37, and 96.66. The USD/JPY is currently exchanging at 95.30.
GBP/USD
The USD/JPY continues to struggle, heading beneath our 1st tier downtrend line. The currency pair briefly traded below the psychological 95.00 level today, but bulls quickly came to the rescue. However, the fact that the USD/JPY dipped below our 1st tier uptrend line is a negative sign for the near-term. At least we haven’t seen a high volume selloff and volume seems to be on the decline. Therefore, we could see a temporary bottom soon, likely above March 19 lows. On the other hand, we could see an accelerated movement to the downside if March 19 lows don’t hold. Fortunately for optimists, these lows are still fairly out of reach, leaving the possibility of a near-term turnaround in the mix. Hence, the next few trading sessions could prove to be critical to the USD/JPY’s uptrend.
The USD/JPY has been trending lower the last week as analysts caution of overbought conditions in U.S. equity markets. The currency pair seems to be under more downward pressure than the S&P futures, possibly indicating an oncoming selloff in U.S. equities. On the other hand, with the Carry Trade mute, investors could be hinting at a recovery in the U.S. economy with the Japanese economy lagging behind. Either way, the momentum remains to the downside in the USD/JPY for the near-term, and we’ll have to see a reversal to the upside on sizable volume for the currency pair to change course. That being said, the medium-term outlook is still bullish unless the aforementioned supports collapse.
The resilience of the USD/JPY’s uptrend will likely be determined by U.S. equities. Are we witnessing profit taking in equities, or are U.S. markets in for a second round of pain? The currency pair is getting close to testing its limits and it will be interesting to see how the USD/JPY holds up over the next few trading sessions.
Fundamentally, we find supports of 95.04, 94.83, 94.50, 94.14, and 93.89. To the topside we see resistances of 95.40, 95.69, 96.05, 96.37, and 96.66. The USD/JPY is currently exchanging at 95.30.
GBP/USD
The Cable is heading north on Friday after the U.S. released better than expected CPI, Manufacturing, and TIC Long Term Purchases data points. Meanwhile, the GBP/USD continues to experience relative strength due to the past weeks of better than expected data from Britain, including this week’s CCC number. The GBP/USD seems to be disregarding the worse than expected GDP numbers from the EU while separating itself from 1.50 once again. The Cable’s resilience above 1.50 while floating above our relatively tight uptrend line shows the bull trend is in control. There’s still no downtrend line in sight.
The barriers to large, near-tem gains are May and January highs. If the S&P rallies above 900 and the Cable manages to climb past these highs, then we could witness an excited near-term gain in the GBP/USD. However, seeing as the EUR/USD is under a bit of selling pressure while the S&P continues to battle 900 due to overbought conditions, a breakout in the GBP/USD today may not be likely since all of the correlative forces are not moving in unison to the upside. We also notice volume sloping downward, normally indicative of near-term weakness.
Despite the near-term weakness we maintain a bullish outlook on the GBP/USD trend wise unless upcoming British economic data disappoints analysts. Additionally, any large selloff in U.S. equities would not go unnoticed, and the GBP/USD would likely participate to the downside albeit at a lesser degree.
Fundamentally, we find resistances of 1.5322, 1.5389, 1.5465, 1.5544, and 1.5615. To the downside we see supports of 1.5241, 1.5190, 1.5109, 1.5052, and 1.4987. The GBP/USD is currently exchanging at 1.5247.
EUR/USD
The EUR/USD sold off earlier today after German Prelim GDP and EU Flash GDP came in well below analyst expectations with downward revisions to their previous releases. The negative GDP data dampens optimism a bit and creates an air of caution while placing further downward pressure on the EUR/USD. On an encouraging note, today’s pullback comes on declining volume. Investors entered to support price once it approached 1.35 for the 2nd time in as many days. The stabilization comes after the U.S. reported better than expected economic data all around. The defense of 1.35 shows investors aren’t willing to give into the downtrend so easily while the EUR/USD pops off of our 2nd tier downtrend line. Meanwhile, our 3rd tier uptrend line and 2nd tier downtrend lines are approaching an inflection point, meaning the consolidation could end shortly. Unfortunately, the near-term momentum is still in favor of the downside due the disappointing EU economic data coupled with what some analysts deem overvalued U.S. equities. The EUR/GBP is under some downward pressure, further emphasizing the relative weakness of the Euro.
One week after the ECB acted in rare unison to lower rates and purchase covered bonds, several governors have gone public with their discontent and seem defiant to avoid diving head first into quantitative easing. The return of instability in the ECB could cap any gains in correlation with U.S. equities since investors dislike uncertainty concerning future monetary policy. However, we’ve seen Britain’s quantitative easing policy have a positive impact on the Pound since the program’s inception. Therefore, investors may not be concerned of negative near-term downward pressure on the EUR/USD if the ECB does decide to expand its present alternative liquidity operation.
We suggest investors continue to keep a close eye on 1.35. For if this psychological cushion is pushed aside, we could see a sharp, near-term selloff towards 3/25 lows. On the flipside, if U.S. equities rally off of the positive economic data and the EUR/USD manages to participate hand in hand, watch for March highs. If March highs are conquered, we could see a nice, near-term pop. We maintain our bullish outlook trend wise unless 1.35 is taken out.
Fundamentally, we find resistances of 1.3579, 1.3604, 1.3639, 1.3659, and 1.3701. To the downside, we see supports of 1.3554, 1.3552, 1.3497, 1.3459, and 1.3416. The psychological cushion sits at 1.35 with a psychological barrier waiting above at 1.40. The EUR/USD is currently exchanging at 1.3582.
Gold
Gold continues to climb north while locking in a positive correlation with U.S. equities. The precious metal is enjoying gains and only partially participating in pullbacks. Volume is falling off, implying the present rally could experience a peak and consequential pullback in the near-term. However, the uptrend seems to be in the driver’s seat and this could continue to be the case until our downtrend line and/or the psychological $950/oz barrier. Meanwhile, gold is building up a solid base above the critical $900/oz psychological level. As a result, any near-term weakness has several lines of defense ready to act. Therefore, we have a bullish outlook for the near-term.
Meanwhile, the precious metal continues to exhibit odd behavior, including a positive correlation with equities. Perhaps gold is thriving off of rising oil and signs of inflation. We’re seeing a positive reaction to a higher than expected Core CPI from the U.S. coupled with a higher than expected headline CPI from the EU. Additionally, we may be witnessing further diversification of China’s reserves from the Dollar into gold, reducing supply and raising price.
Fundamentally, we maintain resistances of $933.40/oz, $940.04/oz, $943.18/oz, $947.81/oz, and $951.34/oz. To the downside we hold supports of $923.07/oz, $918.43/oz, $911.55/oz, $908.39/oz, and $902.12/oz. Gold is currently trading at $929.85/oz.
