US$ under pressure as rate hike expectations are delayed

Aud, Kiwi retreat from their highs and look to the China CPI today for direction.

Most of the action was in stocks today, although the dollar remained under pressure as expectations for a US rate hike were pushed back to H2 2015.  Downside momentum may slow a bit given the oversold nature of the dollar on most of the short term charts, and there is not a lot of data to drive the markets. The highlights will be the German CPI and the Rts/Michigan Consumer Sentiment. Before then Asia gets the BOJ minutes and the Chinese CPI, which might put some pressure on the Aud and Kiwi, if below par.

EUR/USD: 1.3885

The Dollar remained heavy against most of the  most major currencies today, including the Euro, as traders continued to sell it after the dovish FOMC minutes from the March meeting, although the damage was limited by the better than expected Jobless Claims, which fell by more than expected (exp 320K) to 300K.

The Euro actually traded in a relatively tight 60 point range but is currently at the top end of it and having taken out the 24 March spike high at 1.3875, it looks as though it will want to take out 1.3900 to see what lies ahead.

So far, the Fibo resistance (76.4% of 1.3966/1.3675) is capping it, but beyond 1.3900 would suggest a retest of 1.3966 and eventually 1.4000. If we ever get there, it won’t be easy to overcome as there well be plenty of option related sellers protecting it, but if/when the Euro finds the legs to head above it, there is not a lot to stop it heading on to the next major Fibo resistance at 1.4240 (76.4% of 1.4940/1.2041) which was also the Oct 2011 high.

The 4 hour charts are now becoming severely overbought so upside momentum should slow a bit, although the German CPI might provide some volatility. If the resistance at 1.3900 holds, then we could again head lower towards 1.3850 and then 1.3815. Below 1.3800 would then see a return towards the 100/200 HMA’s currently at 1.3770/80 although this looks unlikely in the near term.

For now, the daily indicators point higher, albeit without too much conviction and thus buying dips is the preferred strategy, but I don’t think I would be looking for too much today, suspecting that 1.3850/1.3910 could cover it.

Economic data highlights will include:

IMF Meeting, German CPI, US PPI, Provisional Rts/Michigan Consumer Sentiment

Meta Trader – AxiTrader

EUR/USD: 4 hour

USD/JPY: 101.50

The dollar remains heavy, having been down to 101.32, but is holding above the important 101.20 area and has finished the NY session at the 76.4% Fibo support of the rise from 100.75/104.12 at 101.53.

The intraday indicators remain oversold and I am not sure that 101.20 is going to be taken out today, but if wrong, then we should expect a run towards 101.00 and probably to the 4 Feb low at 100.75, roughly where rising trend support and 200 DMA also lie, and thus should be strong support.

If we do see a squeeze to the topside, sellers will arrive at 102.00/05 (daily cloud base) and again at 102.15. Above there would see an acceleration towards the 200 HMA at 102.35 although this looks unlikely to day.

The BOJ minutes will be released later on, but are unlikely to tell us too much that we don’t already know, and for the coming session I suspect 101.30/102.00 may well cover it.

Economic data highlights will include:

BOJ Minutes

Meta Trader – AxiTrader

USD/JPY: 4 hour

GBP/USD: 1.6780

Cable squeezed higher to reach the 17 Feb high at 1.6821 today but that was as good as it got and it had retraced to slightly lower levels by the time the BOE left rates and the APP unchanged, and has not done too much since then.

 Today looks as though it should be contained below the 1.6821 target, but the dailies point higher and if next week’s UK CPI and Employment numbers continue the recent run of improving UK data then it would appear that 1.6820 will be taken out, for a run towards 1.6875, which has not been visited since Nov 2009 and thus should prove difficult to break at the first attempt. Above that, there is little to stop it heading to 1.7000, although not yet.

On the downside, minor support lies at 1.6720 and then below 1.6700 and 1.6685. Below this, the rising trend support currently sits at 1.6600, which won’t be seen today, but as long as it holds it means that dips are probably a buying opportunity for an eventual run to the 1.6820 barrier, and probably higher.

For today, use 1.6740/1.6820 as a guide.

Meta Trader – AxiTrader

GBP/USD: 4 hour

USD/CHF: 0.8765

The Dollar is lower once again, and currently sits on minor rising trend support at 0.8760 (76.4% of 0.8695/0.8953). A break of this would suggest a run, below the session low of 0.8750 back towards 0.8700 (13 March low: 0.8698).

On the topside, we need to regain 0.8800 before any sign of recovery, where sellers would now be seen at 0.8827 (38.2% of 0.8953/0.8750) and then 0.8850 (50%).  It seems unlikely that we are going much above here today and 0.8900 looks out of touch, but if wrong we could yet be in for another look at last week’s 0.8953 high.

While the dailies point lower, the intraday indicators are oversold and I suspect the downside for the dollar is a bit limited today and would therefore tend to use 0.8740/0.8800 as a guide.

Meta Trader – AxiTrader

USD/CHF: 4 hour

AUD/USD: 0.9408

The improved jobs number allowed the Aud to rise to 0.9439, a new 5 month high before the soft Chinese Trade data took some of the wind out of its sails. Later in the day the Aud took out the option barriers at 0.9450, in heading up to 0.9460, before reversing sharply back towards 0.9400, where it bottomed out late into the US session.

The positive jobs data should prove supportive of further medium term gains in the Aud given that is probably another nail in the coffin of those expecting a rate cut, and the chances of a hike in Q4 seem to be building momentum. Thus, dips appear to be a buying opportunity and we may get a chance today given that the intra-day indicators are pointing a bit lower. If 0.9400 is taken out then we should expect a run back towards 0.9385 and then possibly to 0.9350. Rising trend support is now at 0.9325, which needs to hold. If it were to give way, we should expect a deeper correction towards 0.9270.

While we remain bullish for the medium term and look to buy dips, the topside today looks a bit limited and I am doubtful of heading back above 0.9460. If wrong, there is not too much to stop it heading towards 0.9494 (76.4% of 0.9757/0.8660) although I suspect it is too early for this. Above here, 0.9542 is the 6 Nov high, and the longer term strategy of looking for a run towards the SHS target at 0.9580 remains intact.

For today, look for 0.9385/0.9440 to cover it, with direction to be dominated by the China CPI. A soft reading (exp -0.5% mm +2.5% yy ) might put some pressure on the downside.

Economic data highlights will include:

China CPI, PPI, Leading Economic Index

Meta Trader – AxiTrader

AUD/USD: 4 hour

NZD/USD: 0.8665

We had 2 attempts to break above 0.8745, which failed, and saw a retreat back below 0.8700 to sit just above the 100 HMA/38.2% Fibo support of the rise from 0.8513/0.8745 at 0.8656. The intraday indicators are pointing lower, and if 0.8650 gives way, we should expect a run towards the 200 HMA at 0.8630 and possibly towards 0.8600.

The dailies suggest that the topside might be a bit limited for the next couple of sessions and I would be a bit surprised to see the Kiwi back above 0.8700 today and suspect that a return to 0.8745 is unlikely. If wrong, then above here would see a run towards 0.8800 and the July 2011 high of 8842.

Look for 0.8630/0.8700 to cover it, with a preference of trading from the short side for the coming session. Keep an eye on the Chinese data

Economic data highlights will include:

NZ Business PMI

Meta Trader – AxiTrader

NZD/USD: 4 Hour