The US Dollar built on to overnight recovery move led by comments from US Treasury secretary Steven Mnuchin, stating that the Trump administration is close to bring forward major tax reform. Mnuchin also affirmed that approval for raising the US debt ceiling would be obtained by summer. Investors, however, seemed noncommittal for any concerted near-term direction as they gear up for the next big event risk - the first round of France’s presidential election on Sunday.
Although the latest poll results continue to indicate that liberal centrist candidate Emmanuel Macron remains the front runner, investors' nervousness was evident from the pair's inability to build on the recent up-move. The pair extended previous session's retracement from monthly tops and slipped below the 1.0700 handle, failing to benefit from mostly better-than-expected Euro-zone PMI prints. In what is expected to be one of the tightest contests, investors seemed to refrain from carrying big bets in anticipation of a gap opening on Monday.
From technical perspective, the pair has already broken below the neckline support of a bearish head & shoulders bearish pattern formation on 1-hourly chart. Hence, any up-move is likely to be short-lived and the pair seems more likely to extend the pull-back further towards an important juncture near 1.0630 region, comprising of 100-day SMA and year-to-date ascending trend-line.
Meanwhile, the neck-line support break-point, near 1.0710-15 zone, now seems to act as immediate hurdle, above which the up-move could get extended towards 1.0735 level. A decisive break through this 1.0735 barrier would negate any near-term bearish bias and pave way for further near-term appreciating move for the pair, even beyond monthly high resistance near 1.0775 level and the 1.0800 handle, towards retesting the very important 200-day SMA resistance near 1.0845-50 region.
The pair quickly reversed disappointing UK retail sales data led slide to 3-day low and was now seen darting towards reclaiming the 1.2800 handle. Despite of its pull-back from 5-1/2 month peak, the pair remains in a broader consolidation phase and continues finding some buying interest on every dip closer to 23.6% Fibonacci retracement level of 1.2366-1.2906 up-move.
Any up-move, however, continues to face some supply near a short-term descending trend-line resistance and hence, it would be prudent to wait for a decisive break through this immediate resistance, currently near 1.2835 region before committing to the near-term bullish bias. On a sustained move above this immediate hurdle, the pair should easily clear 1.2860 intermediate resistance and aim towards reclaiming the 1.2900 handle.
Alternatively, weakness below 1.2760-50 zone might prompt some additional profit taking move and turn the pair vulnerable to head back towards the 1.2700 handle support, representing 38.2% Fibonacci retracement level.
The Japanese Yen remains a key beneficiary of the prevalent cautious environment, with the USD/JPY pair snapping two-days of winning streak and retreating from weekly highs to currently trade back around the 109.00 handle.
Technically, the pair remains supported by the very important 200-day SMA level and nearly 5-month old descending trend-channel. The pair, however, has failed to register any meaningful recovery from the lowest level since mid-November, touched at the beginning of this week, and clearly points to market anxiety, which is boosting the Japanese Yen’s safe-haven demand.
Hence, investors are likely to wait for a decisive break below the immediate support levels, near 108.75 region and 108.25 level, to confirm a fresh bearish break-down, or a sustained recovery back above the key 110.00 psychological mark that would indicate that the pair has bottomed out for the near-term.
On a sustained weakness below the descending trend-channel support near 108.25 region, the pair now seems to break below the 108.00 handle and head towards testing its next support near 107.75-70 area ahead of mid-107.00s.
Meanwhile on the upside, momentum above mid-109.00s is likely to face strong supply near 110.00-110.10 zone, which if conquered should trigger a short-covering rally towards 110.70-80 intermediate resistance ahead of the 111.00 handle and the next major hurdle near 111.40 level.
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