Dollar Recovers Some Post FOMC Loss
Dollar recovers some post-FOMC slump today. Dollar was clearly oversold against sterling and euro and will likely consolidate its losses further before staging after fall. Jobless claim came in at 316k, slightly better than expectation of 323k. Conference board leading indicators dropped -0.5% in Feb, below consensus -0.3%. But reactions to the data are muted. Fed chairman Bernanke has failed to mentioned the US economy nor interest rates in his speech today and as result focus will turn to other fed speakers, including Kroszner and Kohn later today.
Earlier today, Sterling was boosted across the board after a much stronger than expected retail sales report that showed retail sales increased 1.4% mom, 4.9% yoy in Feb, which is much better than expectation of 0.7% mom, 3.9% yoy. However, the reactions were brief only and Sterling’s rally halts even though CBI industrial trends survey also came in better than expected at 8.0 in Mar.
The Japanese yen was the under performer post FOMC and remains week today. In particular, NZD/JPY, the ultimate carry, strengthens further to above 84 level today. Yen was weighed down by a Nikkei report that Japanese retail investment in foreign currency assets continues to grow with Japanese investment in foreign-currency denominated mutual trusts up 42% on the year to Feb 28th or almost 9 trillion yen.
EUR/USD
Daily Pivots: (S1) 1.3319; (P) 1.3354; (R1) 1.3418;
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EUR/USD retreats mildly today after upside was limited by mentioned 61.8% projection of 1.2483 to 1.3364 from 1.2865 at 1.3409. Touching of 1.3354 minor support suggest that an intraday top is formed and some consolidations should follow. But downside should be contained above 1.3268 support and bring rally resumption.
On the upside, sustained break of 1.3409 fibo resistance will confirm that whole medium term up trend from 1.1639 has resumed for next upside target of 1.3668 (04 high). Meanwhile on the downside, break of 1.3268 support will argue that the rise from 1.3070 has completed, probably with bearish divergence condition in 4 hours MACD and RSI. In such case, deeper pull back could be seen towards 1.3185 resistance turned support.
In the bigger picture, correction from 1.3364 have already completed with three waves down to 1.2865 and the current rise from there is treated as resumption of the whole medium term up trend from 1.1639 as EUR/USD is still staying well within the rising channel. Sustained break of 1.3364/09 resistance zone will confirm this case and bring stronger rally towards 1.3668 resistance (04 high).
However, with bearish divergence condition in weekly MACD and RSI, a medium term top could be around the corner. Upside of this medium term up trend could be limited by resistance zone of 1.3668 (04 high) and 100% projection of 1.1639 to 1.2978 from 1.2483 at 1.3822. But clear reversal pattern or a break of the lower channel line (now at 1.2883) is needed to indicate a medium term top is formed, otherwise, further rise is still in favor.
On the downside, below 1.3185 support will be the first warning that whole rise from 1.2865 has completed and will put 1.3070 cluster support (61.8% retracement of 1.2865 to 1.3410 at 1.3073) back into focus again. Sustained break of 1.3070 will confirm this and bring deeper decline towards medium term rising channel (now at 1.2888).
Read full report (EUR/USD, GBP/USD, USD/CHF, USD/JPY, EUR/JPY) here.
Shing-Ip Tsui is the founder and CEO of
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