EUR/JPY strength, Fed speakers awaited
While yen remains under pressure throughout the day, Euro was boosted by hawkish comments from ECB Executive Board member Juergen Stark that euro zone inflation will remain clearly above the ECB’s target this year and next. Also, Stark said that it’s correct to expect another hike next month. The net result is, we’re seeing a strong rally in EUR/JPY today that pushed EUR/JPY from day low of 147.74 to as high as 149.30 so far.
Even though EUR/USD rebounds strongly against dollar too, it’s actually inspired by cross activities from EUR/JPY and EUR/GBP rather than weakness in dollar. As we can see that USD/JPY rises sharply on yen’s weakness, while GBP/USD, USD/CAD and AUD/USD are still quiet steady. So there is not enough evidence of reversal of last week’s dollar strength.
While there is no important economic indicators scheduled to release in US session, traders’ attention will be on St St. Louis Fed President William Poole and Federal Reserve Board Governor Donald Kohn’s speeches.
GBP/USD
Daily Pivots: (S1) 1.8600; (P) 1.8680; (R1) 1.8734;
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Cable’s recovery was limited below 1.8720 minor resistance and fall from 1.9090 resumes in early US session with a marginal break below 1.8626 low. As discussed before, further weakness is expected to be seen sooner rather than later towards 1.8538 cluster support (61.8% retracement of 1.8174 to 1.9142 at 1.8544) as long as cable stays below 1.8720 minor resistance. On the upside, above 1.8720 will indicate a short term low is formed and risk recovery towards 4 hours 55 EMA (now at 1.8853) first but it will take a break above 1.9090 resistance to indicate the corrective fall from 1.9142 has completed and bring retest of 1.9142. Otherwise, short term risk remains on the downside.
In the bigger picture, rise from 1.8090 was limited slightly below 1.9199 projection target (61.8% projection of 1.7230 to 1.9024 from 1.8090) and then retreated with bearish divergence in daily MACD and RSI as well as weekly RSI. An important medium term is possibly formed at 1.9142 already. Last week’s sharp decline is inline with this view with cable pulled back to below 55 days EMA (now at 1.8736).
Focus is now on 1.8538 cluster support. Firm break of this level, which will also bring sustained trading below the medium term rising channel (now at 1.8655), will add much credence to such case and bring further decline towards 55 weeks EMA (now at 1.8216) and possibly further towards 1.8090 low (50% retracement of 1.7047 top 1.9142 at 1.8095).
From a medium term point of view, we’ll treat the price actions from 1.9142 as consolidation to whole rally from 1.7047 only as long as downside is contained by 1.8090 low and further rise is still in favor upon completion of this consolidation.
Read full report (EUR/USD, GBP/USD, USD/CHF, USD/JPY) here.
Shing-Ip Tsui is the founder and CEO of
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