Key Forex Levels
Last week I had
mentioned that the recent headlines regarding China facing a hard
landing economically had been a bit overdone. Political and economic
developments in recent years have changed China dramatically and also taught
them some important lessons. The volatile nature of the Chinese economy seems
to be behind it and the fact that China plays a far more critical role in
today’s world, economically speaking, is yet another reason to have been a bit
skeptical of the talking head analysis.
Sunday evening saw what I consider the beginning
of such a story being refuted. Asian equity markets were up strongly and more
importantly, so were the commodity based currencies, mainly
AUD and NZD, which are the sole
beneficiaries of a strong China and Asia, for that matter. We all know that the
best opportunities come when everyone is looking one way. This appears to have
been the case recently as the AUD/USD and NZD/USD and USD/CAD have shot higher
in the last two sessions. Subscribers to my FX alert service are long both the
NZD and CAD from good levels late last week.
The Yen (USD/JPY) is also a major beneficiary of
a strong China and a strong US. The continued impressive numbers that our
economy keep generating is very bullish for the Japan and of course, the Yen.Â
Secondly, intervention by Japanese banks has been absent for several weeks now.Â
It would appear that most Japanese exporters are hedge against a decline Dollar
around the 105 level. Hence, the likelihood of significant intervention ahead
of that level seems somewhat unlikely.
Key Levels:
USD/JPY:Â
109.15, retracement level from rally off late March lows.
EUR/USD:
1.2345, 50% retracement off the March high, a move
through here
should open up the 1.2480 level
GBP/USD:Â
1.86 level may be tested. This is the right shoulder of the H&S
pattern that failed in early April. A move back
above 1.86 sets the stage
for a move towards 1.9140
NZD/USD:Â
the 50 and 200 day EMA’s have been cleared, this is bullish. One
last level to clear, .6377, wave high on June 1.
USD/CAD:Â
200 day EMA has been breached, 1.3474.
Momentum still down, but slowing.
As always, feel free to send me your comments and
questions.