This Is The Big Question On The Yen
While the general consensus still
believes the recent range has been broken, the FX markets did not
make too much headway higher versus the dollar on Tuesday. The Dollar Index (DXC)
remained above some key support at 86.80 although it dipped below there a few
times intra-day, there were simply no solid sellers under that level. The CAD
weakened versus the greenback despite comments from the BoC that rates will
likely continue higher.Â
In talking with colleagues yesterday on the East coast and
in London it seemed like the election is in fact playing a part in keeping the
action somewhat subdued. As one trader put it, this election will likely be the
most litigated in history. Uncertainty abounds; witness the grind lower in USD/CHF.Â
The UK housing data out last night will shed light on not only future monetary
policy but whether or not home prices are flat to down or as some suspect
slipping much faster than most expect. With the GBP looking only less ugly in
recent sessions, lower levels may be at hand.
The Yen was on a good tear versus the dollar as declining
oil prices, the yuan revaluation dominated the wires. The big question is
whether or not the 108 level will draw out the ever present BoJ and their open
wallet.
Technical Notes:
The overnight session finally saw the dollar break the
86.80 level with vigor. We decided to cut our long NZD/USD position late in the
afternoon, so that has proven to be a costly mistake, although at the time it
seemed like the right call.
EUR/USD:Â with a solid move up to 1.26, look for the
1.2580-1.2600 level to be a short-term top while the price action is digested.Â
GBP/USD:Â daily and weekly charts are now in the clear, at
least from a momentum standpoint. 1.8220 is a reasonable target if dollar
weakness continues. 1.8040 is near-term support on pull-backs.
USD/CHF:Â the franc continues to benefit from dollar
weakness but also general uncertainty. The US election and other global
concerns are making the franc the choice for risk averse traders. The
1.2190-1.2200 level will be pretty key as this has been solid support on several
occasions in 2004.
AUD/CAD:Â despite some poor data out of Australia
overnight, the AUD/CAD is trading higher. Higher gold prices are likely
overshadowing that weaker data. .9175 still stands as solid resistance.
EUR/CAD:Â ran into near-term resistance at 1.5760 (50 day
ema). Looking to buy pull-backs here.
As always, feel free to send me your comments and
questions.