EUR Trading Outlook
EUR/USD Above f/c March German IFO had the pair bid in Europe's morning. The pair lifted towards 1.0980 into NY's open. The lift was aided by general USD weakness. NY added to the gains after ECB's Praet noted QE has helped inflation expectations re-anchor and US durable goods saw a big miss while prior releases were revised down. EUR/USD rallied to 1.1014 but the gains didn't last. A recovery for the USD and US bond yields combined with market chatter of a large Asian seller above 1.1000 saw EUR/USD begin a slide. The move lower tested hourly support in the 1.0945/50 zone but the level held. The pair then lingered in the 1.0950/1.0993 range for the remainder of the session with it settling near 1.0965. German GfK consumer confidence for April and French Q4 GDP are the risks in Europe while the US weekly jobs data and Fed speakers Bullard & Lockhart might stir the market in NY's session. For now bulls have the edge. Daily RSI is biased up with room to run and the 21-DMA is containing dips. A break of the post-Fed high is needed to ignite the next bull leg. If it occurs resistance near 1.1115 and 1.1185 are then eyed.
USD/JPY Very poor USD Feb Durable Goods Orders data briefly yanked USD/JPY to its 119.23 low, unable to quite retest Tues's 119.22 post-FOMC correction low. That alone got some nimble spec shorts and latent relative value buyers bidding; a trend that was nurtured by Fed's Evans and a rise in Tsy yields. The pair initially ran into hourly Ichi resistance by 119.60, but after a pre-fix dip to 119.325 prices made new regional highs and are by them as the NY session winds down. Weakness in US and N225 equities gave the haven yen a little boost intraday, but rising yield spreads outmatched this in the end. We are, however, keeping a keen eye on a potential 38.2% retracement of the N225's '15 overbought advance given the implications for USD/JPY prices. The daily Kijun is now at Monday's 120.17 high and daily on-close pivot pt, while the Tenkan & 21-DMA converge on Thur by 120.40. Need a breakout and close above the latter to put the broader uptrend back on track. EUR/JPY's rebound remains stymied by the daily Kijun, last at 131.49. Crucial resistance is by 131.81 from 50% of the Feb-Mar drop & the weekly Tenkan. Weekly JPY flows tonight.
EUR/USD Short covering in Europe had the pair pressing 1.1000/10 resistance for most of their morning. NY walked in with the pair just below 1.10 and feeling firm. The US CPI was slightly above f/c This pressured the pair below 1.0940 initially. Dip buyers emerged though as the USD's spike up faded. The ensuing EUR/USD rally saw Europe's high broken and stops above 1.101 run. Bullish momentum carried the pair to a 1.129 high. A USD bounce and EUR/USD sales by RM names saw the pair's gains begin to erode. The slide persisted into Europe's close and support near 1.0885/90 was tested. Pressure remain on the pair in the afternoon and sour risk had JPY bid and EUR/JPY pressing down on 130.50. This aided to keep EUR/USD heavy and it sat just below 1.0920 late in the day. No major EZ data is due tomorrow so traders will look to Feb US durable goods order for direction. A weak result could see EUR/USD's recent rally see further gains.
USD/JPY Early NorAm trading took USD/JPY down to a session low of 119.22, which is exactly the level of this year's up TL off the Jan-Feb lows. The low came despite slightly above f/c US CPI results. The low breached last Wed's post-FOMC nadir of 119.29, but strong US Markit PMI & New Home Sales helped prices briefly best the o/n high, only to be sent down again without trading 120. US Tsy yields fell, particularly out the curve, despite the day's upbeat data, dragging USD/JPY back toward the middle of the range. Prices are now below the Kijun at 120.14 and need to retake that to give today's TL carom increased credibility as a turning point. GBP/JPY is threatening its first daily close below the 200-DMA (178.16) since Oct. 177 looks pivotal there. EUR/JPY got closer to the daily Kijun at 131.57, as well as the last two weeks' highs, 50% of the Feb-Mar slide and the weekly Tenkan in the 131.80 vicinity, with today's 131.52 NY morning high. Next heavy Japanese data day is Friday. Broader focus is on next week's US Jobs report for March. Early March indications are solid, putting a little extra weight on the jobs data to be robust, too.
EUR/USD The rally in Europe inspired by the Fed's Mester's tip for plenty of room to use easing tools persisted in early NY. The USD was on its heels as US bond yields were on the soft side. EUR/USD sat near 1.0900 into the open and made a run above 1.0945 before any pullback took hold. Draghi hit the wires and weighed a bit. His comment to BBG noting the weak EUR will help inflation return toward 2% sent the pair down to intra-day support in the 1.0885 area. Dip buyers emerged though and the day's rally resumed as the USD couldn't mount any serious bounce. EUR/USD eventually hit a 1.0955 high and sat just below it late in the day. A retest of the post-FOMC high looks likely. The 21-DMA has been pierced, the daily RSI is biased up with room to run and yield spreads are narrowing. Should the March 18 high break, traders will begin targeting the 1.1215/45 zone (late-Feb/early-March highs). US Feb CPI data is the big risk tomorrow. A weak reading could see EUR/USD's recent squeeze accelerate.
USD/JPY USD weakness drew USD/JPY down through Thur & Fri's lows, but last Wed's post-FOMC spike low at 119.29 was not retested. Yen short positioning wasn't nearly as extreme as EUR and others were heading into the FOMC, which is cushioning the blow somewhat for USD/JPY. Fri's close below the Kijun & 50% Fibo at 120.07 gives the pair a bearish tinge. Weekly Tenkan is at 119.39: key at week's end if prices are threatening a close below there then. Fed's Fischer talked about rate hikes sometime later this year, which may have been enough to stabilize USD/JPY in the NY afternoon after last week's lows couldn't be retested. With COT data from just before the FOMC meeting showing specs loading up on short EUR/USD and lightening up on long USD/JPY, it's not surprising that the position adjustment underway is favoring a higher EUR/JPY this week. Today's low was on the daily Tenkan & high is getting closer to the Kijun at 131.35 and last week's 131.67 spike high. The 38.2% of the Feb-Mar slide at 130.65 looks like it will finally be closed above, perhaps instigating further buying to the 50% & the weekly Tenkan by 131.80.
EUR/USD Early NY echoed Europe's quiet morning but the stillness didn't last very long. NY walked in with EUR/USD just below 1.0700. A sharp drop in USD/JPY and US bond yields initiated a round of broad based USD sales. EUR/USD lifted from the open and ran stops through 1.0740. the rise persisted and got a boost as a large US bank recommended cutting USD long positions vs. EUR , CAD & AUD. Somewhat dovish comments from the Fed's Lockhart & Evans added to the USD's woes. EUR/USD's lift pressed on and hit a 1.0882 high. A late day rebound for the USD saw some intra-day profit taking kick in and EUR/USD sat near 1.0815 late in the day. EZ data next week is second tier so traders look to the US for direction. US Feb CPI kicks things off on Tuesday with Fed Durable Goods following on Wednesday and Q4 GDP then due on Friday. Should the data set indicate a weakening US economy, the USD long trade get put further in doubt and more covering likely ensues. EUR/USD's squeeze might press on and the post-Fed reaction high might break. Should that occur, the pair has scope to the 1.1150/1.12550 resistance zone.
USD/JPY Not at the weekly close yet, but USD/JPY is comfortably below the daily Tenkan at 120.67 and has been below the Kijun & 50% of the 119.29-122.04 rise at 120.075 intraday. A close below the latter would raise suspicions about a possible retest of the daily Cloud that is going to twist on March 25 at 118.28/50. A steady stream of new trend highs in the Nikkei are being overlooked due to bearishly diverging USD-JPY 2-yr yield spreads since March 6, and, more broadly, since late Dec trend highs. Weekly oscillators are also flashing bearish divergence signals since the 122.04 trend high barely bested the Jan 8 peak at 121.86. The Dec 5 closing high at 121.53 has yet to be closed above. The BOJ's QQE2 & Abenomics have had some success in lifting this year's annual wage agreements vs last year and the govt, at the Feb BOJ meeting, removed its request that the BOJ get CPI to the 2% target ASAP. Fed fund futures have reduced the probability of a June rate hike. Now the focus will be on March US data to see if it improves dramatically from weather-beaten Jan & Feb results. Yen lost ground on the cross due to widespread USD hi-beta losses.
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