Better than expected Australian CPI has allowed for a much needed bounce in the AUD% index from strong support levels although the rest of the market seems less sure of it’s self. The euro continues to find sellers to push EUR/USD lower while the Cable continues to find buyers, pushing EUR/GBP further lower. The yen seems quite undecided in terms of direction and although ended the session lower it was far from a clean drop lower with reasonably high intra-day volatility despite the overall low range for the session.
Wednesday sees a raft of UK data although the focus will likely be more on the claimant count and unemployment rate rather than the MPC statement, largely due to the comprehensive forward guidance in place. Good numbers are expected.
USD% Index
An unimpressive show of strength currently from the dollar although a show of strength none the less. The key stumbling block seems to be consistency of dollar strength with numerous major pairs bucking the trend higher for the dollar. We have been in a casual wait and see mode for the USD% index with RSI barely moving from the middle of the road 50 position for the past five sessions. interestingly, RSI is also now holding below the 100 period moving average which suggests downside although the lack of definite momentum in either direction for the indicator makes this only a weak signal. I am bullish USD.
USD% Index Resistance (EUR/USD support): EUR/USD 1.3541, 1.3500, 1.33459
USD% Index Support (EUR/USD support): EUR/USD 1.3560, 1.3584, 1.3620
EUR% Index
The break through bullish channel support has not yet found clear downside, with instead a bearish flag formation tracking the angle of the bottom channel support. This is again suggestive of an indecisive market which in not yet fully committed to the idea of a significant break to the downside. Never the less, without a clear rejection higher either, the momentum remains to the downside, albeit lacklustre momentum at that. I am bearish EUR.
EUR% Index Resistance: EUR/USD 1.3550, 1.3600
EUR% Index Support: EUR/USD 1.3496, 1.3461
JPY% Index
A widely expected no change on policy from the BoJ has not had much of a reaction from the market overnight and we remains tracking mildly sideways within a shallow bullish channel. The bottom of the channel will need to be broken before the major bearish theme can be rejoined with support for the index indicating USD/JPY 105.00 as the key level to break for a resurgence of yen weakness. A failure to do that could see some yen short position squaring to push the index back higher for a more impressive retracement. I remain mildly bullish JPY in the short term, bearish long term.
JPY% Index Resistance (USD/JPY Support): USD/JPY 104.10, 103.50, 103.33
JPY% Index Support (USD/JPY Resistance): USD/JPY 104.58, 105.00
GBP% Index
Positive data is expected to further push the GBP% index higher within it’s current range however the upside doesn’t have very much room before major levels are once again tested. With the dollar trying hard to break higher this could make the price action slightly choppy. The broken bullish channel support shown in blue is now acting as a resistance for the index in much the same way as the yellow bearish trend line shown on EUR/GBP (at the bottom) is acting as support. Pound strength is expected to continue. GBP/USD 1.6600 is the key level to break to the upside. I am bullish GBP.
GBP% Index Resistance: GBP/USD 1.6490, 1.6500, 1.6535, 1.6600
GBP% Index Support: GBP/USD 1.6370, 1.6291, 1.6253
AUD% Index
Better than expected inflation data was the catalyst for a well needed push higher for the Australian dollar with the AUD% index failing to make any proper headway below the 261.8% fib expansion support shown at AUD/USD 0.8753. Gold on the other hand, having performed considerably better than the Aussie recently has begun a retracement lower and further equalisation of the spread between the two seems likely in the short term. I am short term bullish AUD long term bearish.
AUD% Index Resistance: AUD/USD 0.8919, 0.8941, 0.9000
AUD% Index Support: AUD/USD 0.8869, 0.8815, 0.8752
CHF% Index
Although we have pushed below significant levels now, the downside for the CHF% index is being hampered by it’s European peer’s lack of downward momentum. EURCHF is consolidating sideways also which only enhances the Swiss Franc’s reliance on the Euro for direction. downside still seems preferable for the time being although this break has question marks over it currently. I am bearish CHF.
CHF% Index Resistance (USD/CHF support): USD/CHF 0.9100, 0.9068, 0.9000
CHF% Index Support (USD/CHF resistance): USD/CHF 0.9160, 0.9200