After seven consecutive weeks of gains, EUR/USD had its first weekly loss since mid-December and the EUR rally looks to be rolling over.
With prices finding strong resistance in the 1.08 zone and subsequently breaking out of an ascending bullish channel, there has been a key change in market structure.
Fading any EUR rallies looks to be the play for the week, noting that Yellen’s semi-annual testimony on Tuesday should be fairly balanced. President’s Trump’s ‘phenomenal’ tax plans should also keep any USD downside limited for the near term. Euro losses should accelerate through the 1.0615 area.
More Brexit clarity and Forbes’ hawkish comments have supported sterling recently. However, dollar strength kicked in by the end of the week in spite of strong UK data.
Cable is forming another consolidation range around the 1.25 handle. Notably, the December swing high of 1.2775 was reinforced by the ‘double top’ formed more recently. This is now a key reistance zone.
With the strong support below at 1.24, we are still looking out for bullish reversal patterns within the 1.24-1.25 zone. However, any daily close below 1.24 increases bearish momentum and could spark a stronger sell-off.
USD/JPY's severe price compression last week resulted in a sharp breakout with prices bouncing firmly off the sub 112 lows.
The resumption of dollar strength has meant inevitable yen weakness as the reflation trade gains prominence once again in traders’ minds. Weaker Japanese GDP this morning has seen USD/JPY rally above 114.00 and although we have settled back to mid 113s, short term momentum is for higher prices.
The Aussie has consolidated after last week’s march higher.
The RBA struck a more optimistic tone in its monthly statement and together with solid Chinese data, this has helped underpin prices against the dollar revival. Prices are now just below the previous swing high at 0.7690.
With commodities like iron ore and copper moving higher in the near term, the potential for more upside is clear. However, long-term resistance around 0.7780 will likely represent a stern challenge to Aussie bulls.
