Here’s a technical snapshot of how the major FX pairs are shaping up as we kick off the trading week…
Friday’s ‘short squeeze’ helped to sober those dollar bulls who were anticipating a smooth decline into January’s lows.
Friday’s price action also helped to reinforce the significance of 1.0500 as a level of short-term demand. What Friday’s price action didn’t do was change our higher timeframe bearish bias.
In fact, with multiple layers of resistance on the chart it’s likely that we’ll see some opportunistic lower-timeframe short-setups emerge for those traders patient enough to time their run.
After a hard fought battle, cable bulls finally gave up defence of 1.2400 support last week.
Whilst Wednesday’s budget and Friday’s non-farms will ramp up volatility, last week’s decisive break of market structure is likely to see cable’s long-term downtrend take full control.
With minimal support on the price chart prior to 1.2000, any cable rally is likely to present an attractive selling opportunity.
At first glance it may appear that USD/JPY’s price chart is of little interest as the market continues to pin-ball within an unruly trading range. However, the devil lies in the detail of USD/JPY’s pivots…
Since the turn of the year USD/JPY has carved out a series of lower pivot highs and marginally lower pivot lows – creating a bearish back-drop to this long and drawn out consolidation phase.
This pattern of lower pivot lows came to an end last week as prices bounced from the 112.00 marker. We now watch with interest to see whether the market can also snap the sequence of lower pivot highs. If this were to happen it would signal the resumption of the November-December ‘super-rally’.
Last Thursday’s sharp sell-off came as somewhat of surprise given the Aussies stellar start to 2017.
Whether this sell-off signals a shift in market dynamics depends largely on how prices consolidate from here…
Should the market quickly erase over 50% of Friday’s drop then we will have compelling evidence to suggest that Thursday’s sell-off was simply a shakeout. Tonight’s RBA rate decision and statement could well provide the catalyst for this bull case to play out.
However, should prices languish within the lower quarter of Thursday’s range we would then expect to see another leg lower.
