FX Technical Watch: EUR, GBP, JPY And AUD
Thomas Light | May 22, 2017 11:28AM ET
EUR/USD steamrollered higher last week, surging past the 1.1100 handle with ease.
With bullish momentum behind it, EUR/USD looks poised to re-test the US election highs of 1.1300.
Our EUR/USD strategy for this week is pretty straight forward: buy the dips on lower timeframes, unless of course, Wednesday’s FOMC Minutes prompts a change in momentum.
Cable continues to grind its way higher despite Theresa May’s lead in the polls being more than halved following the underwhelming release of the Conservative manifesto.
While we’ve seen an uptick in cable’s volatility, prices have remained within the confines of the ascending channel we mapped out two weeks ago.
The bottom of the channel is starting to converge with the ascending trendline projected from the March-April swing lows. Should prices retest this confluent support level, it will likely create an attractive buying opportunity.
Last week, USD/JPY failed miserably to maintain its early May breakout, posting its largest single-day selloff since last summer. That selloff was triggered by widespread risk aversion following news of an independent investigation into Trump's dealings with Russia.
Unlike equity markets, USD/JPY hasn’t been able to muster much of a fight. Instead, prices have started to coil near their lows with Friday’s inside day the smallest range in the last seven sessions.
Given the intensity of Friday’s price compression and the strength of last week’s selloff, we expect prices to break lower this week, in-line with dominant momentum.
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The Aussie’s retracement phase has reached a pivotal stage as the market presses into previous structural support at 0.7460.
This resistance level coincides with the 61.8% Fibonacci retracement level of the last selloff leg and the top of a descending channel.
While this key area of resistance is compelling, AUD’s recent relative strength should be respected until will see a clear price action sell signal.
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