FX Technicals: EUR, GBP, JPY And AUD
Faraday Research | Jun 12, 2017 12:09PM ET
Last week’s ECB press conference left EUR/USD in limbo following a typically non-committal speech from President Mario Draghi.
Refusing to be drawn on the timing of tapering and lowering his inflation forecast saw EUR/USD retreat from trend highs.
While the dominant structure of this market remains bullish, last week’s subtle failure at trend highs should not be ignored. The lack of progress past the mid-May swing high signals that EUR/USD could be entering a consolidation phase in which 1.1280 and 1.1110 represent the upper and lower bounds of a consolidation range. Wednesday’s FOMC meeting is sure to put our theory to the test.
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Cable's hung-parliament collapse took the market swiftly back down into previous structural resistance at 1.2700.
Thursday evenings sell-off (C-D) was equidistant to the mid-May sell-off (A-B) and this once again proves how useful market harmonics can be in anticipating the magnitude of price shocks.
The nature of cables next consolidation phase will be absolutely critical in determining if sterling’s heightened political risk premium is now fully ‘baked in’. For the bull case to hold true we’ll need to see clear evidence of bullish price rejection at one of the many horizontal support levels that cable currently trades within. If we fail to see this and cable continues to languish near its lows, we’ll be looking to position ourselves for a new leg lower.
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Last Tuesday’s break and close below 110.00 was followed by a steady retracement higher, retesting the broken support level.
Today’s weakness suggests that broken support will provide resistance and USD/JPY’s recent series of lower swing highs will hold firm, keeping the descending trendline intact.
While updates from both the Fed (Wednesday) and BoJ (Friday) could well create waves, trend continuation plays to the downside look the most appropriate course of action.
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Boosted by better than expected Q1 GDP figures and decent Chinese import data the Aussie surged past 0.7500 resistance last week, continuing its impressive start to the month.
Prices have since undergone a low-volatility pullback, using broken resistance as a platform of support. With Friday’s trading range the narrowest in seven sessions, all signs continue to point north for the Aussie.
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