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USD/JPY - Have We Found Support at 118.00?

 

For now the 118.00 level remains the key support for USD/JPY and the pair has bounced strongly off the lows indicating that it may consolidate above it for now. But a break of 118.00 would suggest the end of the bullish run for the pair with possible target of 115.00 as the long term longs are unwound.

USDJPY_03_26_2015.jpg.44874bc258385a1f536685be9825389b.jpg

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the EUR/USD could continue to fall from its current level of 1.0825, we prefer to wait for a bounce to 1.0910 to sell. The market is leaning heavily one direction according to the latest CFTC report and this linear thinking raises the risk of a countertrend move so we rather get a get better entry price than chase the current decline. Also, 1.08 is an important support level created by the convergence of the 10 and 20-day SMA and the currency pair is finding difficult breaking it. Our second entry level is right below the 50-day SMA, indicated by the pink line on the chart and our stop is at 1.1235, right above the 61.8% Fibonacci retracement of the move from the record low to the record high between 2000 and 2008.

EURUSD33016.png.ca4ee9dbc1713ff1a6746a78386dc993.png

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If the pair can hold ground at the 91.00 level AUD/JPY could be in the process of setting up a higher low which could propel it towards a retest of the swing highs near 94.00. A break however, could signal a move towards 90.00 as it tests the double bottom support.

AUDJPY_03_31.2015-784x464.jpg.357a90fa1461a9faa3877383e419db76.jpg

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Taking a look at the daily chart in USD/CAD, there is short term support at 1.26. If this level is broken, the currency pair should slip easily down to 1.24. Resistance remains at the 6 year high of 1.2835.

USDCAD040215.png.8827880fa5b8c14a06cc04afb51fb1d2.png

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AUD/NZD is at a record so there is no support level until parity, which is psychologically and technically important. However the following chart shows how AUD/NZD bounced before and after testing 2 key levels that are not as significant as parity – 1.10 and 1.05. When AUD/NZD broke below 1.10 in September after spending some time above it, it dropped to 1.0917 before bottoming out and reversing sharply higher. In December when it broke 1.0500 it hit a low of 1.0430 before bouncing back above the 1.05 level to 1.0570. We are long at 1.0065 with another order to buy below parity at 0.9950. If AUD/NZD holds parity then great but if it breaks below parity our second entry should be triggered giving us a nice average price that would position us for a bounce back above this key level.

Screen-Shot-2015-04-03-at-10_36.15-AM-784x463.png.58724bc84988494ea0e68035a8fee62a.png

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GBP/USD 2010 Election Chart

The U.K. general election is a month away but the prospect of a divided government means that sterling could come under serious selling pressure. The best way to look at how GBP/USD could trade going into the May election is to refer back to how the currency pair performed in 2010. This year’s election is similar to 2010 because of the strong possibility of a divided government. What makes it different is the potential power grab by smaller parties that could make it even more difficult for a coalition to be formed. It is almost assured that the Conservative Party will fail to secure enough seats and if this leads to a hung parliament it will translate into more losses for the currency.

GBPUSD040715.png.b272c71bc8b1498b1bff9d8dbd144f2f.png

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USD/JPY has found strong support at the 118.00 level and has now made a higher low at 119.00 but the 122.00 overhang still provides considerable resistance. A break above however could target the pair to 125.00 over the medium term horizon.

USDJPY_04_07.2015-784x560.jpg.c8d41182cbf5962c050712b539f25bd8.jpg

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Fundamentally, the weakness in EUR/USD has been driven primarily by dollar strength but this morning’s Eurozone economic reports also didn’t help. German factory orders missed expectations for the second month in a row, falling -0.9% after dropping -2.6% in February. While this data contradicts with some of the stronger reports released by the region’s largest economy, it also highlights the area’s vulnerability. Business sentiment and activity in Germany is only beginning to turn positive and we firmly believe that as long as the euro remains weak, Quantitative Easing will work its way through the economy and provide the basis for a stronger recovery. However the euro needs to remain weak and QE should do the trick. Eurozone retail sales also turned negative, falling 0.2% in February. This decline should not be a surprise because consumer spending in Germany and France was very weak. German industrial production and trade numbers are scheduled for release tomorrow and given the softer factory orders report, the odds favor a downside surprise. News flow out of the Eurogroup meeting could have a larger impact on the euro than data. So far, EU officials are saying that progress is being made but when it comes to Greece, the talks could go sour at anytime.

Screen-Shot-2015-04-08-at-3_43.22-PM-784x482.png.1904ff315b9bd65d1270a9d9484ad685.png

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With tomorrow's CAD employment data due at 12:30 GMT the prospect of big miss and a therefore the possibility of yet another rate cut by the BOC looms large. Therefore, we could have a trigger that could push the pair to fresh yearly highs as rate differentials continue to widen out.

Having made a series of higher lows the uptrend in the pair remains in tact and the 9600 figure is the next target of the longs which if broken opens up the way to a run towards .9800

NZDCAD_04_09.2015-784x521.jpg.4653e0869093e88c56c7a9b9a38e2ac7.jpg

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Taking a look at the monthly chart of GBP/USD, there is a major head and shoulders pattern with a neckline around 1.45. If 1.45 breaks, there is no major support until the 2010 low of 1.4225. Near term resistance is at 1.48, the former breakdown zone. This can be seen more clearly on the daily chart.

Screen-Shot-2015-04-10-at-2_48.44-PM-784x482.png.4efc221a08d8a4209e9e23e00181d8ae.png

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From a fundamental and technical angle, AUD/USD should be trading below 75 cents. The Reserve Bank of Australia made it clear that this is their comfort level for the currency and they would have no problems if AUD/USD dropped below this rate. Australia has 2 big problems – growth in China is slowing and the price of iron ore is falling. Earlier this year the RBA cut interest rates to provide cushion for the economy but with conditions deteriorating further since the February decision, they will need to lower interest rates again in May to avoid a downward

BT_AUDUSD_415151.png.3425156ed86370cc68bb37c32c4d97f8.png

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Euro Could Bounce to 1.08 After falling for 6 consecutive trading days and touching a low of 1.0520, euro has found a near term bottom versus the U.S. dollar. While we are long term bearish euros, we believe that the currency pair could bounce to at least 1.08 before reversing course and moving lower once again. The tone of today’s monetary policy press conference was decidedly more upbeat with ECB President Draghi saying that the recovery is broadening and strengthening. Earlier in the morning, the ECB left monetary policy unchanged and at the conference that followed Mario Draghi expressed his satisfaction with the smooth implementation of QE and the effectiveness of program thus far. He feels that improvements in the economy have diminished the economic risks and is moving the economy in the right direction. Draghi ruled a rate cut and instead said that the central bank can adjust QE if needed. European policymakers are happy with how Quantitative Easing is working and this optimism helped to stem the slide in EUR/USD and a further shot squeeze could drive the currency pair higher. Technically, there is a clear double top in the EUR/USD that we expect to hold. However the target for the current rally is the 20-day SMA at 1.0800. If EUR/USD struggles to break this level and starts to move back down, 1.0500 and then 1.0460 will be targets to the downside.

EURUSD041615.png.933de057298d3b678f1c9ab4b78c350b.png

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the “smart” trade is to buy CAD/JPY on a breakout. The currency pair failed at a key resistance level below 98. The confluence of the 50% Fibonacci retracement of the 2007 to 2009 decline and the 100-day and 200-day SMA, makes 98 a very tough level to break. However if CAD/JPY manages to close above this level, then there is no major resistance until the September 2014 high of 99.82. Alternatively buying CAD/JPY at the range low near 94 may not be a bad idea but the risk is the fulfillment of the head and shoulders pattern.

CADJPY042015.png.a76a093a87dbab56c9fb6daf05a371c3.png

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RBA Governor Stevens said he would be surprised if the AUD/USD didn’t go do more. He also added that more rate cuts will come. How AUD/USD trades from here will be determined by tonight’s RBA minutes. If the minutes reinforce the Central Bank Governor’s dovish views, the currency pair will head back below 76 cents.

 

Technically, it appears that there is a triple top in AUD/USD. If the minutes are dovish and AUD/USD continues to trade lower, there is no support until 0.7550.

Screen-Shot-2015-04-20-at-5_43.07-PM-784x485.png.f7f65976063792a577a5cb3214a4c760.png

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Technicals for the pair look relatively sound with the euro making a higher low at 1.0600 level. For now however the 1.1000 looks to be formidable resistance, so any push higher should be limited in scope.

EURUSD_04_23_2015.jpg.f76a68a165a1cde2bbbbd53b13b5cda9.jpg

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From a technical perspective, 0.75 is not only a psychologically significant support level but it is also where a trendline and 50-day SMA converge. If this level breaks, the next areas of support will be at the round numbers. Resistance on the other hand is up at the April high of 0.7740.

NZD042715.png.e392626e138ddccd620adfd6fcb19c5b.png

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From a fundamental and technical perspective, we have strong reasons to believe that USD/CAD will fall to 1.20. The Canadian dollar was the day’s best performer, rising to its strongest level against the U.S. dollar in over 3 months. What is interesting about the move was that no economic data was released from Canada and oil prices declined. However, last week’s positive news flow continued to boost the currency. The price of crude increased 20% this month, leading the Bank of Canada to drop its bias to lower rates. In fact, on Friday, Bank of Canada Governor Poloz said he is also very optimistic about the U.S. economy and believes that the adverse effect of lower oil prices will be gone by the second half of the year. The pickup in consumer spending and trade activity should lead to a stronger GDP report and it is one of the main reasons why we are looking for USD/CAD to hit 1.20.

USDCAD042815.png.77544df05803f73e57a21361862c3b5f.png

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The AUD/USD had a very powerful move today but stalled just ahead of key 8025 resistance levels and may now take a pause as it consolidates its gains. A break above the 8050 level opens a run towards the 8100 figure while 7900 now becomes the new support.

Screen-Shot-2015-04-28-at-2_28.57-PM-784x524.png.ed47fe9212d722d6c830da9b0e745e02.png

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Technically, today’s move has taken AUD/NZD above the 100-day SMA for the first time since November. The next level of resistance is near the February highs of 1.0615. Above that is the year to date high just shy of 1.08. If AUD/NZD moves back below the 100-day SMA, now near 1.04, we could see a steeper slide down to 1.02.

AUDNZD043015.png.c5bd4d7726f3750d5f4658b08ce2b8ba.png

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One of the most interesting trends today was the massive divergence between the euro and the pound. While the former soared almost 200 points in one day the later treaded water. This all happened despite lackluster data out of Europe and promising political news from UK where the Torries opened up a 5% lead on Labor. In short today was momentum day in euro driven by massive short covering and end of month settlement flows. Typically such moves do not last. Tomorrow the market is going to get a glimpse of UK PMI Manufacturing as the cycle of reports begins for the pound. If the data remains relatively buoyant it will show that UK economy continues to outperform the continent and with Torries now more likely to retain power, the markets could warm to the pound once again. All of which leads us to conclude that the 7400 level will likely be a triple top. Technically the pair has made a nice W double bottom, but now faces stiff resistance at the 7400 level and further resistance at 7500 and is likely to consolidate the move for now

Screen-Shot-2015-04-30-at-7_05.39-PM-784x587.png.a41ae122b57979d70101eb18fd1d687a.png

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although 120 is an important psychological level for USD/JPY, there are many layers of resistance in the currency pair above current levels. First we have the 61.8% Fibonacci retracement of the 1998 to 2011 decline at 120.16, followed by the Feb high of 120.50 and the April high of 120.85. If the currency pair breaks above all of these levels, it would then face stiff resistance at the March high of 122. On the downside losses should be limited to the March low at 118.33.

USDJPY050415.png.65f8de79a93cdbbf95a06786d0295d7e.png

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if GBP/CAD drops below the April low of 1.8150, there is no support until 1.80. More importantly however the chart included today shows how the currency pair traded after the 2010 election. Compared to all other GBP pairs, it had the most consistent reaction with the longest follow through.

GBPUSD50615_4.png.381ba8098ef3668cb502a90e16805d12.png

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How High Can GBP Rise?

Sterling raced to its strongest level this year on the back of weaker U.S. retail sales, stronger U.K. wage growth and the residual boost from the Conservative Election win but with the Bank of England tempering the market’s expectations for tightening, how much further can GBP/USD rise? From a fundamental perspective, we know the U.K. economy is improving and we are still waiting on a turnaround in U.S. data but sterling has risen quickly in a very short period of time. The Bank of England also poured cold water on U.K. rate hike hopes by lowering their growth forecast for this year and next and warning that inflation could fall below zero before rising again. While the BoE is next in line to raise rates behind the Fed, it is looking more and more likely that they want to raise interest rates in 2016 and not 2015. U.K. data on the other hand continues to be firm with average weekly earnings rising at 1.9% versus the 1.7% forecast. Jobless claims dropped less than anticipated but the unemployment rate fell to 5.5% from 5.6%. Considering that inflation is nonexistent, the increase in wages is a net gain for U.K. consumers.

GBPUSD051415.png.1091ad6c904dedb390f2be51e063f31a.png

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