Trade Of The Week: Can ECB Hawks Rescue Euro Bulls?

Our focus falls on the European Central Bank (ECB) which is expected to unleash a monetary bazooka in the form of a 75-basis point rate increase! Such a move will place the ECB among the ranks of 40+ central banks that have increased rates by 75bp or more in one go this year in the face of soaring inflation.

Before we take a deep dive into what to expect from the ECB meeting on Thursday, it is worth keeping in mind that the Eurozone economy remains vulnerable and faces the growing risk of recession. The unsavoury combination of ongoing geopolitical tensions, untamed inflation, and energy crisis continues to darken the outlook for Europe with the latest development revolving around Russia’s Gazprom dumping salt into the wound.

Interestingly the euro was able to hold its ground versus most G10 currencies in August excluding the dollar. However, things are not looking too pretty quarter-to-date with the euro down roughly 5.7% against the king of the currency space.

Since the EURUSD secured a solid daily close below parity back in late August, prices have struggled to push higher thanks to technical and fundamental factors.

The outlook for the EURUSD remains bearish on the daily, weekly, and monthly timeframe with prices wobbling above 0.9900 as of writing. Given how the ECB is expected to join the jumbo hike club, could this be enough to cushion the downside and rescue euro bulls?

The Low Down…

Eurozone inflation hit a new record high in August at 9.1%.

This was higher than the 8.9% witnessed in July and above the 9% market forecast. With inflation hitting such lofty and uncomfortable levels, market expectations intensified over the ECB adopting an aggressive approach toward rates in an effort to cap inflation. According to Bloomberg, traders and predicting a 66% probability of a 75 bp rate hike in September. It does not end here.

Last Friday, Gazprom made a last-minute decision to suspend natural gas flows through the Nord Stream 1 pipeline – ultimately worsening the squeeze on Europe’s energy supplies. This move is likely to expose the economy to downside shocks and create more uncertainty and fuel inflationary pressures as gas prices soar.

What to Expect From ECB?

Before thinking about what to expect from the ECB on Thursday, there are a couple of things to keep in mind before the big day. ECB hawks are certainly in the building but the question is how much resolve they have to tame inflation. It’s worth keeping in mind that the latest ECB economic forecasts could offer fresh insight into inflation expectations. It will be interesting to see what the central bank has to say about the energy crises and whether this will push the Eurozone into recession. Let’s not forget about the depreciating euro and how it could impact the central bank’s policy outlook.

Possible Outcomes on Thursday

  • ECB hikes rates by 75 basis points and strikes hawkish tone opening doors to further jumbo hikes. This move may inject euro bulls with fresh inspiration, pushing the EURUSD back above parity towards 1.0100. However, upside gains may be capped by the gloomy outlook for the Eurozone.
  • ECB hikes rates by 75 bp but expresses concern over the economic outlook, reducing bets of more aggressive hikes down the road. Euro pops higher but bears seize control – limiting gains below parity
  • ECB surprises markets with a 50 bp hike and strikes dovish tone, this could excite euro bears – triggering a selloff that breaches the 0.9900 floor.

EUR/USD: The Path of Least Resistance South…

As the subtitle says, the path of least resistance for the EURUSD points south.

Earlier we identified how the currency pair was bearish on the daily, weekly and monthly timeframe. Looking at the weekly timeframe, prices are respecting a bearish channel and trading well below the 50-, 100- and 200-week Simple Moving Average. Sustained weakness below parity could trigger a selloff towards 0.9700 and 0.9600, respectively. A strong weekly move back above 1.1000 may suggest an incline towards 1.0200.

Zooming in on the daily, prices remain bearish but there could be a period of consolidation if 0.9900 proves to be reliable support. A solid daily close below this level could trigger a selloff towards 0.9700. Should 0.9900 prove to be reliable support, a rebound towards parity and potentially higher could be on the cards before bears re-enter the scene.

For more information visit FXTM.

EUR/JPY 4H Bullish Sequence Trade

EUR/JPY Technical Analysis

  • EUR/JPY Rejection above W H5
  • Daily is strongly bullish
  • 139.20 needs to hold
  • Ideally price should stay above W H5
  • M H3 is next target if remains bullish

MEGATREND MAs: Bullish

H4 Chart EUR/JPY

  1. Bullish order block
  2. Swing low
  3. Bullish order block retest
  4. Retest of the W H5
  5. Final bullish target

The EUR/JPY has a strong uptrend on daily time frame. We can see that the price is creating an empty space between itself and the Megatrend moving averages. It means that there is a strong trend. We move down to the 4h timeframe to cherry pick an entry. Drilling down to the 4h time frame means that we want to see a rejection in the 4h zone since the daily trend is strongly bullish.

The entry came after the W H5 rejection. However as the entry has been made on a living candle (candle that hasn’t closed yet) it is important that W H5 is not taken out. In that case we should see a continuation up. If the candle breaks and closes below W H5 we might see a drop.

This analysis, and all entry signals and targets are a part of the Megatrend system and a trading course. I am maintaining 1 long trade on EUR/JPY with an entry right at the 4H bounce signal.

Cheers and safe trading,

Nenad

EUR/JPY Triple Top For a Good Short Trade

EUR/JPY Technical Analysis

  • EUR/JPY Triple Top Formation
  • Selling the rallies
  • Bearish trend continues below point 1
  • 134.30-60 is the first target

MEGATREND MAs: Bearish

D1 Chart EUR/JPY

  1. Double bottom support
  2. Higher high
  3. Double top
  4. Intraweek target

EUR/JPY is bearish. Technicals show a clear downtrend with many attempts to break the blue line point 1 as the price is bouncing. However, today’s candle might break it lower and continuation below the point 1 should lead the price lower to intraday target -136.57 and eventually towards the intraweek target 134.31 or 132.41 depending on the ATR and momentum.

These are the reason when Yen is getting stronger:

Yen strength

1.100% risk off sentiment

2.Gold up

3.Commodities prices down

4.Equities down

5.Yen strengthens as a result

It happens because the Japs can get cheap credit, so they invest overseas heavily. When it’s risky, they bring the money back creating demand for Yen and vice versa, when its bullish Equities, they pump their money overseas, which means they sell Yen and buy foreign currency.

This analysis, and all entry signals and targets are a part of the Megatrend system and a trading course. I am maintaining the short trade on EUR/JPY with an entry at 137.32.

Cheers and safe trading,

Nenad

Thursday Special: My Trading Week

Before we proceed, I know some of you are wondering what is going on here. Well, I have hijacked the Thursday 101 slot to share my thoughts and personal experiences with markets this week!

While this may not follow the normal style of our market reports, we still aim to provide key insight and information on market themes complemented with some trading setups to watch out for.

Game plan #1 – USD Hunting Gone Wrong

I marched into the trading week heavily equipped with the fundamental knowledge and technical weapons to hunt dollar bulls. With signs of easing inflationary pressures in the United States fuelling speculation around the Fed adopting a less aggressive approach towards rates, the dollar looked like an easy tasty meal. However, the greenback drew ample strength from weak Chinese economic data on Monday – eventually trampling all obstacles and G10 currencies in its path.

The bearish dollar setup I had in mind was blown out of the water. Instead of the Dollar Index (DXY) respecting the daily bearish channel, prices pushed above 106.00, signalling an incline back towards 107.30.

The same could be said for the equally-weighted dollar index which blasted back above 1.1700. Prices seem to be finding resistance around the 50-day SMA. It will be interesting to see whether this level limits further upside gains.

Game plan # 2 – If You Can’t Beat Them…Join Them

After witnessing the dollar’s rebound on Monday, I decided to hitch a ride with bulls on Tuesday.

The EURUSD snatched my attention as prices tumbled back below 1.0200. Even though the currency pair remains in a range, the path of least resistance points south with 1.0100 acting as the first level of interest. Looking at the current price action, we are not expecting any fireworks for the rest of the week. But bears seem to be creating a foundation for a steeper decline in the week ahead.

Game plan #3 – Inflation Heartache Boost BoE Hike Bets

On Wednesday morning I felt nauseous and uneasy after official data revealed that UK inflation rose 10.1% in July. As the inflation menace causes havoc across the UK economy, households are feeling the squeeze. Everything from the price of food, energy, and services is increasing dangerously. Yesterday evening I witnessed a man argue with a shop owner over the price of bread and this morning I found myself in a heated conversation with my energy provider.

Rising inflation will most likely force the BoE to aggressively raise interest rates but will also fuel uncertainty over the UK’s economic outlook. Looking at the GBPUSD, it remains in a range on the daily chart with support at 1.2000. Best to revisit this next week when more life returns to the FX space.

Game plan #4 – Riding the Volatile Yen Wave

Hats off to my intraday traders that were able to tame the Yen beast this week.

The EURJPY and GBPJPY were untamed and ready to dish out punishment to any trader unprepared. Both tumbled on Monday, only to experience a sharp rebound on Tuesday and Wednesday! We can see some resistance around 138.00 for the EURJPY and 164.00 for the GBPJPY. Should these levels hold, the currency pairs could resume their descent in the new trading week.

Game plan #5 – Classic Breakdown on Gold

The last time gold secured a daily close below $1770 was at the start of the month. After flirting within a range for almost three weeks, it looks like the precious metal is ready to move lower. Interestingly, the precious metal somewhat ignored the minutes from the Fed’s July meeting.

Policymakers saw inflation as a significant risk to the economy and indicated they would not pull back on rates until inflation came down. With inflation in the United States cooling to 8.5% in July, traders have cut bets over how aggressive the Fed will be on rates. In fact, markets are currently pricing in a 47% probability of a 75bp rate hike in September.

Talking technicals sustained weakness below $1770 could open the doors towards $1752 and $1724, respectfully.

For more information visit FXTM.

Mid-Week Technical Outlook: FX Movers & Shakers

Some action was witnessed across the FX markets yesterday as the mighty dollar regained some of its mojo amid the risk-off mood and hawkish Fed commentary. Even the Japanese Yen fought back briefly, enacting sweet revenge against other G10 currencies before later surrendering gains.

Sterling seems to be on standby ahead of the Bank of England (BoE) rate decision on Thursday while oil prices remain under pressure as the OPEC+ meeting looms. After weakening on hawkish comments from Fed officials, gold is likely to trade within a tight range ahead of the US jobs report on Friday.

The second half of the week could be wild for markets given the string of high-risk events and potential market shakers. Situations like this could present fresh trading opportunities across FX, commodity, and equity markets.

Below we will discuss potential movers & shakers to watch out for this week and beyond using technical analysis.

DXY rebounds from 105.00 support

Dollar bulls drew support from the risk-off mood and hawkish comments from Fed officials on Tuesday. After staging a rebound from the 105.00 support level, prices are trading marginally above 106.00 as of writing. Should this level prove to be reliable support, a move back towards 107.30 and 109.14 could be on the cards.

Equally weighted USD Index rebounds

After rebounding from the 1.1700 level, the equally weighted USD Index has found itself back within a wide range. The upside momentum may take prices back towards 1.1950. Beyond this level, bulls could challenge 1.21840.

EUR/USD trapped in a range

A classic breakout/down opportunity could be forming on the EURUSD with support at 1.0100 and resistance at 1.0270. A solid daily close above 1.0270 may open the doors towards 1.0350 and 1.0480. Alternatively, a selloff below 1.0100 could inspire a move back towards parity.

GBP/USD waits for BoE

Where the GBPUSD concludes this week may be heavily influenced by the BoE rate decision on Thursday. Key levels of interest can be found at 1.2060 and 1.2350. A move back above the 50-day Simple Moving Average may encourage an incline back towards 1.2350.

AUD/USD back within a range

It’s the same old story for the AUDUSD as prices trade within a very wide range. After yesterday’s steep selloff, prices are back under the 50-day Simple Moving Average. A decline back towards 0.6850 could be on the cards.

NZD/USD breakdown pending?

An appreciating dollar could drag the NZDUSD back below the 0.6220 support level. Such a move may open doors towards 0.6100 and potentially lower. If 0.6200 proves to be reliable support, prices may rebound back towards 0.6375.

USD/CAD sticky around 1.2860

The subtitle says it all. Prices remain in a sticky range with 1.2860 acting as a key level of interest. Should this level prove to be reliable support, the next key level can be found at 1.3050. Weakness below 1.2860 may open the doors back towards the 100 and 200-day Simple Moving Average.

EUR/JPY set to rebound?

After rebounding from the 200-day Simple Moving Average, is the EURJPY primed for a major rebound? The trend remains bearish and prices are trading below the 50 and 100-day Simple Moving Average. Even the MACD is trading below zero, reinforcing the bearish bias on the EURJPY.

Prices have the potential to bounce from the 134.50 region towards 138.00 which is below the 100-day SMA. Beyond this point, bulls may target 139.00 and 141.50.

Bonus: Gold

Gold is trading below the 50, 100, and 200-day Simple Moving Average while the MACD is trading below zero. However, prices are respecting a minor bullish channel with resistance at $1785. A strong break above this level could encourage a move towards $1809 and beyond. If the precious metal breaks under $1752, a decline towards $1724 and $1700 could be on the table.

For more information visit FXTM.

EUR/USD Crumbles To 20-Year Lows

Euro bears went on a rampage today, dragging the EURUSD to levels not seen in 20 years as traders cut bets on European Central Bank (ECB) rate hikes!

The heavy sell-off was triggered by soft economic data from France which not only darkened the already gloomy outlook but fanned fears of a recession in Europe. With ongoing geopolitical tensions obstructing the ECB’s ability to aggressively raise rates like the Fed, the widening interest rate differentials could fuel the EURUSD selloff.

According to Bloomberg, there is now a 60% chance of the parity dream becoming reality by the end of 2022. The last time the EURUSD was parity was back in the first trading week of December 2002.

Before we take a dive into the technicals, it is worth keeping in mind that the euro has depreciated against most G10 currencies today. With the fundamentals swinging in favour of bears, euro weakness could become a key theme this quarter. Although the EURUSD remains our focus, the latest selloff could present fresh opportunities across other euro crosses.

EUR/USD breaches critical support…

The EURUSD has cut through the 1.0350 support like a hot knife through butter.

Prices are heavily bearish on the daily charts as there have been consistently lower lows and lower highs. Bears have a lot of freedom below 1.0350 due to the absence of any key support levels. The next level of interest can be found at 1.0200 and 1.0000. If prices are able to push back above 1.0350, then the EURUSD could retest 1.0480.

EUR/JPY approaches 50-day SMA

After failing to conquer the 144.00 resistance level, the EURJPY could be experiencing a bearish reversal with the breakdown under 141.50 signalling further downside. A weaker euro could drag the EURJPY towards the 138.00 support level. Should bears secure a strong daily close under this point, the next level can be found around 134.50.

EUR/GBP choppy as ever…

There was some action on the EURGBP as prices spiked below the 0.8580 support level before pulling back higher. This currency pair remains a battleground for bulls and bears. Although the overall trend point north, resistance can be found around 0.8680. A daily close below 0.8580 may encourage a selloff towards 0.8500 and 0.8440.

EUR/AUD wobbles above support

The EURAUD could be gearing up for a breakdown below the 1.5150 support.

It’s been trapped within a range over the last 2 weeks with the pressure growing by the day. Yesterday’s bearish candle suggests that a selloff could be around the corner with 1.5150 acting as the gatekeeper. A breakdown below this level may open the doors towards 1.4900 and 1.4770. Should 1.5150 prove to be reliable support, a move back to 1.5300 could be on the cards.

For more information visit FXTM.

Mid-Week Technical Outlook: Pivot Points & Breakouts

Global stocks slipped amid the risk-off mood and growing caution ahead of today’s highly anticipated panel discussion at the ECB forum in Sintra, Portugal. In the currency space, the dollar was on standby while the euro appreciated against most G10 currencies. Oil benchmarks extended gains, lifted by supply worries while gold rose in range-bound trading with prices eyeing $1830.

As we head into the new trading month and second half of 2022, this could present fresh opportunities across the FX space. Today, we will use pivot points and moving averages among other technical tools to unearth potential setups on various currency pairs.

A pivot point is a technical analysis indicator used to determine the overall trend of the market over different timeframes. Pivot points have predictive qualities, so it is considered a leading indicator to traders. The FXTM pivot point indicator can be downloaded HERE.

GBP/USD breakdown on horizon

If you are looking for a bearish trend, then look no further.

The GBPUSD is under pressure on the weekly and monthly charts as there have been consistently lower lows and lower highs. Bears seem to be making a move on the daily charts as prices wobble above the 1.2150 support level. Given how the currency pair is trading below the weekly pivot and has already hit the weekly support level, further downside could be on the cards. A strong daily close below 1.2150 could trigger a selloff towards the S2 at 1.2088 and S3 at 1.2016.

The bearish trend is already defined on the weekly charts. A strong weekly close below 1.2150 could trigger a selloff towards 1.1930 and potentially lower.

A similar theme can be observed in the monthly timeframe. The GBPUSD has shed roughly 3.5% this month with the bearish candle likely to encourage further downside. Should 1.2150 prove to be tough support to crack, prices have the potential to rebound towards 1.2400 before bears re-enter the scene.

USD/JPY bulls relentless

The USDJPY is on a path to hitting a new 24-year high beyond 136.70.

Prices are firmly bullish on the daily charts and have already hit the first weekly resistance level at 136.504. A daily breakout above 136.70 could inspire a move higher towards 137.831 which is where the second weekly resistance level resides. Should bulls run out of steam, prices could decline back towards the weekly pivot at 135.377.

Zooming out to the weekly charts, the USDJPY seems to be gearing up for another breakout. A strong push above 136.70 could trigger an incline towards 138.00.

AUD/USD ready to breakdown?

The AUDUSD weekly chart says it all. Prices are under pressure and trading below the 50,100- and 200-week Simple Moving Averages. Support can be found at 0.6850 while resistance can be seen at 0.7000. A strong weekly close below the 0.6850 support could trigger a selloff to 0.6650. If prices manage to push back above 0.7000, then the next resistance will be at the 200-week SMA at 0.7130.

EUR/JPY eyes 144.00 level

A possible breakout opportunity could be forming on the EURJPY. On repeated occasions, bulls have attempted to conquer the 144.00 resistance level with no luck. The currency pair could be waiting for a fresh directional catalyst before making its next major move. If bulls are able to secure a solid move above 144.00, this could trigger a rally to levels not seen since December 2014 around 146.50. Sustained weakness under 144.00 may encourage a decline towards 142.50 and 141.50, respectively.

NZD/USD destined to tumble?

All eyes will be on how prices behave around the 0.6220 support level which has been held on a couple of occasions. A strong breakdown below this point could encourage a selloff towards 0.6100 and 0.6030. A move back above 0.6300 may suggest an incline back towards 0.6370 and 0.6450.

 

One Last Support Left for the Major Sell Signal on the EUR/JPY

All we need to receive it is for the EURJPY to close below one mid-term dynamic support.

H&S for a Start

EUR/JPY 4 hour chart

Let’s start from the very beginning. The gray formation you see on the chart is the Head and Shoulders pattern which, in theory, ended the uptrend and started a bearish tone. Technically, it happened on May 12th when the EURJPY broke the neckline (green) of the H&S formation.

After that, the price entered the correction stage, which created a wedge pattern (blue). It looks like the wedge is coming to an end, as we’re currently testing its support after a successful bounce off the mid-term down trendline (red). The lower line of the wedge is the support I mentioned at the very beginning, the one that needs to be broken in order to receive a major sell signal.

Target for the Sellers

In case of a breakout, the target will be on the 133.1 support (yellow), which has already proven its effectiveness. The negative sentiment cancels when the price breaks the red down trendline, but chances for that happening are now rather limited.

For a look at all of today’s economic events, check out our economic calendar.

Mid-week Technical Outlook: FX Minors & Crosses In Focus

Global equities were tugged and pulled by inflation fears, rate hike expectations, and ongoing geopolitical risks. In the currency space, king dollar loosened its grip on the FX space allowing G10 majors to bounce while lingering below its 200-day Simple Moving Average.

Over the past few weeks our attention has been on king dollar but this afternoon the spotlight shines on minor and cross currency pairs. The minors are normally referring to non-USD forex currency pairs while crosses are pairs that do not contain the dollar as either the base or quote currency.

Although minors and crosses are slightly less popular than the majors and often experience more wild swings due to less liquidity in the markets, they still present trading opportunities. So, if you have had enough of the dollar and would like something different, check out the setups below!

GBPJPY wobbles above 160.00

After rallying the previous session, the GBPJPY looks tired and may be running on empty fumes. Prices remain bearish on the daily timeframe with the candlesticks trading within a negative channel. A breakdown below 160.00 could result in a steeper decline towards 157.50 and lower. Should 160.00 prove to be reliable support, an incline back towards 162.00 could be on the cards.

GBP/JPY Daily chart

EUR/JPY ready to resume selloff?

The technical bounce on the EURJPY could be over if prices fail to push above 137.00. Bears still remain in some control with prices respecting a bearish channel on the daily charts. A decline back under the 50-day Simple Moving Average could trigger a selloff towards 134.50 and 133.00, respectively. If prices are able to break above 137.00, then a move towards 138.00 could become reality.

EUR/JPY Daily chart

EUR/GBP choppy as ever

There is a lot going on with the EURGBP as bulls and bears battle it out. Prices remain as choppy as ever but the trend could turn negative if prices close below 0.8420. Sustained weakness below this level could result in a further decline towards 0.8380. If prices are able to bounce from 0.8420, the next key level of interest can be found at 0.8500.

EUR/GBP Daily chart

EUR/AUD breakdown or bounce?

As the subtitle says, the EURAUD can either experience a technical bounce from 1.4900 or breakdown below this point to hit 1.4600. The trend looks bullish on the daily charts but prices are trading below the 100 and 200-day Simple Moving Average. Should 1.4900 prove to be reliable support, a move back towards 1.5300 could on the cards.

EUR/AUD Daily chart

AUD/NZD higher highs and higher lows…

This currency pair remains firmly bullish on the daily timeframe. There have been consistently higher highs and higher lows while the MACD trades to the upside. A solid breakout and daily close above 1.1100 could encourage a move higher towards 1.1200. A daily close below 1.0750 could trigger a selloff towards 1.08200.

AUD/NZD Daily chart

For more information, please visit: FXTM

Does Tech Provide the Lifeline? China Credit Impulse? Oil Sanctions?

Global Macro and Stock Markets Analysis

US stocks finished higher in choppy trading, buoyed by a tech-name rally as 10-year yields slumped, which provided a relief conduit for growth stocks. Indeed, the tilt to the tape favoured growth over value as UST 10y yields fell.

The FOMC meeting scheduled for May 4 is expected to display a hawkish Fed that remains steadfast in bringing inflation back down to its 2% target; it is debatable how long of a reprieve growth stock will get.

The drawdown in China/Hong Kong continued triggered by ongoing economic weakness in Mainland. It turned contagious, with Covid concerns escalating to fears of a Beijing lockdown that spurred broader de-grossing globally, fueling concerns of global growth slowdown and for further supply-chain snarls to only exacerbate already rampant inflation.

But we have been down this bumpy Covid road many times before, and it is improbable that mainland powers do not have a flood-like policy contingency plan when lockdowns are removed.

In China, the credit impulse has been a good leading indicator of the PMIs. Once again, the PMIs are significantly weaker than implied by the credit impulse. If history is any guide, the PMIs may have a further downside as lockdown will extend through Golden Week but should recover sharply once restrictions are eased.

And while China property could shift out of the short seller’s gaze when lockdowns are eased, the steady drumbeat of online regulation catching up to innovation will continue to be painful.

Oil Fundamental Analysis

Crude prices are down at the start of the week due to concerns around Covid-19 outbreaks in China, leading to a more protracted lockdown. While a quick return of Libyan production also fueled the bears. Libya’s Oil Ministry said that the closed fields, shutting in >500kb/d of production, could reopen within days.

Given Omicron’s less-lethal footprint, traders had expected some easing of lockdowns before the Golden Week. And with this unlikely to happen, traders were then forced to revalue oil prices lower on a more protracted consumption slump than expected. China’s economy was quite normal last year. So, we are set to see abysmal consumption data post the Golden Week.

Still, reports are rampant that the EU will have some form of the Russian oil embargo in its sixth sanctions, according to EU Commission Executive Vice President Valdis Dombrovskis. While the details have yet to be agreed upon, the sanctions could be a gradual phasing-out of Russian oil or tariffs on exports beyond a sure price cap. And this continues to support the downside.

In addition, Macron has been vocal in calling for an escalation of sanctions against Russia, including a ban on oil and coal imports. On the back of a Macron election win, these calls should grow louder despite German reluctance.

Energy inflation hedges continue to dwindle with the CFTC data released on Friday showing that money managers cut their net long US crude futures and options positions by 15,963 contracts to 246,481 on April 19. Cleaner positioning is suitable for oil bulls as it can elevate downside risks

FOREX Fundamental Analysis

Japanese Yen and the BoJ Meeting

The US yields moved lower overnight, undoing much of last week’s move, on risk aversion related to China’s inability to contain covid cases (more lockdowns) and how this will impact global growth. Cross JPY selling was the main driver, with AUDJPY and EURJPY, in particular, getting hit. USDJPY topped out in the early Asian session near 128.80/90 before falling to a low of 127.89.

USDJPY opens today’s Asia session near 128.00/10, and support in USDJPY rests at 127.80/90 (overnight low) and 127.30/40 (200-hour MA). Buying dips remains the preferred way to play the pair despite the recent price action. It is unlikely the Bank of Japan changes tack at its meeting later this and, given next week is Golden Week in Japan, local USD buyers will need to get their USDs in before heading on holiday.

Even after Kuroda seemed to dismiss any chance of intervention with his remarks on Friday evening, the market remains wary of a downside. BOJ options climb steadily as the market adds a risk premium for the upcoming policy meeting. The USDJPY curve is now pricing an 80bp gap move. The market will be looking for any changes to policy rate forward guidance and inflation outlook adjustment in the medium to long term

PBOC Cuts Forex RRR Rate By 1%

The PBoC has cut the Forex RRR rate by 1% to 8%. This is the rate that governs firms foreign exchange reserve requirements, and the last move saw them hike it by 2% to 9% back in December 2021.

I think the PBOC FX RRR rate cut is a reaction o the increased volatility and the pace of the weakness. And I suspect the PBOC is still okay with a weaker CNH/CNY, but the FX RRR cut could put a lid on USDCNH speculative topside fervor for now, and we could trade within current levels for a bit.

Malaysian Ringgit

And easing of topside USDCNH momentum due to the PBoC RRR FX cut and a softening of US 10 y UST yields should offer the beleaguered MYR some relief today. By no means do I suggest donning the rally caps just yet, as we have a pregnant hawkish FOMC meeting lying in wait for any USD bears on the first week of May

Thai Baht

USDTHB spot is now trading at 33.10, near the highest level since mid-2017. The consensus view is that this is a combination of general risk-off sentiment, yield differentials, and glum China covid lockdown outlook (and the associated impact of the Tourism sector) weighing on THB. Hard to disagree.

But there were also $425 mn of dividend outflows last week. THB is most sensitive to periods when dividend flows are more considerable than $350 mn. Thailand companies will pay around $1.5 bn of dividends to non-residents in April-May this year. (That’s in the price now) I think THB longs as a tourism recovery play are getting close and would look to cross it with local low yielder TWD as opposed to typical funders like JPY or EUR a

Turnaround Tuesday

During periods of market fear, there is a typical inter-week pattern that stock markets often follow. Markets do not always follow this pattern, but they do follow it a surprising proportion of the time.

The most reliable part of this pattern is “Turnaround Tuesday.” Indeed, stocks tend to rip higher on Tuesday if they sold off the Thursday, Friday, and Monday before. It is a simple human pattern because when the news appears bad, traders get nervous into the weekend and sell some of their holdings on Friday. Then they read all kinds of adverse media reports about China’s lockdown, which scares them to sell more on Monday.

Investor selling pulls in momentum traders who go short on Monday and adds to the selling pressure. The shorts get squeezed into the Monday close, which triggers Turnaround Tuesday. Then, Tuesday comes, and there is nobody left to sell so short covering set in, and stocks go up.

For a look at all of today’s economic events, check out our economic calendar.

Why Is the Yen So Weak?

By Han Tan Chief Market Analyst at Exinity Group

Last Tuesday, USDJPY posted its biggest single-day climb since November 2020, only to then take a breather for the time being.

(Note: weaker Yen versus the US dollar = USDJPY climbs higher).

USD/JPY Daily chart

The last time USDJPY traded at these levels just below 130, Eminem had just released his hit 2002 track, “Without Me”.

In fact, JPY is the worst performer against the US dollar amongst all G10 currencies … by far.

And the Yen’s woes aren’t just limited to its performance against the US dollar alone.

Consider how the JPY Index has weakened by almost 9% so far this year.

JPY Index daily chart

This index comprises a basket of currency pairs measuring the Yen against its G10 peers, all in equal weights:

NZDJPY
GBPJPY
CHFJPY
EURJPY
AUDJPY
USDJPY

The Yen also has a year-to-date decline against all its major Asian counterparts as well.

So why is the Yen so weak?

The main reason is because of monetary policy divergence.

Let’s break it down.

Firstly, monetary policy is the way a central bank achieves its goals for the economy (e.g. maximum employment, stable prices, etc.), using tools like interest rates, money supply, and even currency levels.

And where’s the divergence?

The Bank of Japan is still using its monetary policy to support its economy.

This is in stark contrast to what most other central banks around the world are doing = pulling back that support. They do this by raising interest rates/easing back on bond purchases.

The goal of such policy-tightening (not what the BOJ is doing) is to reduce money supply and demand levels in an economy = less money chasing after scarce goods = to lower consumer prices/inflation.

Monetary policy: Comfort food vs. a regular diet

Consider when a child is feeling down, his/her parents may have no qualms treating the child to some ice cream, candy, or chocolate bars.

Such sweet indulgences are meant to make the child feel better in a jiffy, but is (hopefully) just a short-term fix and also (again, hopefully) far different from the regular diet the child consumes as part of the daily routine.

Similarly, when the economy was suffering during the pandemic, central banks rolled out record-low interest rates and printed money out of thin air to keep financial markets supported.

Low interest rates = cheaper for households/businesses to borrow money = they have money to spend in the economy = the economy gets better

But now that economies are recovering and even posting red-hot inflation numbers, it no longer needs record-low interest rates and unlimited bond purchases

Hence, central banks are returning to their economy’s “regular diet” by tightening policy = paring down bond purchases/reducing the supply of money in the economy/raising interest rates.

Who’s already hiking rates?

Within the G10 space alone:

  • Bank of New Zealand – raised its benchmark rate by 125 basis points (1.25%) since Q3 2021
  • Bank of Canada – raised its benchmark rate by 75 basis points so far this year
  • Bank of England – raised its benchmark rate by 65 basis points since December
  • US Federal Reserve – raised rates by 25 basis points in March, perhaps another 50-basis point hike in May

But not so the Bank of Japan.

It’s keeping Japan’s benchmark interest rate at a record low of negative 0.1%, while buying up even more bonds.

Hence, the divergence in monetary policy.

How is policy divergence playing out in markets?

This divergence is evident in the widening gap in yields between Japanese bonds and its global counterparts.

Firstly, what are yields?

Yields are a way to measure how much money you could earn on an investment over a set period of time.

In the case for bonds, it’s calculated in terms of how much interest one would get paid if they held on to that bond till it matures/reaches the end of its tenure.

For context, bond yields have been climbing around the world.

This is because investors are selling off bonds in tandem with central banks that are reducing their balance sheets.

And when bond prices drop, their yields rise.

Here are the benchmark 10-year yields for these other countries (at the time of writing):

US = 2.88%
Canada = 2.87%
China = 2.82%
UK = 1.95%
Germany = 0.89%

Contrast the numbers above with Japan’s 10-year yields, which are capped at 0.25%.

As a policy, the Bank of Japan is buying even more bonds to keep bond prices elevated and limit its benchmark 10-year yields to no higher than 0.25% (this process is also known as “yield curve control”).

The goal for capping those yields is to keep borrowing costs low in Japan so that households/businesses can still borrow to stimulate the economy.

Government bond yields are often used as the benchmark by which other banks/financial institutions calculate the interest to charge the customers who borrow money.

Here are two charts that show how the widening gap/spread between US benchmark yields vs. Japan’s benchmark yields (10-year government bonds) correspond with the USDJPY’s performance:

US vs JPY yields spread and USD/JPY

See how those two lines are moving in sync with one another?

In essence, the wider the gap between US and Japan’s yields, the higher USDJPY goes (the weaker the Japanese Yen against the US dollar).

How are Japan’s capped yields affecting the yen?

The lower yields on offer in Japan suggests that investors would get more bang for their buck by buying bonds in other countries that are now posting higher yields (again, yields in this case are a measure of how much one could earn from investing in that particular bond).

At risk of oversimplifying matters:

Less demand for Japanese assets = less demand for the Japanese yen.

And when there’s lower demand = prices fall (all else equal).

Hence, the Yen has been falling as investors shun Japanese bonds.

From a fundamental perspective, markets are getting the sense that the Japanese economy is still too fragile – or at least the Bank of Japan thinks so of its own economy – and is nowhere near strong enough to be able to do without the ‘comfort food’ from the central bank.

But of course all that could change, as the BOJ faces increasing pressure to follow suit with other central banks in tightening policy … or perhaps even just to stem the Yen’s weakness.

Which brings us to the final question to ponder upon for this article …

Will the Yen eventually rebound?

As a market cliche goes … nothing lasts forever.

So yes, theoretically the Yen could eventually rebound.

But one of two things may need to happen first:

1) The Bank of Japan has to signal that its willing to abandon its ultra-loose monetary policies.

Policymakers need to be convicted that Japan’s economic recovery is sustainable, and that inflation is being fuelled by robust demand (a.k.a. demand-pull inflation) as opposed to cost-push inflation.

To be clear, this seems unlikely for a while more, at least through the end of 2022.

Still, look out for the Bank of Japan policy meeting next week (April 28th).

The slightest clue that the BOJ is ready to tweak its policy stance could trigger a big move in the Yen.

2) Policymakers intervene to curb Yen weakness

This has been done before, but not for quite some time.

The last time the Japanse government propped up the yen was back in 1998, when USDJPY traded above 140 and peaked at 147.66 in September 1998.

However, back in 2002 even when USDJPY surpassed 135, the government sat on its hands and didn’t intervene.

So it remains to be seen at what level Japanese policymakers will tolerate before trying to stop the Yen from weakening further.

Keep in mind that a drastically-weaker Yen causes its own problems for the economy.

Japan is a net importer of energy, which are widely denominated in US dollars. The weaker Yen forces Japan to spend more of its currency to buy the same amount of fuel, not to mention the other imported goods (e.g. food) and services that it now has to spend more money on. If the imported costs become too great and weigh on businesses/households, then the Japanese government may be forced to pay for subsidies to ease the pain.

That’s money out of the Japanese government’s pocket that could be spent on other things.

So until either of the above scenarios happen, shorting the Yen has remained a popular bet.

Last week, asset managers raised their short bets on the Yen to the most ever on record, according to CFTC data.

Overall, as long as this policy and yields divergence continues to play out between Japan and other major economies, that’s likely to keep the Yen on its weakening path for longer.

That is, unless the BOJ or Japan’s Finance Ministry switches tact and, in intervening to halt the Yen’s weakness, might do so while singing lines from Eminem’s monster hit from 2002 …

“Now this looks like a job for me
So everybody, just follow me
‘Cause we need a little, controversy
‘Cause it feels so empty, without me”

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Mid-Week Technical Outlook: Hidden Jewels & Gems

The mood across markets slightly improved as investors placed hopes on EU leaders fending off a recession caused by geopolitical risks. In the commodities arena, gold prices reversed course to dip below $2000 while oil bulls took the day off. There was action across the FX space as the dollar and yen weakened with the EURUSD among other currency pairs snatching our attention. Volatility has certainly been the name of the game over the past few days. While this comes with risk, it also presents potential setups across equity, foreign exchange, and commodity markets.

There are a couple of jewels and gems hidden beneath all the noise. However, technical analysis remains a suitable tool to unearth these opportunities.

EURUSD breakout or throwback?

It may be wise to keep a close eye on how the EURUSD behaves around 1.1121 on Thursday.

With the European Central Bank (ECB) widely expected to leave interests rates unchanged and the dollar drawing strength from the overall uncertainty, the EURUSD is poised to decline. Given how prices are approaching a key dynamic level, anything could be on the table. A strong breakout above 1.1121 may open the doors towards 1.1320. Alternatively, sustained weakness under 1.1121 could trigger a decline back towards 1.0850.

EUR/USD Daily chart

GBPUSD above major resistance

If you want clarity on the GBPUSD, just take a look at the weekly charts.

Prices remain in a bearish weekly channel and there have been consistently lower lows and lower highs. Strong support can be found at 1.3100 which is also where the 200-week Simple Moving Average resides. Should bears secure a weekly close below this support, a decline back towards 1.3000 and lower could be on the cards. Alternatively, a rebound from this level could signal a move to 1.3430 and potentially higher.

GBP/USD Weekly chart

USD/JPY same old story

It’s the same old story for the USDJPY. Prices remain trapped within a range with multiple levels of support and resistance levels on both sides. The currency pair needs a fresh directional catalyst and this could come in the form of the pending US inflation report on Thursday. In the meantime, a breakout above 116.00 could open a path towards 116.30 and 117.40. If prices slip below 115.50, then the next level of interest can be found at 114.50.

AUDUSD bears still lingering

The AUDUSD experienced a rebound over the past few weeks with bulls pushing the currency beyond 0.7300. Interestingly, prices still remain in a bearish channel on the weekly charts with 0.7300 acting as a pivotal point. Sustained weakness under this level could trigger a selloff towards 0.7120 and 0.6990.

EURJPY trend reversal?

The EURJPY has jumped over 200 pips today thanks to a weakening Japanese Yen. Prices could turn bullish on the daily charts if a strong daily close above 129.30 is achieved. A selloff back below 128.00 may trigger a steep decline towards 124.38.

GBPJPY to push higher on shorter timeframe

Things are looking bullish for the GBPJPY on the hourly charts. The upside momentum could take prices to 153.30 and 154.00 before bears re-enter the scene. A move below 152.20 could trigger a selloff towards 151.00.

Is the party over for gold bugs?

They say a picture says 1000 words. Well, then check out gold on the weekly timeframe. The forming pin bar on the weekly charts is bad news for bulls with a weekly close back below $2000 signalling further downside. It is worth keeping in mind that gold prices may be influenced by the US inflation report on Thursday.

Oil bulls twist ankles

Yesterday we questioned whether oil bulls were unstoppable? It looks like they have tripped over something or injured themselves today as prices tumble. Brent crude is trading around the $108 level after punching above $131 on Tuesday. A strong breakdown below $108 is likely to encourage a decline back towards $100.

S&P500 respects bearish channel

Despite today’s sharp rebound, the S&P500 remains in a bearish channel on the daily charts. If 4300 proves to be reliable resistance, a decline back towards 4150 and lower could become reality. Above 4300, the next key levels of interest can be found at 4415 and 4470 – a level just below the 200-day Simple Moving Average.

By Lukman Otunuga Senior Research Analyst

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

EUR/GBP and EUR/JPY Elliott Wave Analysis: Approaching Low

EURGBP Daily Elliott Wave Analysis

EURGBP keeps moving lower on a daily chart, but we see it approaching important support zone. If we consider that that it’s running out of steam within an ending diagonal pattern for wave 5 of (C), then bullish reversal can be around the corner, we just need price confirmation.

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EURJPY 4hElliott Wave Analysis

EURJPY came higher, up to 133 as expected, but then it fell sharply, clearly in impulsive fashion back to 130.30 area, which suggests that impulse from 128.20 is completed. As such, we see room for more weakness in the short-term to complete an A-B-C drop that can be underway within a higher degree triangle.

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For a look at all of today’s economic events, check out our economic calendar.

How Tensions Between Russia and Ukraine Can Affect the Markets?

It’s reported more than 100,000 Russian troops are positioned at Ukraine’s eastern border, despite Moscow denying claims of a pending invasion. Sparking global interest, and a number of nations urging its citizens to leave Ukraine, world leaders continue to pursue a diplomatic resolution.

Germany’s Chancellor Olaf Scholz is bound for Russia later today to hold talks with President Vladimir Putin. This follows his meeting with the Ukrainian president, Volodymyr Zelensky, in Kyiv on Monday.

Scholz informed reporters in Kyiv there was ‘no reasonable justification’ for the Russian military build-up on Ukraine’s borders.

Also of note on Monday, in a call between US President Joe Biden and UK Prime Minister Boris Johnson, both leaders agreed that a window of diplomacy remains open, according to a Downing Street spokesperson following the call.

Additional developments on Monday witnessed US Secretary of State Antony Blinken announce that the US embassy in Kyiv will shut its doors and temporarily relocate to the western city of Lviv. ‘I have ordered these measures for one reason, the safety of our staff, and we strongly urge any remaining US citizens in Ukraine to leave the country immediately’, Blinken added in a statement.

Preparation is Key

Global equities took a hit on Monday amid escalating tensions. The FTSE 100 dropped nearly 1 percent and the DAX shed 0.6 percent. Across the pond, the S&P 500 fell 0.4 percent and the Dow Jones Industrial Average erased 0.5 percent.

According to reports out of Russia’s Interfax news agency today, however, a number of Russian units have left the Ukrainian border and are headed back to their bases. Cheered by markets, European indices are higher across the board as well as US equity index futures trading on solid footing, at the time of writing. Risk-sensitive currencies also trade firm, in addition to US Treasury yields rising across the curve.

As a trader or investor, preparation is key to attaining consistency and preparing for the insanity of war can be particularly challenging.

Although tensions appear to have stabilised for now, many market participants consider safe-haven assets the ‘go-to’ investment vehicles in times of turmoil. The Japanese yen will be a key ‘watch’ should war be declared, anticipated to find demand as investors seek safety.

Consequently, bearish scenarios across USD/JPY, EUR/JPY and GBP/JPY currency pairs are possible. EUR/JPY has been entrenched within a consolidation between ¥132.72 and ¥127.95 since late June 2021. Technically speaking, though, the immediate trend faces north (see EUR/JPY daily chart). An invasion may equally underpin the Swiss franc, the US dollar and gold (XAU/USD), all of which are perceived safe-haven markets.

Oil and gas markets are likely to advance as a consequence of Russian military action inside the Ukraine. With the demand of oil at multi-year highs—oil prices touched seven-year pinnacles in recent days and reached a high of US$95.79 a barrel—there are concerns a war (or sanctions) on Russia could cut supplies and guide oil prices higher, movement stoking inflation worries. Note that Russia is the second largest oil producer in the world.

Speaking to CNBC’s Squawk Box Europe, veteran strategist David Roche was asked whether he saw a significant three-digit handle on the price of oil in the event of war. Roche stated that he believed oil prices could reach as far north as US$120 a barrel.

In terms of global equity markets, temporary declines across the board would be expected. Jeff Schulze, ClearBridge Investments Investment Strategist, joined Yahoo Finance last week and said ‘conflict would cause only a momentary sell-off across equity markets’.

(Source: Trading View EUR/JPY Daily Timeframe)

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Technical Outlook: Yen Crosses Under The Spotlight

The weakness could be based on a jump in risk sentiment amid strong corporate earnings. However, geopolitical tensions and inflation worries could still accelerate the flight to safety, rekindling appetite for safe-haven assets like the Yen.

Focusing on the technicals, February could be a volatile month for the Yen if conflicting themes influence global risk sentiment. Looking at the USDJPY, prices remain firmly bullish on the monthly timeframe as there have been consistently higher highs and higher lows. Bulls remain in a position of power but need to conquer 116.30 to open the doors to further upside.

USD/JPY Monthly chart

The story changes on the weekly charts. Prices remain in a wide range with support around 113.360 and resistance at 115.50. A solid weekly close above this resistance could trigger an incline towards 116.30 and 117.40.  Alternatively, a rejection from 115.50 could inspire a selloff towards 114.50, 114.00, and 113.360.

USD/JPY Weekly chart

Some momentum is building on the daily charts with bulls in a position of power. A strong daily close above 115.50 could trigger a move towards 116.00 and 116.30.

USD/JPY Daily chart

EUR/JPY bulls in the building

The aggressive rally last Thursday may have set the tone for the EURJPY this month.

A hawkish ECB tipped the balance between the EUR and JPY with bulls going out of control. Prices are trading around the 132.00 level of writing with further upside certainly on the cards. A strong daily close above 131.70 could encourage a move towards 132.60 and 133.47. Technical indicators such as the Simple Moving Average and MACD agree with the bullish outlook. Should 131.70 prove to be unreliable support, a decline back towards 131.00 and 130.20 could become reality.

EUR/JPY Daily chart

GBP/JPY journeys north after bounce on MAs

The GBPJPY remains in a healthy bullish trend on the daily charts after bouncing from the 50,100 and 200 Simple Moving Averages. A weaker Yen may inject GBPJPY bulls with enough confidence to challenge the 157.50 resistance level. Should prices secure a daily close above this point, the next key point of interest will be found around 158.19. Alternatively, if 157.50 proves to be a tough nut to crack, prices are likely to decline back towards the 155.50 support.

GBP/JPY Daily chart

AUD/JPY presses against 82.50

A major breakout could be on the horizon for the AUDJPY. Prices are trading just below the 82.50 level which is where the 50, 100, and 200 Simple Moving Average reside. A solid breakout and daily close above this point could open a path towards 84.00. Should 82.50 prove to be reliable resistance, prices may decline back towards 80.50.

AUD/JPY Daily chart

By Lukman Otunuga Senior Research Analyst

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Currency Pairs USD/JPY and EUR/JPY Elliott Wave cycles Point Resistance

As such, there is still a chance for a reversal, ideally, after the current fifth wave that is moving into 114.50-114.80 resistance area.

As per Elliott Wave analysis, USDJPY has completed the 5th wave as an ending diagonal (wedge) pattern and that weakness will resume towards much lower prices as a drop from 115.52 unfolded as an impulse. Ideally, that was wave A)/1), so more weakness is coming after an A-B-C rally within wave B)/2), which can be now approaching important resistance here around 61,8%-78,6% Fibonacci retracement and 114.50 level, from where we should be aware of another decline for wave C)/3).

USD/JPY 4h Elliott Wave Analysis

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EURJPY is still in sideways consolidation in the 4-hour chart, which still looks like wave 4 correction, but we see 130.00 psychological level as key resistance, from where we have to be aware of another sell-off for wave 5, especially if we consider bearish looking EURUSD and resistance on USDJPY.

EUR/JPY 4h Elliott Wave Analysis

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EUR/JPY and CAD/JPY Currency Pairs Elliott Wave Cycles Point Downside

However, after recent bounce seems like EURJPY is forming a bearish triangle pattern, so we may see a sideways consolidation, but still be aware of a bearish continuation for the final wave 5 of C) before it finds the support.

EUR/JPY 4h Elliott Wave Analysis

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CADJPY is turning sharply down from the highs on a daily chart, which suggests that a five-wave cycle is completed. So, we are now tracking a three-wave A-B-C correction that can send the price at least back to 38,2% Fibonacci retracement and to the former wave 4 support. Currently seems to be wave B still in progress and once it’s fully finished, be aware of another wave C decline.

CAD/JPY Daily Elliott Wave Analysis

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Indices Try to Correct Lower and EUR/USD to the Upside

SP500 reaches an important resistance and creates a head and shoulders pattern on the lower timeframes. The neckline isn’t broken yet, so buyers can still chill.

DAX is correcting a recent surge inside of a flag formation.

Silver is raising pressure on a long-term horizontal support.

EURJPY with a false bearish breakout is ready for a new bullish wave.

CHFJPY is locked inside of the rectangle between two Fibonacci’s: 23,6% and 38,2%.

EURUSD is trying to initiate the reversal with an inverse head and shoulders pattern but is still trading below the neckline.

GBPUSD is still under heavy selling pressure but may use the 38,2% Fibo in order to create some kind of a bounce in those oversold conditions.

For a look at all of today’s economic events, check out our economic calendar.

Traders Were Hoping for a Stronger Bounce I Guess…

So far, the recovery from Friday’s carnage is, let’s say, pretty mild. The same mild as apparently, the symptoms from the new coronavirus strain are. That information was about to drive today’s reversal but as you can see, traders are not encouraged to buy the dip at this point.

Gold is defending the mid-term up trendline.

SP500 bounced during the Asian session but the European one does not start well.

DAX is giving back almost all gains from the Asian session.

USDJPY continues the downswing after the breakout of the mid-term up trendline.

EURJPY drops after breaking crucial horizontal support.

AUDNZD continues a very technical movement by creating a wedge finishing the correction on the 38,2% Fibonacci.

USDCHF is trading lower after the false breakout from the symmetric triangle.

The Mexican Peso continues the weakening to USD and EUR despite quite a good opening after the weekend.

For a look at all of today’s economic events, check out our economic calendar.

Risk Off Is Back. Indices and EM Currencies Drop. Safe Havens Surge

Shocking night and morning for the vast majority of stock bulls. Indices are collapsing and the new strain of the virus is apparently to blame.

In this situation, safe-haven assets like gold for example are gaining traction. Gold is aiming higher after breaking the neckline of a small inverse head and shoulders pattern.

Yen is also gaining, USDJPY is currently performing an attack on the mid-term up trendline.

EURJPY is testing crucial long-term horizontal support on the psychological level of 128.

USDCHF is dropping after the false breakout from the symmetric triangle pattern.

EURUSD is trying a small bullish reversal to test the major horizontal resistance.

USDMXN advances higher after the breakout of an important horizontal resistance.

EURMXN continues the rise after the price escapes from a beautiful wedge pattern. A price action classic!

For a look at all of today’s economic events, check out our economic calendar.