The following is paraphrased from Danske Bank:
EURUSD: Backed off the 1.1279 high which stands just below the 1.1284 resistance and 1.1300 level. Break here will clear the way for retest of the 1.1327 and 1.1366 highs. Support now at 1.1221 and 1.1194 and only below the latter will see risk for deeper pullback to the 200-day MA at 1.1156 then 1.1123 low.
USDCHF: Staging rebound from the .9660/50 support though upside seen limited above the .9700 level. Would need lift over the .9743/62 resistance to revive upside focus and see strength to retest the 200-day MA then .9820 high. Break of the .9660/50 lows will trigger deeper pullback to .9632 then the .9600 level.
USDJPY: Held firm above the 100.00 level and bounce from the 100.09 low see scope for retest of the 101.00 level. However, the upside seen limited and only lift above the 101.24/54 resistance will fade downside pressure. Below the 100.00 level will expose the 99.54 and 99.02 lows to retest.
EURCHF: Held firm above the 1.0854 and bounce from 1.0856 low to regain the 1.0900 level see scope to tge 1.0921 resistance. Lift over this needed to see stronger recovery to 1.0960. Clearance here needed to expose the 1.0985 and 1.1001 highs to retest. While the latter caps, lower high sought to further pressure the downside later.
GBPUSD: Intraday trade a touch firmer with prices sustaining above the 1.2915 support and eyeing intraday hurdle at 1.3050 and break will expose stronger gain to 1.3120 daily resistance. Below 1.2915 support, bears back on footing and eyes 1.2866/50.
EURGBP: Failed to sustain rally to .8716 high which stands just below the .8725, Aug high. Long upper wick seen weighing and setback see the .8631/11 recent highs to watch. Would take break to trigger deeper pullback to the .8562/35 support. Break above the .8725 high will resume the underlying bull trend.
The following is paraphrased from ScotiaBank:
USDCAD (1.3231) • CAD is flat, having recovered from a headline-induced decline to a fresh multi-month low as market participants reacted to Gov. Poloz’s postspeech Q&A in which he hinted to a 3-5 year timeline for Canada’s economic restructuring in response to the oil price shock. The outlook for relative central bank policy remains dominant, as we note the continued deterioration in expectations for the BoC with OIS pricing in a nearly 35% chance of a 25bpt rate cut over the next 12 months. The U.S.-Canada 2Y spread appears set to widen in a CAD-negative manner to levels last seen in June. Oil prices may gain greater near-term prominence on the back of OPEC-related headlines, however domestic risks should remain in focus into Friday’s monthly GDP for July. Measures of implied CAD volatility are elevated across a range of time horizons, and risk reversals have responded accordingly—pricing a greater premium for protection against downside risk. Remain bearish.
USDCAD short-term technicals: bullish—USDCAD has broken to a fresh multimonth high with gains above the 1.3250 resistance area that had served as key resistance in late July and mid-September (see middle chart). The balance of risk is biased to further upside as both trend and momentum signals are bullish. We look to gains toward 1.33 and 1.35.
EURUSD (1.1237) • Spot remains tightly range bound. We continue to note two distinct negative for the EUR – wide, short-term Eurozone-US interest rate spreads (145bps at the 2Y sector of the curve) and the continued pressure on Eurozone bank shares – that could yet trip the EUR up (impact on Merkel government and broader political situation) and should certainly suggest limited upside potential for the EUR in the near-term at the very least. We think EURUSD is fundamentally vulnerable to the downside and expect firm resistance in the upper 1.12s.
EURUSD short-term technicals: neutral/negative—EURUSD is showing little sign of weakness or vulnerability on the charts. Intraday price action looks firm, in fact, even if the market remains resolutely range bound. The 1- and 6-hour chart patterns suggest firm demand on short-term dips to the 1.1240 high/low support zone. We note strong, long-term resistance overhead at 1.1275/80, however, and rather favour using short-term EUR rallies as a selling opportunity.
GBPUSD (1.2968) • GBP is quiet, consolidating around 1.2950 at the lower end of its multi-month range. The balance of risk is biased to further downside, and Brexit-related concerns may deliver fresh lows for GBP as we note the continued focus on the timing of the negotiations and triggering of Article 50. There are no major domestic releases scheduled ahead of Friday’s final Q2 GDP figures, however we note that (departing) BoE MPC member Shafik is set to speak to media on Wednesday. Considerations of relative central bank policy and a renewed focus on Fed-BoE divergence could deliver added pressure to GBP. Measures of implied GBP volatility are climbing, and risk reversals are building a greater premium for protection against GBP weakness.
GBPUSD short-term technicals: bearish—momentum signals are bearish, DMI’s are providing confirmation, and moving averages are bearishly aligned. We look to a break of the trend channel (see bottom chart) and recent support around 1.2920 with risk to the August 16 open at 1.2880 followed by 1.2850 and the July low around 1.28.
USDJPY (100.40) • JPY is quiet, consolidating in a tight range around Monday’s close with near-term risk limited to sentiment in the absence of domestic data. The release of BoJ minutes from the late July meeting provided for minor knee-jerk strength in JPY to a fresh one month high, however the move was completely negated by the subsequent response to the U.S. election debate as broadbased risk appetite delivered JPY weakness. Sentiment is likely to remain dominant ahead of retail sales and CPI later this week. We highlight the significant turn in short-term risk reversals, repricing a greater premium for protection against JPY strength (USDJPY weakness) with a full retracement of the shift from mid-August.
USDJPY short-term technicals: bearish—USDJPY has tested a fresh one month low and is consolidating in a tight range around 100.50. Momentum signals are bearish, DMI’s are providing confirmation, and moving averages are bearishly aligned across a range of time horizons. We look to the mid-August low around 99.50 followed by the June 24 low around 99.
The following is paraphrased from Danske Bank:
EURUSD: Higher in consolidation following bounce from the 1.1200 level on Fri. Resistance now at 1.1285 then the 1.1327 high. Long upper wick from the latter seen weighing and while the latter caps, risk is seen for eventual break of the 1.1200 level to see return to the 1.1139/23 lows.
USDCHF: Rejection from the .9790 high see pressure returning to the downside and clear break below the .9700 level will expose the .9650 low of last week to retest. Below the latter will return focus to the .9600 level then .9537 low. Upside seen well contained and only above the 200-day MA at .9810 will revive upside focus.
USDJPY: Backed off from the 103.00 level though dips see support at the 101.41 and 101.21 lows. The latter stands just above the 101.17/100.93 support and only break will weaken and expose the 100.00 level and 99.54 low to retest. Higher low sought for retest of the 103.00 level later.
EURCHF: Sharp pullback from the 1.0976 high keep the 1.1000 level out of reach and see risk for setback to pressure the 1.0888 low. Break of the latter will trigger deeper pullback to the 1.0869 and 1.0827 lows. Upside see resistance now at 1.0945 then the 1.0976 high.
GBPUSD: Bounce from the 1.3236 low keep recovery within the 4-wk channel from the 1.2866 low in play and see scope for return to the 1.3445 high. Clearance will see scope to target 1.3481 then the 1.35000 level. Only below 1.3236 and the 1.3200 level will weaken and see risk for deeper pullback.
EURGBP: Corrective bounce from the .8334 low of last week stalled at .8495 high and setback see pressure returning to .8422 support. Risk is seen for break to return focus to the .7334 low where break will extend the broader down-leg from the .8725, Aug high. Lower will shift focus to .8300 level then .8251, Jul low.
The following is paraphrased from ScotiaBank:
USDCAD (1.3101) • CAD is weak, down 0.5% and underperforming all of the G10 currencies in tandem with AUD in an environment of elevated risk aversion. The broader tone is dominant, oil prices are weakening, and yield spreads are widening in a CAD-negative manner, leaving CAD vulnerable to further decline. This week’s domestic risk events are limited to Wednesday’s public appearance from BoC Senior Deputy Governor Wilkins’, whose speech—titled ‘(S)low for Long and Financial Stability’—should expand on some of the key components of last week’s ‘tilt’ in tone. Relative policy divergence between an increasingly hawkish Fed and a tentatively dovish BoC should weigh on CAD. In terms of sentiment, we note the broad rise in measures of implied CAD volatility across a range of time horizons and the corresponding increase in the premium for protection against CAD weakness. Remain bearish.
USDCAD short-term technicals: bullish—USDCAD has cleared 1.31 on the back of its fourth consecutive session of gains, rallying toward the late August-early September highs around 1.3150 and the late July high around 1.3250. Momentum signals are modestly bullish, DMI’s are confirming the shift in the balance of risk, and short-term MA’s are bullishly aligned. Near-term support is expected between 1.3050 and 1.3020.
EURUSD (1.1232) • EUR is soft, retreating back toward 1.12 as it retraces last week’s U.S. data (non-mfg ISM) and ECB-driven rally. Fundamental releases have been limited, leaving the focus squarely centered on the broader market tone as markets digest a shifting outlook for Fed rate hikes. EUR’s greatest near-term risk lies with Fed BoG member Brainard’s speech at 1:15pm ET, her tone, and its impact on the outlook for relative central bank policy. Measures of implied EUR volatility are climbing across a range of time horizons and risk reversals suggest a rise in the premium for protection against EUR weakness. Remain bearish.
EURUSD short-term technicals: bearish—EUR is under pressure, retreating from last week’s short-lived high above 1.13. Thursday’s shooting star candle has been followed by two consecutive sessions of weakness, and EUR is testing near-term support around the 100 day MA at 1.1211. We look to further weakness through 1.12 toward the September 6 open around 1.1150 followed by the August 31 low around 1.1120. Near-term gains are likely to be limited above 1.1250.
GBPUSD (1.3289) • GBP is quiet, consolidating in a tight range around Friday’s close, its movement limited in the absence of domestic data and its relative performance underscoring its risk profile in periods of risk aversion. Domestic risk will remain elevated throughout the week as market participants look to Tuesday’s CPI, Wednesday’s employment, and Thursday’s retail sales data and BoE policy decision. A BoE hold on Thursday (0.25%) is widely expected and the tone will be key as policymakers interpret the shifting outlook following the most recent round of stronger-than-expected PMI’s. Lastly, note that MPC member Shafik is set to leave the BoE at the end of February 17. The departure was unexpected.
GBPUSD short-term technicals: bearish—GBP has made a fresh marginal low under 1.3250 and it continues to retreat from the recent high around 1.3450. GBP has broken through its 9 day MA (1.3290) and its clearing of the September 1 close (1.3268) leaves little support ahead of the September 1 open at 1.3138.
USDJPY (101.79) • JPY is outperforming all of the G10 currencies with a 0.6% gain, its strength driven by the broader market tone of risk aversion. Domestic releases have been mixed, the upside surprise to machine orders offset by weaker than expected PPI. JPY’s greatest near-term risk lies with the 1:15pm ET speech from Fed BoG member Brainard and its impact on the broader market tone. Continued risk aversion would be expected to provide added support to JPY (pressure USDJPY).
USDJPY short-term technicals: neutral-bearish—momentum signals are shifting and the RSI has dropped back below 50. USDJPY has broken 102 and appears set to decline toward its 21 day MA at 101.67. We look to further weakness toward 101.50 followed by 101.20.
The following is paraphrased from Danske Bank:
EURUSD: Rally to regain the 1.1200 level has seen strength to break the 1.1252 high of last week. Nearby see resistance at 1.1271 then the 1.1300 level. Beyond this will return focus to the 1.1341/66 highs. Support now at the 1.1200/1.1182 area protecting the 1.1140/23 lows.
USDCHF: Rejection from the .9800/20 area to break the .9739 support see follow-through of the broader decline from the .9885 high. Break of the .9700 level expose strong support at .9688 and .9632 next. Upside see resistance now at the .9739/72 recent lows.
USDJPY: Follow-through below the 102.00 level shift focus to the 101.17/100.93, recent highs. Stretched intraday tools see the latter holding firm for now though risk is seen for eventual break to return focus to the 100.00 level and 99.54 low. Resistance now at 102.40 and 102.80.
EURCHF: Pressure stays on the downside though the 1.0900 level still intact. Risk is seen for break to extend the drop from 1.1001 high of last week and target the 1.0869 support. Below the latter will see return to 1.0827 and 1.0790 lows. Resistance now at 1.0946/57 area.
GBPUSD: Intraday trade a touch softer in retreat but the strong rally last session is keeping the upmove from 1.3060 low in play and eyeing strong hurdle at 1.3481 and break needed to warrant further call on the upside. Only setback below 1.3372 support to ease upside pressure.
EURGBP: Staging recovery from the .8334 low though the upside still limited and regaining the .8400 level needed to ease downside pressure. Above the .8407 resistance will trigger corrective bounce towards the .8445 and .8485 resistance. Below .8334 low will see further decline to the .8300 level and .8251, Jul low.
The following is paraphrased from ScotiaBank:
USDCAD (1.2844) • CAD is flat, consolidating in a tight range just below Tuesday’s multi-week high with near-term risk centered on the 10:00am ET Bank of Canada policy decision and statement release (no MPR or press conf.). A policy hold is widely anticipated (see middle chart), and the statement tone is expected to remain neutral with ‘roughly balanced’ risks to inflation and no change to the outlook for an H2 2016 rebound in growth. Both CAD and oil (WTI) are trading at levels roughly in line with those observed at the July 13 meeting, leaving the primary BoC risk centered on language relating to financial vulnerabilities. CAD drivers are moderately supportive, as oil prices stabilize off last week’s lows and yield spreads narrow from their recent multi-week highs. Sentiment is also providing support as measures of implied volatility soften and risk reversals suggest a moderation in the premium for protection against CAD weakness.
USDCAD short-term technicals: neutral-bearish—momentum signals have turned and the RSI is below 40. DMI’s are confirming the shift in the balance of risk and USDCAD appears set to test the ascending trendline off the May-August lows. Support is limited ahead of the August 19 open around 1.2780. Look to near-term resistance above 1.2920.
EURUSD (1.1243) • EUR is quiet, consolidating Tuesday’s impressive 1% rally with no material response to the release of weaker than expected industrial production figures from Germany (-1.5% m/m vs. 0.1% exp.). The greatest near-term risk for EUR lies with Thursday’s ECB as market participants consider the lack of clarity with regards to the near-term path for policy. Expectations are generally muted, with the bulk of Bloomberg survey respondents looking to no change in either the deposit rate (-40bpts) or the monthly pace of asset purchases (80bn). Risk of a disappointment is thus limited, reducing the risk of a replay of the March/December experience.
EURUSD short-term technicals: neutral—momentum signals are neutral and the ADX is trendless. Short-term MA’s are bearishly aligned however EUR appears unable to make a clear break of its recent congestion range around 1.12. We look to near-term resistance above 1.1280 and highlight the recent support observed around 1.1150.
GBPUSD (1.3366) • GBP is weakening on the back of softer than expected manufacturing production data for July (-0.9% m/m vs. - 0.3% exp.), challenging the narrative of post-Brexit resilience that had emerged in response to the most recent round of PMI’s. Nearterm risk lies with BoE Gov. Carney’s 9:15am ET appearance before parliament. He will be joined by MPC members Cunliffe, Forbes, and McCafferty.
GBPUSD short-term technicals: neutral—GBP appears to be retreating from resistance just below 1.3450 as it retraces a portion of Tuesday’s impressive rally from 1.33. The broader picture is relatively muted with near-neutral momentum signals and a trendless ADX. The two-hour chart is bearish, delivering a three candle evening star pattern in the latter half of Tuesday’s NA session (see bottom chart). Near-term support is expected at 1.33 followed by 1.3250.
USDJPY (101.68) • JPY is outperforming nearly all of the G10 currencies with a gain of 0.5%, rising in response to local media rumors of discord among policymakers at the BoJ. Gov. Kuroda is said to favor lowering interest rates further into negative territory and Dep. Gov. Iwata is said to favor an expansion in the monetary base. Board members Kiuchi and Sato are said to oppose any further easing. Risk is elevated heading into the September 21 policy decision, given that messaging following the most recent July 29 meeting (and disappointment) had put a heavy emphasis on a comprehensive review that was intended to help formulate the policy outlook into September. The likelihood of another BoJ disappointment is climbing, putting upside risk to the near-term path for JPY. Risk reversals are responding accordingly, pricing a greater premium for protection against JPY strength.
USDJPY short-term technicals: neutral-bearish—USDJPY has dropped back below its 50 day MA, momentum signals have turned, and the RSI is now below 50. DMI’s are providing confirmation to the shift in the balance of risk and USDJPY is attempting a clear break below the 21 day MA.