Commuters make their way through Grand Central, New York and strong data out of the US indicates the economy is motoring and dollar is rising accordingly Photo: Shutterstock
By John J Hardy
Key developments in FX Today:
- EURUSD hit a major Fibo level and USDJPY bumped up into the 200-day moving average territory today after strong US data, but as of this writing, the move was showing signs of faltering ahead of another day of testimony from US Fed Chair janet Yellen today, See charts below and the latest Notes of Interest on the attached FX Board PDF for more.
- The sterling rally attempt has fizzled today, with GBPUSD dipping into a key pivot zone and needing to recovery strongly into the close to avoid a test lower. Elsewhere, EURGBP broke to new local lows yesterday but was strongly supported by the 200-day moving average. See chart below.
EURUSD made it all the way to the 1.0530 area where the 61.8% Fibo came into view and provided support despite the strong US data and bump in US interest rates. Today's lows and down to 1.0500 are a key area for determining whether we will trigger a full-scale test of the lows for the cycle below 1.0350.
Today's closing EURUSD level vital to determine whether we'll get a test of cycle lows
USDJPY pulled as high as the 200-day moving average today before faltering a bit. That level and perhaps the Ichimoku cloud top, currently above 116.00, are critical for whether the pair can bull back up to the highs for the cycle. Meanwhile, the 114.00 area to the downside looks like a top of a local capitulation zone if this rally doesn't hold.
USDJPY looking towards 116.0 for path higher
EURGBP push stymied
EURGBP did manage to poke to new local lows Tuesday, but UK data hasn't inspired and the pair returned higher today despite a round trip back lower after yesterday's brief rally. The local resistance/trigger higher looks like 0.8525-50, above which stops are likely clustered.
Until then, the bears will hold out hopes for a push back through the local lows and thus a capitulation lower through the neckline of the local, nested head-and-shoulders formation and then the bigger and more well-defined one down in the 0.8350-00 zone.
EURGBP nestled in a zone
Cable has wobbled today and found itself in the downside support zone below 1.2400 briefly after triggering stops below 1.2450 on weak UK data today. The pair needs to find support here to avoid a test lower still - watching today's close on that account.
GBPUSD close critical to possible downside development
Spot gold had a look at the $1,219/oz support level today - an important one on the way up - and this will be key for maintaining a view higher, otherwise, a break would likely quickly lead to a focus on $1,200/oz or even $1,180/oz.
— Edited by Martin O'RourkeJohn J Hardy is Saxo Bank's head of forex strategy