09 September 2016 at 13:53 GMT
By John J Hardy
Key developments in FX today:
The USD pulled sharply higher, in part supported by the reaction to the European Central Bank meeting yesterday, where the lack of dovishness by its president, Mario Draghi, saw carry trades reversing broadly, and AUD and NZD going lower in particular against the euro and the US dollar.
Additionally, higher yields and some rhetoric from the Boston Fed's Rosengren added to the USD strength, which broadened to across the board by the early US hours. This gives USD bulls a hook going into next week – particularly in pairs like AUDUSD and NZDUSD, where fresh bearish reversals may be in the offing.
USDJPY zipped back higher today – the interest picks up again next week if the bottom of the Ichimoku cloud comes into play around 103.70. Note that EURJPY and GBPJPY have entered their respective Ichimoku clouds as well. Above there, the focus will be on recent highs near 104.30 and then the top of the Ichimoku cloud a bit above 105.00.
While the euro has wilted against the US dollar in today's trading, it has still fared better than the AUD in the wake of the ECB meeting, and an interesting resistance area is coming into view here, and if we see a reversal of the carry trade it is likely to favour euro over the Aussie.
AUDUSD has reversed hard again, though beleaguered bears may decide to sit on their hands for a break of the 0.7500 area before believing that a bigger unwind is in the offing, after a recent false start.
Next week, we may have an interesting case of momentum divergence confirmation as we watch whether AUDNZD pulls back higher after attempting to breech the lows below 1.0313 this week. NZD may be the biggest loser if we have a powerful anti-carry trade theme next week.
– Edited by Clare MacCarthy
John J Hardy is head of FX strategy at Saxo Bank