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Kim Cramer Larsson
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Article / 18 June 2015 at 14:30 GMT

FX Board: USD bulls running for the hills

Head of FX Strategy / Saxo Bank
Denmark
  • Gold is responding quite strongly to the dovish FOMC meeting late yesterday 
  • EURNOK upside ambition may prove rather limited 
  • Next focus for GBPUSD could zero in on 1.6000 or even 1.6190
By John J Hardy
Hawk
 The BoE is on the hawkish side... Photo: iStock

Key FX developments today:

  • Some additional follow through in USD weakness today after the very dovish FOMC meeting yesterday saw US rate expectations adjusted lower and the greenback weakening. EURUSD took out a local resistance level at 1.1385 and AUDUSD doing the same, while GBPUSD rushed to its highest level since last November. 

  • NZD remains extremely weak after a very weak Q1 GDP report late yesterday, though it did manage to avoid fresh lows against the USD today, as 0.6880 has developed as the latest support level amid a rather weak US unit. AUDNZD is up challenging the major 2014 highs just above 1.1300, which rate differentials suggest may not hold the pair.

  • Gold is responding quite strongly to the dovish FOMC meeting late yesterday and is up challenging the key zone between 1200-1210 today 

Charts: 

EURUSD
EURUSD has challenged above the local resistance just above 1.1380, but is perhaps reluctant to gun too aggressively higher with the Greece issue handing over Europe through the end of this month and very likely beyond. 

The next obvious level is the nominal high for the cycle at 1.1467, the psychologically important 1.1500 level (these round numbers are often key for EURUSD) and then the 200-day moving average, which is descending from above 1.1700 currently. Some will be tempted to recognize an upside down head and shoulders formation with the neckline below 1.1500 (blue line below).

eurusd
Source: Saxo Bank. Create your own charts with Saxo Trader click here to learn more

Dove
 ..while the FOMC is rather dovis. Photo: iStock

GBPUSD
GBPUSD has ripped higher on the Bank of England clearly leaning hawkish while the FOMC leans dovish, driving a powerful new expansion in the UK-US rate spread that suddenly introduces fundamental support for the rally where little existed previously (apparently FX was ahead of the curve in predicting what would unfold!).

The old 1.5820 high now becomes the important support and next focus could zero in on 1.6000 or even 1.6190 (61.8% FIbo of the huge sell-off from 1.7190-1.4565) if the USD is in full retreat in the days ahead.

GBPUSD
Source: Saxo Bank. 

USDJPY
The move lower in USDJPY today on the back of the dovish FOMC comes ahead of tonight's BoJ meeting. There is a local support level at 122.50 that has been in play, but the real structural key is the 122.00/121.50 zone in the days ahead, as any challenge below this levels risks reversing the uptrend status.

USDJPY
Source: Saxo Bank.
 
AUDUSD
AUDUSD has looked above the key range high, and 38.2% Fibo retracement of the last selloff wave, possibly opening up the 61.8% Fibo and even the rapidly falling 200-day moving average in the days to come, depending on the aggressiveness of the USD selling, though bears will be quick to pounce on any bearish pattern reversal back into the old sub-0.7800 range.

AUDUSD
Source: Saxo Bank.
 
AUDNZD - weekly
AUDNZD has been on fire on the NZD weakness, as we are rapidly approaching the 2014 highs near 1.1300. 

AUDNZD
Source: Saxo Bank.
 
EURNOK
A very dovish Norges Bank today lowered guidance in addition to delivering a not-fully-priced in rate cut took EURNOK sharply higher. The upside ambition may prove rather limited if risk appetite returns and oil prices don't sell off deeply as many measures of NOK suggest it is extremely cheap - but let's see if the 8.87 area high holds.

EURNOK
Source: Saxo Bank.
 
XAUUSD (spot gold)
Gold is ripping back higher, as much on the dovish Fed itself as on the actual reaction in the US dollar because this encourages the prospect for lower real rates, a strong supporter of gold.

Gold moves have so often disappointed attempts to register a new trend, but let's see if gold can work back through the 1200-1210 zone that contains the 200-day moving average, which might provide for a lift toward the next key resistance at 1232.

XAUUSD Source: Saxo Bank.

– Edited by Clemens Bomsdorf

John J Hardy is head of FX strategy at Saxo Bank

 
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FX Board for Thursday, June 18, 2015

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