30 May 2016 at 14:00 GMT
- USDJPY pulls higher on sales tax delay reports
- EURUSD dips to 200-day MA ahead of big data week
- Gold chart shows bullish structural case in danger
The growth question: The greenback is rallying versus the euro, but its success
depends on this week's US economic data. Photo: iStock
By John J Hardy
Key developments in FX today
- USDJPY pulled to new 1-month highs after a Japanese official claimed that the Abe government could seek a significant delay to the planned sales tax hike for next April. This made JPY pairs the most volatile on the day with EURJPY now not far from an important descending trendline and USDJPY and GBPJPY also looking at interesting resistance areas, as we discuss below.
- EURUSD was down to the 200-day moving average near 1.1100 ahead of the US data later this week, while other USD pairs – particularly USD/commodity currencies –showed less conviction in the USD rally, perhaps due to strong risk appetite.
- Gold and silver are getting to levels that are testing the bullish structural case, particularly silver's test below $16/oz today. As we discuss in the gold chart below, it's time for the metals to rally soon if we're to maintain a structurally bullish outlook.
EURUSD slid to the 200-day moving average but then consolidated today ahead of the key US data points through this Friday's jobs report.
The next objectives lower are the psychologically important 1.1000 area and then the 61.8% Fibo of the move from the lows to the highs above 1.1600, which comes in around 1.0940.
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Source: Saxo Bank
Note the test of the top of the Ichimoku cloud, with bulls focusing on a break higher on better US data later this week and a transition into the 112-115 zone as the next step in a larger recovery. Disappointment for the bullish implications of this break if we break below the cloud from here.
Less Ichimoku cloud focus here, but as we have pointed out before, we are arguably looking at a potential upside-down head-and-shoulders formation that is breaking if we use the slanting neckline shown or not quite breaking if we use the previous highs.
Risk appetite and Brexit sentiment are critical from here for the pound.
We've pushed down through the range low established a couple of months back. The bullish case is under fire, but can survive if we get a smart rally here back into the old range or as long as any further selling stops more or less short of the 200-day moving average at the $1,150/oz area.
— Edited by Michael McKenna
John J Hardy is head of FX strategy at Saxo Bank