23 May 2016 at 14:19 GMT
By John J Hardy
Key FX developments today:
- JPY strongest currency on the day after G7 developments (and non-developments) has USDJPY teasing important tactical support area, even as USD very strong elsewhere.
- Commodity currencies uniformly weak against the surging US dollar and JPY today, with EM currencies even more so.
- Weaker gold price threatening important flat-line/Fibo retracement area that could lead to larger capitulation to at least range lows if current market environment extends.
EURUSD continues to trade heavily and may focus on the 200-day moving average next if the local lows give way. There are few US data catalysts of note this week, so it will be interesting to see the degree that USD bulls continue to bid up the greenback ahead of next week's key data points. Resistance comes in at 1.1250 after today's action.
USDJPY failed to pull into the Ichimoku cloud, the key resistance of note, while bulls contend with the tactical risk of reversal back into the lower range if the pair can't maintain itself above the 109.25/50 pivot area. But it won't take much of a rally from here to set the focus back higher quickly.
EURJPY jerked lower on the day - interesting to see here whether we have a strong USD and strong JPY against all other major currencies environment here or whether the JPY's outsized gain on the day was simply unwinding of anticipation of something happening over the G-7 summit that didn't. In any case, the sub 122.00 lows are the focus on further progression lower here.
The consolidation so far here has been quite shallow and the 200-day moving average provided resistance on the day. The final two notable objectives for bears are the 0.7000 level and then the cycle lows down toward 0.6830. Tactically, if we squeeze back higher and today's highs don't hold in coming sessions, we may risk a squeeze toward 0.7400, but the focus is structurally lower for this chart for now.
Gold looks in trouble for a test of the range lows toward 1208 if the 61.8% FIbo and recent 1244 area low gives way here.
– Edited by Clare MacCarthy
John J Hardy is head of FX strategy at Saxo Bank