Risk sentiment is this week's focus following the US/British/French attack on Syria, with the USDJPY's tentative breakout beginning to falter as prices head into the Ichimoku Cloud.
Article / 09 June 2016 at 14:21 GMT

FX Board: USD technical bounce — Kiwi unhinged

Head of FX Strategy / Saxo Bank
By John J Hardy

Key developments in FX today

  • The USD rebounded from very technical levels today, including an exact test of the 61.8% Fibo in EURUSD near 1.1420 and from the 0.7500 level in AUDUSD. The rebound was fairly broad. Elsewhere the action was somewhat muted, with the exception of the Swiss Franc and Japanese yen picking up more strength across the board on a weakening of risk appetite and the kiwi absolutely soaring as the Reserve Bank of New Zealand failed to cut and apparently waxed a bit less dovish in its forward guidance than the market was expecting.

  • Precious metals failed to punch through the key bull/bear lines - the respective 61.8% Fibo retracements of the recent selloff. Below these levels ($12,65/oz-ish in gold and $17.15-25/oz in silver) and the bears have an argument, with confirmation on a fresh, steep selloff, while bulls will want these levels quickly taken out to take the focus back higher toward the cycle tops and beyond.

EURUSD Fibo selloff

EURUSD tested the 61.8% Fibo almost exactly before selling off today, with no real news driving the action, though one imagines that the Brexit issue hanging over markets could keep a ceiling on the range ahead of the June 23 UK referendum.

Euro weakness was as much a driver here as USD strength, as EURCHF was lower still and EURJPY in particularly was punished on the day.

From here, the bears have a nominal case if we remain below the key retracements, with 1.1300 as the first downside objective and perhaps 1.1225/00 as the downside pivot zone.

EURUSD downside case nearing key point at 1.1300
Source: SaxoTraderGO

USDCHF selloff

The USDCHF selloff of late has been steep and brutal on the combination of both USD weakness and franc strength.

Note, however, that most of the previous steep sell-offs in USDCHF have quickly come to an end once evidence of buying materialises.

Will the USDCHF selloff follow previous patterns?
 Source: SaxoTraderGO

NZDUSD ripper

The kiwi ripped higher on the RBNZ decision overnight, doubtless triggering a squeeze on short positioning after the prior meeting surprised on the dovish side, an as the 1.0500 level was taken out in AUDNZD (see below) and the 0.7000/50 zone in NZDUSD.

From here, resistance looks like 0.7180 to start and the beleagured bears can only build a case if we push back down through that 0.7050/00 zone to indicate this was merely a short squeeze, rather than the start of a bigger rally building.

NZDUSD rips through the 0.71 area
Source: SaxoTraderGO

— Edited by Martin O'Rourke

John J Hardy is head of forex strategy at Saxo Bank

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FX Board for Thursday, June 9, 2016


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