- Forex today was mixed for the greenback that took a kicking in the US session following a strong run to the 95.70’s and highest levels since 4th Sep double tops.
- The mood was heavily risked off in the European session but that soon switch up in the US shift, as stocks rallied with good closes in the benchmarks by the end of the play.
- Rates were generally lower across the board on a flight to ‘quality’ but the market likes the greenback in comparison to alternatives n the FX-space currently.
Currency action
EUR/USD dropped on Tuesday and bears now look to get in the driving seat with peddle to the metal on a break below the 1.15 support targeting a break of S3 and the confluence of the 61.8% fib. The mood has turned very sour in European markets on the back of both Greek and Italian finances and there was a flight to Treasuries and Bunds. EUR/USD dropped to as low as 1.1505 in European trade. However, there was a better risk mood on Wall Sreet and the dollar gave back some ground despite Fed’s Powell sounding upbeat – The DXY sank back to the critical 95.36 level from a high of 95.74 – and the euro was able to climb back to a more respectable 1.1568 and ended near 1.16540 late in the day. Cable was also suffering on dollar strength and fell from an Asia high of 1.3049 to a low of 1.2941 before attracting some demand back to 1.2980 for the NY close. Brexit headlines keep coming through thick and fast but there was nothing that stood out that will change the course of sentiment for the time being. However, for the cross, there is a sentiment that the pair could drop heavily if there are signs that Brexit will be sown up in any form of a positive breakthrough between the EU and UK. For the Tuesday session in European and US markets, the pair respected its familiar range and was unable to make any significant breaks of the descending resistance line that has been keeping bulls in check since back on the 25th Sep from 0.8975. The pair tested R1 at 0.8908 but there is no conviction here and shorts are mounting up at the top of the descending channel.
USD/JPY squeezed out some non-committed bulls and fell all the way back to the 38.2% fib down in the 113.50’s It will take a deeper retracement to shake out the bulls that have taken up speculative longs down at 113 the figure on that surge that took place on the 27th September. Data is coming up this week that those markets are likely to hold out for until further specs are either added or pared off – namely the ADP prelude to the NFP first and also the ISM non-manufacturing numbers could prove to be a market mover. As for the Aussie, it broke below the 0.72 figure which is a key level of confluence and now the gates are open for a run back to 0.7140 as being the 76.4% extension level just below S1 at 0.7153. However, commodities were performing and held up the downside whereby oil remains bud at $75 WTI – (stabilising USD/CAD) – and copper looks better, climbing above the pivot and descending trendline. The new short time low mat act like a magnet down at 0.7162 so long as the price stays below the 21-D SMA at 0.7212.
Key notes from US session:
Key events ahead:
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