A very slow day as a result of Martin Luther King Day on Monday gave little indication as to medium term trend. With trade desks back at full strength on Tuesday though we have hardly seen dramatic price movements and the overall tone remained sleepy. The dollar remains strong although with the pound still maintaining strength and the Australian dollar failing to significantly drop lower, we may see some further consolidation in the current dollar trend.
USD% Index
We are now comfortably above the key broken resistance turned support shown in red and the index is still displaying a bullish trend. Yen weakness and euro weakness may have made up for the fact that the pound is still defying dollar strength. Regardless, upside remains the most likely direction in the medium term. We have just rejected from a minor bullish trend line resistance so the red support line may be a key level (EUR/USD 1.3550) for USD long entries. I am bullish USD.
USD% Index Resistance (EUR/USD support): EUR/USD 1.3517, 1.3500, 1.3474
USD% Index Support (EUR/USD support): EUR/USD 1.3550, 1.3568
EUR% Index
A poor German ZEW survey allowed the Euro bears to come out once again and push us modestly lower following the recent sharp drop. Although the overall lack of explosive upside for the dollar has favoured EUR/GBP shorts and only added to the bullish pound sentiment. Downside remains likely for the EUR% index I am bearish EUR.
EUR% Index Resistance: EUR/USD 1.3550, 1.3600
EUR% Index Support: EUR/USD 1.3500, 1.3450
JPY% Index
The overnight drop in the JPY index has not yet created a significant low to challenge the current view that we will consolidate in the mild bullish channel, but the lack of ability to retest the upper levels suggests that the Yen bears may soon appear once more. 105 is the big number to break in USD/JPY. I remain mildly bullish JPY in the short term, bearish long term.
JPY% Index Resistance (USD/JPY Support): USD/JPY 104.62, 104.00, 103.55, 103.35
JPY% Index Support (USD/JPY Resistance): USD/JPY 105.00, 105.50
GBP% Index
Still riding high following last weeks much better than expected UK retail sales, the GBP index has consolidated slightly from the recently broken bullish trend line. A similar story has occurred with EUR/GBP (at the bottom) so we could see a continuation in the direction of Friday’s volatility with the recently broken trend line now acting as support. Upside remains firmly favourable for the GBP% index I am bullish GBP.
GBP% Index Resistance: GBP/USD 1.6500, 1.6580
GBP% Index Support: GBP/USD 1.6400, 1.6365, 1.6250
AUD% Index
The AUD index is slightly direction-less at the moment and consolidating sideways in a narrow range. Longer term the outlook remain bearish but in the short term we could see a retracement higher to test some stronger levels for short entry. Gold on Tuesday fell through the floor once again, which may begin to weigh on the Aussie in the medium term. I am short term bullish AUD medium and long term bearish.
AUD% Index Resistance: AUD/USD 0.8800, 0.8830, 0.8870, 0.8915
AUD% Index Support: AUD/USD 0.8750, 0.8700
CHF% Index
We seem to have finally pushed through support for the CHF% index after numerous attempts and the Swiss Franc seems a favourite currency to pair USD strength with. We have also finally broken the recent low from last week which means we should see further downside until the USD% index reaches the top of it’s bullish channel. EUR/CHF seems to have begun another push higher which could further weaken the Swiss Franc further. I am bearish CHF.
CHF% Index Resistance (USD/CHF support): USD/CHF 0.9075, 0.9015, 0.9000
CHF% Index Support (USD/CHF resistance): USD/CHF 0.9106, 0.9160, 0.9200