European data on Monday was all pretty positive, with German IFO business climate well above forecast at 111.3 vs 110.7 and European CPI also beating the 0.7% expectation with a 0.8% print. The reaction from the euro was rather muted though, sure we had a slight nod to the data but it seems people preferred to use this volatility to enter short with dealers in London reporting a bearish bias from order flow regardless of the numbers.
With quite a slow start to the week in terms of data, these are the points to look out for:
Tuesday Feb 25
3:00pm USD CB Consumer Confidence
Wednesday Feb 26
9:25am GBP MPC Member Broadbent Speaks
9:30am GBP Second Estimate GDP q/q
3:00pm USD New Home Sales
Thursday Feb 27
12:30am USD FOMC Member Pianalto Speaks
All Day EUR German Prelim CPI m/m
8:55am EUR German Unemployment Change
1:30pm USD Core Durable Goods Orders m/m
1:30pm USD Unemployment Claims
1:30pm USD Durable Goods Orders m/m
11:30pm JPY Tokyo Core CPI y/y
11:50pm JPY Prelim Industrial Production m/m
11:30pm JPY Retail Sales y/y
Friday Feb 28
7:00am EUR German Retail Sales m/m
7:45am EUR French Consumer Spending m/m
10:00am EUR CPI Flash Estimate y/y
10:00am EUR Unemployment Rate
10:00am USD FOMC Member Fisher Speaks
1:30pm USD Prelim GDP q/q
2:45pm USD Chicago PMI
2:55pm USD Revised UoM Consumer Sentiment
3:00pm USD Pending Home Sales m/m
3:15pm USD FOMC Member Kocherlakota Speaks
3:15pm USD FOMC Member Stein Speaks
3:30pm GBP BOE Gov Carney Speaks
All times are GMT
USD% Index
The dollar remains above recently broken bearish resistance and it is now acting as support for a slow and very painful dollar rally. Nevertheless, we do have some form of upwards momentum, with the RSI showing above the 100 period moving average even after this recent pull back to support. As such we maintain our bullish dollar bias. I am bullish USD while above the green support line.
USD% Index Resistance (EUR/USD support): EUR/USD 1.3710, 1.3690
USD% Index Support (EUR/USD support): EUR/USD 1.3765, 1.3791
EUR% Index
The positive euro data allowed for a push back up to form a recent double top, with the rejection to bring us back inside the bearish channel the directional clue for the medium term. We could see further attempts higher, although for the time being, the market seems to view the euro as overbought and in need of a retracement lower. Its not clear how low we will go at this stage, our hunch is perhaps not that far given the return to bullish European data. This makes the trend line support highlighted in blue a potential target for an eventual continuation higher although it is still too early to tell given the fact we’re currently at highs. If recent RSI performance is anything to go by, we are now in the sell zone for the time being. I am bearish EUR.
EUR% Index Resistance: EUR/USD 1.3770, 1.3800, 1.3850
EUR% Index Support: EUR/USD 1.3692, 1.3637, 1.3577
JPY% Index
The JPY% index remains trapped between two strong levels and is going nowhere fast. We’ve yet to test the bottom of the current bullish channel at about the 102,90 level for USD/JPY although it looks as though we are building up to a confluence of support from the green support line and the white bullish channel support at some point this week. This may find enough bids to break this deadlock and propel us up to the highlighted bearish major trend line (thick white line) currently displaying USD/JPY 100.00 as a suggested level for a major bearish JPY trend continuation. I am bullish JPY until USD/JPY 100.00 is tested.
JPY% Index Resistance (USD/JPY Support): USD/JPY 101.56, 100.00
JPY% Index Support (USD/JPY Resistance): USD/JPY 102.74, 102.90
GBP% Index
A further creep lower for the pound suggests mild downside until strong levels are defeated. The slow pace of dollar buying has hampered the progression lower for the pound so we really have not gone very far. The confluence of fib exp support levels around 1.6550 may prove to be a strong barrier, but likewise, if that breaks then it will take out stops below and really get things going. We will have to wait and see. Below that we have a similar confluence of support which may prove to be more robust due to it’s proximity to the bottom of the current bullish channel meaning that is is more or less in the buy zone for the current trend. I remain bearish GBP within a bull trend.
GBP% Index Resistance: GBP/USD 1.6684, 1.6700, 1.6823
GBP% Index Support: GBP/USD 1.6555, 1.6493, 1.6394
AUD% Index
Still looking heavy, the Aussie has displayed some nasty price action recently, with volatile spikes followed by slow grinds higher, making it very difficult to decipher the signal from the noise. Overall though downside is expected until the highlighted support is met and then we will have to consider how that level is handled, with the possibility of that being a strong buy price for bullish trend continuation. Longer term, sentiment is still bearish though based on the fundamentals out of china and Australia. We are once again diverging with gold, with the recent push lower in contrast to the gold rally to double top. This may be the reason for the terrible price action for the Aussie. if the double top in gold is rejected we could see further pushes lower for the Aussie. I am bearish AUD until the 0.8893.
AUD% Index Resistance: AUD/USD 0.9000, 0.9083, 0.9150
AUD% Index Support: AUD/USD 0.8892, 0.8800
CHF% Index
Still quite a weak break to the upside for the CHF index suggests that we could just as easily reverse from the recently met resistance. we have upwards momentum, but the price action if far from decisive. With Swiss GDP this week we could get some increased volatility. I am neutral / bearish CHF based on my dollar outlook.
CHF% Index Resistance (USD/CHF support): USD/CHF 0.8860, 0.8838 0.8800
CHF% Index Support (USD/CHF resistance): USD/CHF 0.8900, 0.8950, 0.8988