Australian Dollar Crashes While The Yen Rallies

Tuesday was quite busy in the markets fundamentally, with Spanish Unemployment Change coming in much better than forecast at -2.5K vs 49.3K and UK Construction PMI also posting a very bullish print at 62.6 vs 59.3 forecast. This gave the European currencies a lift at the expense of the dollar, and interestingly, the Nikkei and the USD/JPY finally cracked after hinting towards it for some time now. Australain dollar after having been given a boost by the hold on rates from the RBA, but having suffered from the poor Chinese manufacturing PMI had another shock overnight with a below par GDP number which sent the currency tumbling in most pairs. There are still many hurdles to jump before the end of the week but overall it seems like hinting towards a return to Dollar weakness. ECB rate decision on Thursday seems unlikely to prevent that, although on Wednesday we have US ADP Non-Farm Employment Change, US ISM Non-Manufacturing PMI and US New Home Sales which are all trending high currently which could be a hindrance for a Dollar sell off. UK services PMI is also expected to come in strong.

USD% Index

The upwards momentum of the recent trend line break has failed to last fror even one day with the index crashing back down to support again. This seems to a more meaningful move this time due to the pace of decent although we still need to break support before we can continue lower. The rejection from bearish trend line suggests another support just below the current levels to make the price action defined by slightly bearish channel, however we will have to wait and see how the index handles that level if we get there. US data later in the day is likely to come in strong which may allow for another push higher before we see that level. RSI remains below 50 and below the 100 period moving average. I am mildly bearish USD

USD% Index Resistance (EUR/USD support): EUR/USD 13578, 1.3539, 1.3523
USD% Index Support (EUR/USD support): EUR/USD 1,3610, 1.3622, 1.3662, 1.3682

EUR% Index

A reluctance to meaningfully turn to the downside has placed the head and shoulders theory at risk and there now seems sentiment to take the Euro higher. Seasonal flows may aid the bullishness for the Euro although the price action remains very slow and tedious. The expected rate hold from the ECB this week will likely add though the bullishness, so all in all things are looking up for the single currency at the moment. The only issue being that US data on Wednesday may push the dollar higher and bring the EUR index down again as a result. I am bullish EUR

EUR% Index Resistance: EUR/USD 1,3585, 1.3600, 1.3625, 1.3660
EUR% Index Support: EUR/USD 1,3500, 1.3488

JPY% Index

As previously suggested, the JPY% index has bounced quite well away from the yearly low support (shown in green), although remains in a bearish channel so we need further upside before any confidence that this recent push higher will last. Trend remains firmly bearish for the index, although with a bullish daily engulfing candle on the index for Tuesday we may see some eager profit taking unwind Yen shorts for the time being. Trend remains bearish JPY but we expect a bounce from here in the short term

JPY% Index Resistance (USD/JPY Support): USD/JPY 102.00, 101.37
JPY% Index Support (USD/JPY Resistance): USD/JPY 102.66, 103.00

GBP% Index

The GBP index is an interesting one currently. Trend and momentum are still definitely bullish, although there seems to be a slight struggle to push higher, with the positive UK data recently only managing a double top before a reasonably decent rejection. We have further UK data up on Wednesday which should see another pop higher although the buying in EURGBP (shown at the bottom) may hinder the rally again somewhat. I am bullish GBP although we may see a correction lower before a continuation

GBP% Index Resistance: GBP/USD 1.6424, 1.6450, 1.6500
GBP% Index Support: GBP/USD 1.6331, 1.6300, 1.6227

AUD% Index

The hint towards a push higher has been squashed for the time being buy one too many negative data points. Overnight we had the GDP numbers disappoint which seems to have squashed any hopes for a rally from these low levels. We still have plenty of room below according to the RBA who will be glad to see the currency depreciate further. Things have tended to get a bit messy down at these levels though since there is an eagerness to buy such discounted high yielding pairs. It is questionable how much lower we can go without a rate cut from the RBA though. I am neutral AUD

AUD% Index Resistance: AUD/USD 0.9100, 0.9128, 0.9177, 0.9200
AUD% Index Support: AUD/USD 0.9033, 0.9015, 0.9000

CHF% Index

A bounce from support for the Swiss Franc could see the index extend gains higher, helped by seasonal flows and no longer hindered so much by dollar strength although the US data on Wednesday remains a significant hurdle. This makes the head and shoulder hypotheses less likely although until we actually see a break higher, it is still on the table I am bullish CHF

CHF% Index Resistance (USD/CHF support): USD/CHF 0.9032, 0.9000
CHF% Index Support (USD/CHF resistance): USD/CHF 0.9093, 0.9150, 0.9192, 0.9200