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Don’t Forget About The Yen

Published 06/05/2014, 10:51 AM
Updated 07/09/2023, 06:31 AM
EUR/USD
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USD/JPY
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NZD/USD
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Talking Points
  • USD/JPY sentiment getting interesting
  • EUR/USD at key support
  • NZD/USD reverses from important level

Price & Time Analysis: EUR/USD

EUR/USD

Charts Created using Marketscope – Prepared by Kristian Kerr

  • EUR/USD is in consolidation mode above the 78.6% retracement of the February to May advance near 1.3585
  • Our near term trend bias is lower in the rate while below 1.3675
  • A move under 1.3585 on a closing basis is needed to trigger a new leg lower in the euro
  • A turn window was seen earlier this week
  • A move over 1.3675 would turn us positive on the exchange rate

EUR/USD Strategy: Flat. May look to go long if 1.3675 breaks.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

EUR/USD

*1.3520

*1.3585

1.3605

*1.3675

1.3710

Price & Time Analysis: NZD/USD

NZD/USD

Charts Created using Marketscope – Prepared by Kristian Kerr

  • NZD/USD fell to its lowest level since early March on Wednesday before finding support near the 50% retracement of the year’s range
  • Our near-term trend bias is lower in the Bird while below .8460
  • A daily close below .8410 is needed to signal a downside resumption
  • An important turn window ended yesterday
  • A daily close over .8460 will turn us positive on the Kiwi

NZD/USD Strategy: Flat. Reversal yesterday off key support during important cycle turn window warns a bigger turn could be in the cards. Like going long over .8460.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

NZD/USD

.8350

*.8410

.8445

*.8460

.8500

Focus Chart of the Day: USD/JPY

USD/JPY

I try to look at sentiment figures at least once a day. One of my favorite metrics is the Daily Sentiment Index or DSI which surveys daily the bullishness of a select group of futures traders on several commodities, currencies and indices. I view anything under 15% bulls or over 85% bulls as a strong contrarian indicator. After a long period of doing nothing, I have noticed several markets over the past few days have begun to reach these contrarian warning levels. Particularly interesting is the yen which fell to just 13% bulls (ie. 87% bulls in USD/JPY) on Wednesday. Such extremes in sentiment are usually reserved for markets on or near multi-month highs. USD/JPY on the other hand is still at the low end of a multi-month range. The surge in positive sentiment in the exchange rate when it really hasn’t gone anywhere suggests to me that the belief in the Kuroda/Abe trade remains very strong and market participants are still just chomping at the bit to position themselves. While I think USD/JPY eventually moves a lot higher I am not sure it happens without a more meaningful “gut check” position washout first. The next week or so is a long-term cycle turn window related to the 2011 low in USD/JPY. The market looks vulnerable to a top of some importantance during this time (ideally from slightly higher levels in sentiment). A move above 103.15 would make me doubt this negative view, but only traction over 104.10 would completely undermine.

--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com

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