Talking Points
- USD/JPY sentiment getting interesting
- EUR/USD at key support
- NZD/USD reverses from important level
Price & Time Analysis: 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
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
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