Yesterday saw an across the board EUR squeeze as EUR shorts were under pressure in every pair from EURUSD to the popular EURNZD (which was up over 2% yesterday after the dovish RBNZ rhetoric) on no real apparent catalyst save for weak risk appetite (which leans against the euro carry trade). Later in the day it was EURUSD, on another batch of weak US data, as both the weekly claims number and the new home sales data disappointed expectations.
The first test of whether this euro squeeze can find additional legs to run on will be this morning’s IFO report out of Germany, as well as further developments in risk appetite after yesterday’s very weak action.
The other big focus for the moment is on the Eurogroup meeting in Riga, which is unlikely to provide Greece-related developments, though we did have more optimistic comments yesterday than we have been accustomed to lately from both Greek PM Tsipras and Finance Minister Varoufakis.
EURUSD
After yesterday’s action, we have a classic bullish engulfing candlestick, which has gotten early “confirmation” this morning as we test the waters above the previous 1.0840 resistance line established on the prior bounce (and also the 61.8% Fibo retracement).
Bulls will be pushing for a test of the 1.10 range resistance ahead of next week’s Federal Open Market Committee meeting. Bears will be looking for a strong rejection of this break higher today for fresh arguments for getting short.
The focus for next week will be on the cluster of central bank meetings Wednesday/Thursday, as we see if Sweden’s Riksbank can provide any guidance that will spark interest in EURSEK.
The Federal Open Market Committee meeting is later the same day, and the now much more interesting RBNZ (after this week’s big moves) is up only hours after the FOMC meeting.
The Bank of Japan will also be meeting on Thursday – but expect nothing of note there, with Abe touring the US.
After these latest data points, and with few data points of interest ahead of that FOMC meeting next Wednesday, the market’s expectations from the Fed are going to be as close to nil as possible.
The G-10 rundown
USD: The greenback is trading to the weak side after yesterday’s squeeze in EUR pairs and came under additional pressure across the board as we price in a very passive FOMC next Wednesday. The Durable Goods Orders data series up today has been a weak one – making any upside surprise a potential interesting test for USD bears ahead of the weekend.
EUR: Today is about whether the euro squeeze extends or fades sooner rather than later, with 1.0840 now the intraday support in EURUSD after the attempt higher this morning. 1.0915 is a minor Fibo level, but otherwise the obvious focus is on the 1.1000+ highs of the range.
JPY: Conflicting noises out of Japan in late Asian hours, as an LDP lawmaker said that the April 30 BoJ meeting could see developments, but Abe won't want anything rocking the boat ahead of his US tour. Bloomberg sources in contact with the BoJ, meanwhile, said the BoJ is trying to forecast when an additional taper might need to be discussed (much, much farther down the line). Let’s allow the charts to tell us the story here, as we will sit on our hands on USDJPY until we trade at least sub 118.50 or above 121.50. EURJPY is an interesting pair if the EUR strength fades here and we get a bearish reversal back into the range – but seeing is believing there.
GBP: Surprised at its strength versus the USD – have a hard time seeing additional GBPUSD rally potential ahead of the election unless next Wednesday’s FOMC meeting proves some kind of dovish watershed event for the Fed (unlikely). Meanwhile, the EURGBP sell-off also may have little downside potential as it may be difficult to find fresh sellers in the low end of the range ahead of the election. Also, yesterday saw a minor bullish reversal in EURGBP.
CHF: The selloff after the recent SNB announcements on widening the application of negative interest rates so far proved a one-day wonder. Could that announcement be a sign of more activism to come? Today we have an Sswiss National Bank get together that may or may not provide additional color. Watching the 0.9500 area in USDCHF.
AUD: Still trading within the recent range as we watch whether this USD weakness continues and the pair can take out the 0.7850 area and possibly test the 100-day moving average for the first time since last September (currently just below 0.7900).
CAD: Probing lower supports in USDCAD amid strong oil prices, as the focus now is on the 1.20-1.21 zone for whether the counter-trend consolidation is nearing its end soon.
NZD: AUDNZD rallied to the key 1.0300 area as the market mulls whether next week’s RBNZ will provide dovish developments. NZDUSD looks bearish, but certainly needs a firmer USD elsewhere for that view to gain any traction.
SEK: EURSEK made a bid at the top of the range yesterday during the general squeeze on Euro crosses, but the pair may see little action until we see next week’s Riksbank’s meeting.
NOK: First test of the 8.50/55 pivot zone survived yesterday as we watch for whether this results in a follow up sell-off lower.
Upcoming economic calendar highlights
- Germany Apr. IFO Business Climate Survey (0800 GMT)
- Switzerland SNB’s Jordan to Speak (0800)
- US Mar. Durable Goods Orders (1230)
- Canada Bank of Canada’s Poloz to Speak (1425)