Tech Talk – Key Levels & Charts to Watch

recovered to an even higher level than I noted yesterday (1.3225-50) – See CHART TO WATCH, as a confluence of bullish technical signals aligned: Hourly RSI bullish divergence, RSI found support into the key 40 level, Elliot wave-B pullback into the top of the Daily Ichimoku Cloud and a Hammer candlestick formation. Currently, the single currency is trading around the 100-day sma (1.3260/65) and sees a critical level of resistance around 1.3290: 50% retracement (using then 2/28 high & 3/7 low), 13-day sma and daily Tenkan line. Interestingly, the 2-year yield spread between Germany and U.S. recently took out the December low, which would imply EUR/USD should be not only be trading below 1.30, but perhaps even sub-1.2600. Clearly, this has not been a major influence on the Euro of late and the Greek PSI deal appears to be driving price action in the short-term. With that said, the daily chart sees a potential RSI Positive Reversal, whereby RSI made a lower low and price made a higher low, and this projects a move towards 1.3500 over the coming days.   

• USD/JPY saw a daily RSI Bearish Divergence into the 81.85/90 high earlier this week, but then bottomed far above the prior 80.00 low and has begun to move higher once again (this also sets up the potential for a Positive Reversal). With the U.S. Employment Report out tomorrow morning, USD/JPY could see quite a bit of crazy price action, with a sustained break above 82.00 needed to see further gains – See our Research Note for more on tomorrow’s NFP report.

• USD/CAD failed ahead of the prior February highs around 1.0050 earlier this week and then today it broke below a confluence of technical support around 0.9940/60: Daily Tenkan & Kijun lines as well as the 13 & 21-day sma’s. With Crude Oil (Brent) remaining strong for the second consecutive day, look for the Loonie to remain in vogue, but please keep in mind that Canada also has an Employment report tomorrow (Net Change con. +15K and Unemployment Rate exp. 7.6%) prior to the U.S. announcement, which is due out at 7am ET.

• USD/MXN broke below potential bear flag support, drawn from the 2/6 low, around 12.7500 earlier today and was confirmed by daily RSI which also broke below its corresponding support level. The break below the prior March low near 12.7200 also aids this technical bearish bias. Keep an eye on the Feb. low around 12.6115/20 and then the 61.8% retracement (using the May 2011 low & Nov. 2011 high) at 12.5600 as the next key levels of support heading into the weekend.

• USD/TRY is interesting because it portrays a slightly different picture from many of the other EM currencies (notably the MXN above). Currently it looks well supported by the 200-day sma around 1.7715/20, and sees the daily Tenkan & Kijun lines just below between 1.7660-80. With this type of mixed performance I often look to the crosses to try to gain some perspective, and EUR/TRY is currently just below the 55-day sma around 2.3640/45 and daily Ichimoku Cloud bottom near 2.3700/10. Thus, should ‘risk’ continue to rally tomorrow, then I believe the TRY could be poised to play some catch up.   

• U.S. 10-year yield continues to be mired within a 1.89-2.09% range over the past month and there has been little technically to suggest a break is coming anytime soon. Without a break higher soon however, USD/JPY bulls may need to begin to worry as the two have had a traditionally strong positive correlation over the years.