Yesterday I talked about how the everything was so overdone that something had to give. Turns out the Nikkei was that trigger and a strong drop from a trend line rejection, aided by some news regarding write-downs in the Chinese banking system pushed USDJPY lower. Unusually, the JPY strength also significantly pushed down AUD, NZD and GBP, while EUR was slightly higher and CHF the second strongest on the day with a bold new high. The timing of this is important to understand why the move is so significant. Normally, a big Nikkei move wouldn’t cause such chaos, but there were a lot of itchy trigger fingers already hovering over sell buttons, so this merely acted as the catalyst.
Draghi did his best to sink the Euro, by practically bragging that he wanted to fail poorly performing banks in the upcoming stress tests. This didn’t stop EURUSD pushing higher, back up to retest the recent highs near 1.3800.
The BoE didn’t do anything unexpected and held everything steady, with unanimous voting for policy decisions.
Chinese PMIs could decide if the AUD sell-off lasts, with good numbers likely to push the AUD% index higher from the current low range. likewise, with market sentiment wanting to take profit on the recent rally, poor number will cause another plunge.
A flat day for the USD% index almost down to the bottom of a bearish channel and very close to meeting the AB=CD 100% fib expansion level. It would be very surprising if this level was not met before dollar buying took place, with GBP, AUD and NZD no doubt the prime recipients of dollar buying when it happens unless the HSBC PMIs are really good. I am bullish USD following the 100% fib exp test
USD% Index Resistance (EURUSD support): EURUSD 1.3700, 1.3673,
USD% Index Support (EURUSD support): EURUSD 1.3783, 1.3813, 1.3820
Another strong day for the Euro although not quite as strong as the Swiss Franc. We are approaching an AB=CD for the EUR% index too, which would be strange if not tested having gotten so close. therefore a push higher followed by a rejection seems likely
I bearish EUR% following a test of the 100% Fib Expansion
EUR% Index Resistance: EURUSD 1.3807, 1.3828, 1.3857
EUR% Index Support: EURUSD 1.3777, 1.3700, 1.3588
A break to the upside of the recent expanding consolidation range could signal further upside for the Yen , although this is once again quite focused around large moves in the Nikkei, which will be the catalyst for any moves. The Nikkei was halted by a 4 hour Kijun Sen, but further downside could be possible which would be bullish JPY I am bullish JPY
JPY% Index Resistance (USDJPY Support): USDJPY 96.98, 96.32
JPY% Index Support (USDJPY Resistance): USDJPY 97.42, 98.00, 98.50
Quite a decent drop today on not that much news highlights the markets keenness to take profit on the overblown sterling rally. A bounce from the lows met sellers again and eventually ran out of steam into the close. Further downside on any dollar strength is to be expected in part aided by EURGBP strength for the time being I am bearish GBP
GBP% Index Resistance: GBPUSD 1.6214, 1.6288, 1.6317, 1.6377
GBP% Index Support: GBPUSD 1.6090, 1.5986
The news from china and the Nikkei selling in Japan pushed the AUD% index strongly from the upper trend line of a bullish channel down to the support at the other extreme. The strength of this move suggests further profit taking will occur although a good rebound in the Nikkei could easily reverse this move. It seems likely the Nikkei will continue lower until proper support though which would remain bearish AUD.
I am bearish AUD
AUD% Index Resistance: AUDUSD 0.9710, 0.9782
AUD% Index Support: AUDUSD 0.9600, 0.9590
The strongest currency on the day after the Yen looks set to test resistance not to far above these levels on any continuation of the current themes, although like the other European currencies, a sell-off is well needed and once the strong levels are met, the CHF% index will likely retrace lower, potentially reversing in the medium term. I remain bullish CHF until resistance is met, then a drop lower is expected
CHF% Index Resistance (USDCHF support): USDCHF 0.8886, 0.8877
CHF% Index Support (USDCHF resistance): USDCHF 0.8950, 0.9000