The news late last night of Yellen being appointed Fed Chairman gave the dollar a bit of a push lower, however this was viewed by the Asian traders as a dollar buying opportunity and pushed the greenback through USD% index bearish channel resistance, with GBP leading the way lower following yet more disappointing data from the UK. Aussie rallied, then fell then rallied again but is now starting to carve out a new bullish trend angle on the AUD% index as a result of all the chop. JPY continued it’s decent from resistance aided by a Nikkei rally.
The rest displayed mostly less impressive versions of the moves already mentioned or just chop. The FOMC minutes raised some volatility briefly, although nothing really new emerged other than that most members expected the taper this year. We’ve been endlessly told this by Bernanke though so this was quickly faded.
There still is no resolution from Washington and the words ‘downgrade’ and ‘default’ are being thrown around a bit more than they were. This did nothing to prevent the dollar rally though. We have a slighlty more exciting calendar tomorrow, with US jobless data, Koroda, Draghi and Bullard on the wires.
USD% Index
This morning saw the USD% index break out of the bearish channel and rally moderately for most of the day. This may push back down to retest broken support before continuation which may make for a dollar long opportunity. The move was not exactly impressive though and given the light trading conditions lately seems a bit lacklustre for a breakout in terms of volatility, although this could say more about how weary traders are with the price action currently. As such I am bullish USD although suspect a retest of broken resistance
USD% Index Resistance (EURUSD support): EURUSD 1.3523, 1.3485, 1.3456
USD% Index Support (EURUSD support): EURUSD 1.3560, 1.3573
EUR% Index
The EUR% index pushed higher following the Yellen announcement then spent the rest of the day falling at a moderate pace, finding support from a new bearish channel. The index is still only half way though the failed bullish flag though which may make shorts a little nervous and give bulls an itchy trigger finger and see the index push back higher again before continuing lower. the top of the flag would be a nice short entry if we make it that high, otherwise, the slightly easier to reach 61.8% Fib Expansion would also do the trick for short entry. It’s definitely worth keeping long stops though in this market.EUR% trend is still bullish, although we may have posted a medium term top
EUR% Index Resistance: EURUSD 1.3580 (failed flag upper bound), 1.3630, 1.3650
EUR% Index Support: EURUSD 1.3459, 1.3400
EURUSD Trade Positioning
Short from 1.3565, stops at 1.3716
JPY% Index
Wednesday morning’s Asian session saw another confident sell off, although once the support was met things got a little messier. The FOMC mins pushed briefly though support but retraced instantly to post a bullish pin bar from support. We are also quite close to the major channel support which may see a test although trend may continue higher if we do. I am bullish JPY
JPY% Index Resistance (USDJPY Support): USDJPY 96.50 (strong resistance), 96.13, 96.00
JPY% Index Support (USDJPY Resistance): USDJPY 97.82, 98.00, 98.11
USDJPY Trade Positioning
Short from 97.37, stops at 99.09
GBP% Index
Poor manufacturing production data today made the pound the worst performer although perhaps partially aided by the current bearish market sentiment from the extremes of overbought. EURGBP returned to bullish form today to add pressure to the pound. We are approaching some interesting long entry levels though so it will be very telling to see how the market reacts if the major channel trend line support at GBPUSD 1.5811 is tested. The renewed hopes of an imminent taper via the FOMC minutes today though may see this downward pressure turn into a reversal rather than a retracement within this bearish channel and push though support Trend remains inside a bullish channel, although a further correction lower seems likely
GBP% Index Resistance: GBPUSD 1.5977, 1.6050, 1.6100
GBP% Index Support: GBPUSD 1.5900, 1.5811
AUD% Index
Another choppy day for the Australian dollar with neither recent lows or highs broken. The new trend angle suggests there are still buyer at the dips though so that may continue from the new trend line support, particularly if we see a retest of broken resistance for the USD% index before continuation. I am slightly bullish AUD
AUD% Index Resistance: AUDUSD 0.9473, 0.9545
AUD% Index Support: AUDUSD 0.9430, 0.9363
AUDUSD Trade Positioning
Long from 0.9425, stops at 0.9251
CHF% Index
A drop lower through support today from dollar strength pushed the index to the next fib expansion support before finding it’s feet again. If the USD% index retests broken resistance, then the broken support from the CHF% index may offer a nice short opportunity Trend remains inside a bullish channel although we may have posted a medium term top
CHF% Index Resistance (USDCHF support): USDCHF 0.9082, 0,9075, 0.9040
CHF% Index Support (USDCHF resistance): USDCHF 0.9112, 0.9150 (channel support)
By Mark Lewis
