Dollar is generally firm and sets to continue the current recovery as markets are turning focus to today’s new home sales and durable goods orders data. As pointed out before, the greenback was in extremely oversold condition and the current correction is inevitable. Even if today’s data disappoints, reaction could be muted as the more important Q2 GDP is on the card for release tomorrow. Though, Euro should also be provided some support by stronger than expected M3 growth which reaccelerated to Mar’s peak of 10.9%. Germany Ifo dropped to 106.4, slightly below expectation of 106.5 but remains health.
Overnight, RBNZ raised OCR again by 25bps to 8.25%. In the accompanying statement, Governor Bollard pointed to the recent strength in the economy and growing capacity constraints to justify today’s move. Also, he once again mentioned the overvalued Kiwi currency. Conditionally, RBNZ believed that this would be the last rate hike in their cycle if no surprises come in with the next round of data. Kiwi tumbled after the news as markets believe that RBNZ will at least be on hold to assess the impact of the prior successive rate hikes before making another move. EUR/USD
Daily Pivots: (S1) 1.3667; (P) 1.3749; (R1) 1.3803; «www.actionforex.com»
EUR/USD’s correction from 1.3851 is still in progress today. Outlook remains unchanged. A short term top is likely in place at 1.3851, with bearish divergence condition in 4 hours MACD and RSI, and after failing to sustain above 1.3822 projection target. Intraday bias is currently still on the downside and further decline should be seen towards support zone of 1.3567 to 1.3658, with 38.2% retracement of 1.3262 to 1.3851 at 1.3626. On the upside, above 1.3711 will turn intraday outlook consolidative first and could probably bring recovery to 4 hours 55 EMA (now at 1.3770). But sustained break of 1.3851 is needed to confirm recent rally has resumed. Otherwise, risk remains on the downside.
In the bigger picture, the current development dampened the original view that rise from 1.3262 is the last advance in a five wave structure that started at 1.2483. Firstly, the current momentum of the rise from 1.3262 is seen stronger than the prior rally from 1.2865 to 1.3681. Secondly, the falling trend line in both daily MACD and RSI were broken, negating the bearish divergence conditions. In other words, the underlying bullishness in EUR/USD could be much stronger than we originally thought.
Focus remains on 1.3822 resistance. Sustained trading above this level will add much weight to the case that whole medium term rally from 1.1639 is indeed resumption of multi-year up trend from 0.8223 (00 low). That is, further rise should be seen in medium term towards 95 high of 1.4523 with much chance to extend further to 61.8% projection of 0.8223 to 1.3668 from 1.1639 at 1.5004.
On the downside, as long as 1.3481 cluster support (61.8% retracement of 1.3262 to 1.3851 at 1.3487) holds, any pull back will still be treated as correction to rally from 1.3262 only and another rise is still in expected after completion. However, break will put 1.3262 low into focus. And break will indicate that medium term rally from 1.1639 has likely completed after being limited by 1.3822 resistance as originally expected.
GBP/USD
Daily Pivots: (S1) 2.0470; (P) 2.0550; (R1) 2.0615; «www.actionforex.com»
Cable’s correction from 2.0652 is still in progress and continues to press 4 hours 55 EMA (now at 2.0485). As discussed before, a short term top is in likely place at 2.0652, with bearish divergence condition in 4 hours MACD and RSI. Intraday bias is still on the downside and further decline is expected to be seen to short term rising trend line (now at 2.0400). On the upside, above 2.0652 will indicate an intraday low is formed. But sustained break of 2.0677 fibo resistance is needed to confirm recent rally has resumed. Otherwise, risk remains on the downside.
In the bigger picture, the sustained break of 2.0207 projection target confirms underlying upside momentum is still strong. Also, it added much credence to the case that whole up trend from 1.7047 is resumption of multi-year up trend from 1.3680. In such case, further rally should then be seen to 61.8% projection of 1.3680 (01 low) to 1.9554 (05 high) from 1.7047 (05 low) at 2.0677 first. Sustained trading above 2.0677 will target 2.1 psychological resistance.
On the downside, in case of a pull back, downside should be contained by support zone between 2.0056 and 2.0206 and bring another rally. Break of 2.0056 will suggest that lengthier consolidation will come first with the prospect of another test the medium term rising trend line (now at 1.9823) But medium term outlook will be neutral at worst at long as 1.9621 support remains intact.
USD/CHF
Daily Pivots: (S1) 1.2048; (P) 1.2107; (R1) 1.2192; «www.actionforex.com».
USD/CHF’s correction from 1.1960 is still in progress today. Intraday bias remains on the upside as long as 1.2114 minor support holds and further rebound should still be seen. On the downside, below 1.2114 will turn intraday outlook consolidative fist. Also, since a short term bottom is in place at 1.1960 with bullish convergence conditions in 4 hours MACD and RSI, firm break of 1.1960 is needed to confirm fall from 1.2467 has resumed. Otherwise, consolidation could still extend further.
In the bigger picture, USD/CHF has likely completed a medium term triangle consolidation already, which started at 1.1919 with five waves to 1.2467. Firm break of 1.1993 will confirm this case. 1.1878 (06 low) will be the initial target. And since, in such case, fall from 1.2467 is viewed as resumption of medium term down trend from 1.3283, further weakness should be seen to 100% projection of 1.3283 to 1.1919 from 1.2768 at 1.1404, with much chance to extend to retest 1.1288 (04 low).
On the upside, break of 1.2232 resistance will mess up the short term picture a little bit. In such case, chance is swung to the case that the triangle consolidation indeed started at 1.1878. In other words, the overall outlook didn’t change and just that another rally should be seen before completion. Hence, even in such case, upside should be limited below 1.2467 high and bring another medium term decline.
USD/JPY
Daily Pivots: (S1) 119.99; (P) 120.31; (R1) 120.81; «www.actionforex.com»
4 hours MACD’s cross above signal line suggest that a short term low is possibly in place at 119.76. But still, break above 190.95 resistance is needed to confirm. Otherwise, intraday bias remains on the downside and further decline is still in favor towards 118.35/57 cluster support zone (38.2% retracement of 108.99 to 124.13 at 118.35 and 61.8% retracement of 115.13 to 124.13 at 118.57).
On the upside, above 120.95 will indicate a short term bottom is formed and turn into consolidation. But a break above 120.60 resistance is still needed to indicate fall from 124.13 has completed. Otherwise, risk remains on the downside after finishing recovery.
In the bigger picture, rise from 115.13 has made a top at 124.13 and turned into consolidation since then. But still, rally from 108.99, which is treated as resumption of whole up trend from 101.66, is in progress. Even in case of a deeper correction, downside is expected to be contained by 118.35/57 cluster support zone (38.2% retracement of 108.99 to 124.13 at 118.35 and 61.8% retracement of 115.13 to 124.13 at 118.57) and bring rally resumption. Next medium term upside target will be resistance zone of 100% projection of 101.65 to 121.38 from 108.99 at 128.72 and 100% projection of 108.99 to 122.17 from 115.13 at 128.31.
However, break of 118.35/57 cluster support argue that rise from 108.99 has possibly completed and put 115.13 low into focus.
EUR/JPY
Daily Pivots: (S1) 164.57; (P) 165.44; (R1) 166.18; «www.actionforex.com»
EUR/JPY turns sideway after reaching as low as 164.70. At this point, correction 168.93 is still in progress and intraday bias remains on the downside as long as 166.18 minor resistance holds. Next downside target will be 164.23 cluster support (61.8% retracement of 161.49 to 168.95 at 164.34). On the upside, above 166.19 will indicate a temporary low is formed and bring consolidation, probably with recovery to 4 hours 55 EMA (now at . But break of 167.32 resistance is needed to indicate fall from 168.93 has completed. Otherwise, risk remains on the downside even in case of recovery.
In the bigger picture, break of the short term rising trend line suggest that rally from 150.75 has possibly completed with bearish divergence condition in daily MACD and RSI. Deeper correction could not be seen to 161.49 support first. And break will confirm that a medium term top is in place at 168.93 and bring deeper correction, possibly with a retest of medium term trend line support (now at 155.67
However, with medium term trend line remains intact, whole medium term rally from 130.60 is still treated as in progress and the interpretation remains unchanged. First wave up ended at 143.60, subsequent correction ended at 137.167. The third wave up ended at 159.63 while fourth wave correction has ended at 150.75. Rise from there represents the final advance in this structure. With 61.8% projection of 137.16 to 159.63 from 150.75 at 164.64 taken out decisively, next medium term upside target will be 100% projection of 137.16 to 159.63 from 150.75 at 173.22.
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