At a glance: Faint hope rising
The fact that the leading German equity index (DAX) couldn’t be impressed by another very bad ZEW number yesterday shows an increasing resilience and highlights the oversold market conditions for risk on a bigger scale. Given that the S&P 500 additionally managed to close above an internal 38.2 % Fib.-retracement at 1149 raised hopes for an intermediate recovery even further, which would have to be confirmed though via a Dax close above 5602 (int. 38. %) today. Such a break would finally open the way for high beta to at least put in a temporary recovery, which could push EUR/Commodity FX towards internal 76.4 % retracements at 1.3621 in EUR/CAD, at 1.3243 in EUR/AUD, at 1.6577 in EUR/NZD and at 7.7001 in EUR/NOK. These levels offer perfect risk-rewards to bet on the resumption of the broader risk consolidation and only decisive breaks below on hourly close would start questioning this idea. Whether CHF or JPY would make significant gains on the back of still possible minor new lows in risk is questionable and would only be indicated once key-support at 1.1059 (int. 38.2 %) in EUR/CHF and at 109.02/108.75 (pivot/int. 76.4 %) in EUR/JPY would be taken out. EUR/USD on the other hand remains the pain trade, but the continuous failures of stabilizing above daily Ichimoku-resistance at 1.4456 leave daily trend line support at 1.4212 at risk and our idea of a broader decline intact. As for Cable, the focus remains on the key-T-junction at 1.6428 (int. 38.2 %) where the intermediate up-trend is facing its ultimate stress test. A break below the latter would only leave daily trend line support at 1.6245 in the way of acceleration lower.
° Short 2 units EUR/USD from 1.4205 , targets 1.3350 and 1.3120, stop at 1.4600
° Long 2 units USD/CZK from 16.85, add 2 units on a break above 17.65, target 19.02, stop at 16.05
° Short 2 units EUR/INR from avg. 63.30, target 55.50 & 52.00, stop at 68.50
° Short 2 units PLN/HUF from avg. 68.604, target 64.00, stop at 68.600
EUR/USD hourly – No mercy
- The market shows no mercy in this endless waiting game and unless two consecutive daily closes (10pm CET) above neckline resistance at 1.4456 are displayed, the risk of accelerating down south persists.
- For the latter to be indicated though, it takes a break below 1.4212/02 (daily trend/int. 76.4 %), whereas above 1.4579 (pivot), 1.4683/98 would be in focus.
GBP/USD hourly – Range breakout between 1.6576 and 1.6428 required for short-term directions
- Yesterday’s failure to clear 1.6576 (minor 76.4 %) is showing a loss of up-momentum, but in order to reverse the still prevailing positive bias it would take a break below 1.6428 (int. 38.2 %).
- Defending it would keep the upside open for a potential re-test of the 1.6748 top, whereas a break below 1.6428 would challenge 1.6245/30 (d. trend/int. 76.4 %).
EUR/GBP daily – Range breakout between 0.8890 and 0.8651 required for directions
- No news here as the market keeps on filling in the range between the decisive T-junctions between 0.8651 (neckline support) and 0.8890 (neckline res.).
- An upside breakout would finally give room to challenge the next higher T-junction at 0.8981 (int. 76.4 %), whereas a break below neckline support at 0.8651 would most likely challenge the next T-zone between 0.8528 and 0.8474 (76.4 % on 2 scales) straight away.
- Only below the latter though, EUR bulls would have to surrender.
EUR/PLN daily – Make or break at 4.1176/64!
- Given the latest setback and the preceding failure to reach and exceed the last top at 4.2356, the key-question now is whether we are only dealing with the 2nd corrective leg down of an internal 4th wave setback or with a 2nd wave setback of higher scale.
- That said, the decisive T-junction to distinguish between the two is well-defined at 4.1176/64 (int. 38.2 % on 2 scales).
- Above, new highs can be reached straight away, whereas a break below would challenge 3.9741 (int. 76.4 %).
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J.P.Morgan
Global FX Strategy