The USD is at important support levels in EURUSD and USDJPY ahead of the next two days of key EU and FOMC event risks. Stand by for an “either/or” test of these levels in the coming days.
EURUSD and USDJPY are at important support levels for the USD, at the 200-day moving average for EURUSD just above 1.2800 that was effectively already tested this morning and at the 78.00 area in USDJPY, which – except for intraday flirts – has been the low stretching back to February of this year.
Add to this the important of last week being “Labor Day Week”, a key seasonal week that often sets the pivot point for the many months forward, as I argued in looking back at the last ten years of Labor Day Week history in this column (http://www.tradingfloor.com/posts/labor-day-week-in-fx-history-offers-important-lessons-1297032051).
So the USD support levels here will either hold through these event risks, or possibly provide a springboard for further USD downside. Our preferred scenario is for the USD to pick up steam again, but we’ll have to side-line that scenario for at least a while if we end this week closing through these levels.
Chart: USDJPY Weekly
The USDJPY weekly has pushed through the lower bound of the Ichimoku cloud and is poised close to the key 78.00 level which has supported the pair (with a few minor slips) since February of this year. A break could set up a possible test of the 2011 lows.
John J Hardy,
SAXO BANK