At a glance: Political markets
Market conditions are currently dominated by rumors and political statements, which adds to the already prevailing uncertainty and leads to pretty erratic price movements, impossible to anticipate. Yesterday’s rumor about the SNB raising the floor for EUR/CHF again is another example, which pushed the market into its main resistance zone between 1.2289 and 1.2650 (int. 38.2 % on different scales). Only above the latter though, The SNB would be out of the danger zone in technical terms. Risk markets also enjoyed decent gains, discounting hopes that the Fed would do anything possible to provide additional stimulus to the economy. Whether these hopes will be met is however as questionable as additional gains after the announcement due to the “buy the rumor, sell the fact” effect. That said, the S&P 500 remains in a vulnerable stage as long as key-resistance between 1236 and 1249 (50 %/pivot) is not taken out. The same applies for EUR/USD, where it would take a break above the last intra-day high at 1.3937 to escape the imminent threat of breaking below key-support at 1.3601/1.3586 (int. 76.4 %/last intra-day low). A break below the latter would basically resume the broader downtrend and would call for a straight test of the main T-junction at 1.3351/49 (76.4 % on higher scale/Fib.-projection). As for USD/JPY, chances of having resumed the broader downtrend towards 69.94 (Fib.-projection) have increased significantly after the latest penetration of key-support at 76.40/32 (int. 76.4 %/last intra-day low).
° Short 4 units EUR/USD from avg. 1.3990 , targets 1.3350 and 1.3120, stop at 1.4400
° Long 4 units USD/CZK from avg. 17.255, target 19.02, stop at 16.50
° Short 2 units EUR/INR from avg. 63.30, adding 2 units at 62.45 on stop, 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 – Below Ichimoku-resistance, the market remains at risk of accelerating down
° Missing an hourly close below 1.3601 (int. 76.4 %) so far, the start window for another corrective leg up to 1.4001/43 (w. trend/200 day MA) remains open.
° It would take two consecutive higher closes of the red lagging line above the cloud (currently at 1.3792) and a break above 1.3937 (last top)though, to prevent a break below 1.3601 and a straight extension to 1.3351 (int. 76.4 %).
GBP/USD hourly – Break above Ichimoku-resistance required to gain limited upside potential
° The latest stabilization hasn’t altered the overall negative picture and as long as the red lagging line hasn’t displayed two consecutive hourly closes above the cloud (currently at 1.5777), this market remains at risk of at least testing 1.5488 (50 %).
° Only above 1.57777, the start window for a stronger recovery to 1.5940/46/91 (daily breakout line/int 38.2 %) would open.
EUR/GBP daily – Still awaiting a range breakout between 0.8802/17 and 0.8591
° Yesterday’s “Inside Day” hasn’t delivered fresh insights so that the fight between bulls and bears for a range breakout between 0.8802/17 (int. 76.4 %/daily trend) and 0.8591 (int. 76.4 %) has gone into a new round.
° An upside break would challenge the next resistance cluster at 0.8886/0.8922 (last top/daily Ichimoku-lagging) whereas a break a decisive hourly close below 0.8591 (i.e. below 0.8560) would expose 76.4 % retracements on higher scale at 0.8474 and at 0.8307.
EUR/SEK hourly – Current setback seen as a countertrend decline only
° Given the structure of the latest rally from 8.8620 to 9.2497 in a straight line up, which additionally shows a 5-wave structure, we are fairly confident that the current setback is part of a countertrend decline only.
° The latter can extend to 8.9535 (int. 76.4 %) in a wave 2 or wave B down, but would conclusively have to be followed by another rally (wave c or wave 3), which would most likely challenge 9.3514 (old top) or the first decisive T-junction on higher scale at 9.4025 (int. 38.2 %).
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J.P.Morgan
Global FX Strategy