At a glance:
The short term range bias continues to develop for the USD following last week’s choppy price action. With key levels still well-defined, last week’s test and hold of a number of key USD supports argues for additional near term strength. Note this is also in line with Friday’s bullish reversal patterns which should put the recent highs to the test. In that regard, the focus turns to the 76.00 area for the DXY, as well as the key 1.4120/1.4050 support zone for EUR/USD. On the flip-side, the focus is on the 74.80/74.40 zone for the DXY as well as the 1.4340 area for EUR/USD which has been reinforced with Friday’s reversals. Breaks here are necessary to allow for a deeper retracement of the May USD strength. Note that despite holding a number of key resistance levels, the corrective pattern to last week’s price action has failed to alter the short term bullish setup.
The short term parameters remain well-defined for other USD pairs as well particularly against the commodity currencies. With AUD/USD reversing from the 1.0515/00 support area (38.2% retracement from the March low), the 1.0720 and 1.0890 resistance levels will now define whether a more sustained bullish shift can develop. Until then, the short term setup continues to point to further range action. Also, NZD/USD maintains the bounce from the key .7800/.7735 zone which also includes the 38.2% retracement from March. While strength above the .7994/.8000 area is necessary to suggest a bullish shift, the action on the crosses argues for additional outperformance highlighted by Friday’s sharp decline in EUR/NZD below the 1.7840 support, as well as the impulsive breakout above the .7700 area for NZD/CAD implying further upside in the offing. In that regard, the setup in USD/CAD continues to point to additional upside particularly following Friday’s bullish reversal pattern suggests the .9795/.9815 area is at risk. Moreover, the setup for the CAD crosses is consistent with additional underperformance with AUD/CAD set for a break above the 1.0445 early-May high.
The short term retracement for USD/JPY remains intact following the test and reversal from the key 80/79.75 support area. The focus now turns to the 82.50/3.25 levels with breaks setting the stage for a deeper retracement of the decline from the April high. As this should also give some lift to cross JPY, we see a number of key short term hurdles including the 117.20/60 zone for EUR/JPY (which capped last week’s high), the 88.15 area for AUD/JPY and the 85.30/86.10 levels for CAD/JPY.
Trade Strategies:
° Long 1 unit EUR/GBP from .8614 risking .8650 targeting .9380.
° Short 2 units EUR/INR from 63.30 risking 68.50 targeting 55/52.
° Short 2 units PLN/HUF from 68.604 avg risking 68.600 targeting 64.00.
° Short 2 units USD/RUB from 29.450 risking 29.20 targeting 26.24.
° Long 1 unit EUR/MXN from 16.7494 risking 16.25 targeting 17.68.
° Short 1 unit NOK/SEK from 1.1508 risking 1.1505 targeting 1.0850.
° Long 1 unit EUR/NOK from 7.9450 risking 7.7850 targeting 8.21.
° Short 2 units USD/MXN from 11.6775 risking 11.8950 targeting 11.20/10.75.
° Long 2 units EUR/AUD from 1.3364 risking 1.2990 targeting 1.4300.
Niall O’Connor
JPMorgan Chase Bank NA