EURUSD’s initial push through the early April low at 1.3676 (double top trigger for a measured move decline to just below 1.34) has stalled and the pattern of short-term price signals suggests the risk in the early part of the coming week at least is for a minor rebound in spot. The daily chart shows price forming a big “doji” candle Thursday, suggesting a stall in the move down. The lack of significant follow through today suggest that if there is a bounce, it is likely to remain limited. We look for gains back above 1.3730/40 (100-day MA currently at 1.3741) to trigger a short-term recovery to 1.3805 (40-day MA) plus. But with short-term trend momentum signals aligned bearishly across a range of timeframes, we rather think gains will be limited in duration and scope and provide an opportunity for sellers. The big, bearish reversals on the daily and weekly charts last week still suggest the main risk in EURUSD is lower.
The longer-term picture has not changed only the net loss for the EUR this week “confirms” in a technical sense the bear reversal signal from last week. Weekly trend support-turned-resistance is rising at a rate of 25 ticks per week, putting key weekly resistance at 1.3840 in the week ahead. The broader shape of recent price moves suggests to us that an important top/reversal is unfolding in EURUSD around the 1.40 zone as the rising wedge-like shape to the pattern of trade over the past year implies a rally that is losing momentum. Last week’s bear reversal and the break of multi-month trend support opens up the downside for a retracement of the 1.2/1.40 move up towards 1.3374 at least (50% Fibonacci retracement support).
USDJPY’s technical position has deteriorated a little more this week even though spot has barely moved. USDJPY has slipped below trend support in the upper 101 zone and continues to pressure supports defined by a series of lows set since the start of the year. The February low at 100.82 is major support. Spot’s weakness below the cloud base has been confirmed by the bearish crossover of the tankan span on the ichimoku chart, to add to the negative tone. Trend momentum remains sluggish though the oscillators are set up to “endorse” a move lower if USD losses pick up. We still think the USD needs to press below 101 (more specifically 100.82) in order to confirm the outlook for more weakness but that does look to be a growing risk now. Regaining 102.25 will stabilize the slide.
TD Bank