FX snapshot – EUR/USD, EUR/GBP, NZD/USD, USD/JPY

USD weakness has been a feature of the market recently and signs point towards a likely continuation, for now.

Euro
Source: Bloomberg

EUR/USD pulls back yet further gains in sight

Yesterday’s rise of EUR/USD took many by surprise. But set against the backdrop of the $1.0819 support holding, followed by higher highs and lows being created, this just fitted with the profile of the market right now. So far, both the legs higher have occurred at the 61.8% Fibonacci retracement and thus, there is a possibility we could move back down to $1.1 for the next leg higher.

However, be aware that markets rarely exhibit the same degree of retracement each time and usually alternate between shallow and deep pullbacks.

I am bullish and am watching the Fibonacci levels for support given previous respect of them. Thus I am watching for a bullish candlestick formation from one of the Fibonacci retracements to give confidence of the next leg higher. They come in at $1.1052 (38.2%), $1.1027 (50%) and $1.1 (62.8%). 

EUR/GBP resistance turns to support for next leg higher

EUR/GBP has been moving lower following the early strength seen yesterday. However, with support now appearing at the £0.7102 level, there is good reason to think we could see another leg higher today.

The £0.7102 mark represents both the resistance level from the last leg higher, on 23 July, but also the 50-hour SMA. Thus should this level hold, we could be seeing the beginning of a move back towards £0.7161 and on towards £0.702.

Be aware, that the long-term trend is bearish and thus the bears could come back into dominance around £0.702 as this represents the 20-week SMA, which has previously been sold into.

NZD/USD at crucial resistance point following recent strength

The strength in NZD/USD over the past week has gone against the clear downtrend in play and is a threat to that trend. Now we are still far from breaking the $0.6771 level, which would be a strong indication that we are seeing a bottom at the moment. Yet the descending trendline in place since mid-May is being challenged and this could be the level needed to spark either a change in direction, or further strong buying.

This depends on how it reacts now. My preference is for a sell off, in accordance with the long-term trend, overbought stochastic and two-month trendline. Should this occur, we would be watching a lower high created, which points towards a resumption of the downtrend.

However, given the US dollar weakness seen across other markets, that view is not too strong and thus we are in 'wait and see' mode. Therefore, a bearish engulfing pattern or alike would be a good signal of a possible move back towards $0.656, yet a close above this trendline would mean a likely break above $0.6696.

Given the long-term trend, I remain bearish and am watching for possible signs of this retracement coming to an end.

USD/JPY resurgence likely to be sold into

USD/JPY has been moving higher over the last 24-hours, following the breakdown seen from last week’s triangle. However, with price having moved lower from the triangle, this provides a more bearish outlook for the time being.

The upper threshold of the triangle, coupled with the ¥123.73 horizontal resistance level provides a good area of resistance where I would expect to see selling come back to the fore. Thus I am bearish while price remains below the descending trendline (currently ¥123.86) for a move back towards ¥123.0.

I would need price to move above ¥124.2 for me to resume my bullish view.  

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