Technical short-term outlook on EUR/USD, USD/JPY and USD/CNH
Outlook on EUR/USD, USD/JPY and USD/CNH post China slashing its foreign exchange reserve requirement and ahead of US NFP.
EUR/USD slips back to 200-day simple moving average
EUR/USD is seen heading back down towards the 200-day simple moving average (SMA) at $1.0818 on sticky Eurozone inflation data and as the greenback appreciates ahead of today’s Non-Farm Payrolls.
If the moving average were to be slipped through, the March-to-September uptrend line at $1.078 could act as support.
Minor resistance can be spotted around the 24 August high at $1.0876 and along the downtrend channel resistance line at $1.0924.
USD/JPY continues to slide
USD/JPY's spike to a new ten-month high at ¥147.37 on Tuesday as been followed by a retracement lower as Japan capital spending rises 4.5% in Q2.
Since this week’s high has not been confirmed by the relative strength index (RSI), which made a lower high, negative divergence has been created. It tends to lead at least to a minor correction against the trend and sometimes acts as an early warning signal of a significant trend reversal.
A top in USD/JPY would be confirmed if the currency pair were to fall through and, on a daily chart basis, close below last week’s low at ¥144.54. In this case, the 55-day SMA at ¥143.10 would be eyed. Only the resumption of the overall advance and rise above ¥147.37 would put the psychological ¥150.00 region back on the map.
USD/CNH drops as China lowers foreign exchange reserve requirement
The People's Bank of China (PBoC) said that it would lower the foreign exchange reserve requirement ratio (RRR) by 200 basis point (bp) to 4% from 6% mid-September. It was the first such reduction this year, as the central bank seeks to prop up the falling yuan and help China’s faltering economic recovery.
Following the announcement, USD/CNH dropped to a two-week low at ¥7.2392 before regaining much of its intraday losses. Technically speaking the cross remains in a medium-term uptrend despite Friday’s blip with the ¥7.30 region being back in sight while ¥7.2392 underpins.
Below this week’s low at ¥7.2392 support can be seen along the 55-day SMA at ¥7.2288.
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