Session close (Monday, Jan. 29): Settled at 1.24265, down 33.5 ticks
Fundamentals: The euro began working lower late Friday afternoon and continued on that path through today’s session. This slow and steady drip eludes to traders taking positions off the table at the beginning of a pivotal week that has the State of the Union Tuesday night, Fed decision Wednesday and Nonfarm Payroll Friday. U.S. PCE Index data was in line with expectations today. Tomorrow morning brings Eurozone GDP at 4:00 am CT along German CPI. U.S. Case Shiller is due at 8:00 am CT and Consumer Confidence at 9:00. Both fundamentally and technically, the euro has more upside in the long-term. We believe pullbacks are buying opportunities. However, traders do want to manage risk properly through what is expected to be a volatile week.
Technicals: Price action is attempting to relieve itself from overbought conditions. The 14-day RSI reached 75 last week. The CoT showed traders expanded the already record long position in the Euro by 25% in the week ending January 23rd. The Dollar Index is bouncing from the most oversold on the weekly since November 2007.
Session close: Settled at .92035, down 23 ticks
Fundamentals: The Japanese yen retreated slightly today, but given the recent volatility and today’s dollar strength, this was a solid session for the currency. Still, we are concerned that Wednesday’s Fed meeting can bring a hawkish surprise and near-term pressure for the yen. Furthermore, the yen is attempting to diverge from falling Treasury prices but if the Treasuries are lower because of the Fed, the yen is likely to take the similar heat. In a week that will center around U.S. political and monetary policy, there are some key data points out of Japan to watch. Household Income and jobs data are due tonight at 5:30 pm CT. BoJ Core CPI is due out at 11:00 pm CT. Tomorrow night is going to be a volatile one for reasons more than just the State of the Union with Japanese Industrial Production data along with Chinese Manufacturing.
Technicals: The yen has finally picked itself up out of the gutter but faces a tremendous hurdle this week in maintaining its recent gains. Price action is showing signs of fatigue just below major three-star resistance.
Session close: Settled at .8101, down 18 ticks
Fundamentals: The Aussie has gained more than 8% since its December bottom and as the year unfolds there is room for further gains. For now, we believe it should be most vulnerable to a strengthening dollar and domestic data this week. First, last week’s CPI read out of its neighboring New Zealand missed widely and we will be watching tomorrow nights Aussie CPI read that will be accompanied by Chinese Manufacturing data (China is Australia’s top trade partner). Tonight, there is business confidence data at 6:30 pm CT.
Technicals: Price action traded to a high of .8135 on Friday, the highest level since May 2015 before paring gains. Pullbacks in the Aussie over the last two months of been extremely shallow and the trade is overdue for a sharp move.
Session close: Settled at .81195, down 2 ticks.
Fundamentals: The Canadian stayed in a very tight range through the session as NAFTA talks wrapped up with a positive vibe. We look to a busy week of U.S. political and monetary policy to be the key catalyst in price action but at the same time traders need to keep an eye on Chinese Manufacturing tomorrow night and major Canadian data points Wednesday; monthly GDP data and Raw Materials Price Index. We are very bullish the Canadian dollar in the long-term and hope to see it about 1% lower this week on the U.S. Dollar consolidating higher from oversold territory to present a strong buy opportunity, rather than down on negative news out of Canada.
Technicals: Price action is holding strong against major three-star resistance at .81005-.81195.