Session close (Tuesday, Jan. 30): Settled at 1.2441, up 14.5 ticks
Fundamentals: The euro began picking up off session lows shortly after midnight, trading more than a penny higher. After German CPI fell short of expectations, U.S. Case Shiller was solid, and Consumer Confidence beat, the euro middled out the session ahead of Tuesday's State of the Union at 8:00 pm Central. Last week was a turbulent one for the Euro trade and not just because of the European Central Bank meeting. Comments from U.S Treasury Secretary Mnuchin weakened the Dollar while President Trump had to walk back that statement, ultimately strengthening the Dollar on Thursday. The White House did receive blowback from ECB President Mario Draghi as well as others on an agreement to not purposely weaken one’s currency. Due to this as well as the America first agenda, in tonight’s State of the Union we would not be surprised to see supportive comments to the Dollar from President Trump. The week is truly just beginning and tomorrow brings German Retail Sales at 1:00 am CT, regional CPI data, Eurozone CPI at 4:00 am CT, U.S ADP jobs data at 7:15 am Central and Pending Home Sales at 9:00. Of course, the Fed is due to release a policy decision and statement tomorrow at 1:00 pm CT.
Technicals: We have been very bullish the Euro for some time but have taken a more neutral approach in our bias of late. We discussed how overbought the conditions are last night as well as in Sunday’s Tradable Events this Week. We expect the technical conditions to become much more favorable for buying as this week unfolds. For now, first key support at 1.2349-1.23685 has continued to hold strong. Today’s session high was 1.2491, just shy of first key resistance at 1.2514. The 1.2434-1.2436 level remains pivotal and a close above or below here will give an edge to the bull or bear camp in pushing through first key resistance or support.
Resistance – 1.2514**, 1.2608***
Pivot - 1.2434-1.2436***
Support – 1.2349-1.23685**, 1.2307*, .2209-1.22135***
Session close: Settled at .92175, up 14 ticks
Fundamentals: Data out of Japan was mixed last night; Retail Sales, Job Applications and BoJ Core CPI came in stronger while Household Spending fell well short of expectations and the Unemployment rate ticked up. Industrial Production data is due tonight at 5:50 pm CT. BoJ Board Member Iwata speaks at 7:30 pm CT, shortly after Chinese Manufacturing at 7:00 and before President Trump’s State of the Union at 8:00. The yen continues to trade in a very constructive manner on a stronger fundamental outlook while U.S dollar weakness also remains a key catalyst for yen strength. We do feel that the State of the Union and tomorrow’s Fed policy decision can help support the dollar.
Technicals: This was another firm session for the Yen, but price action remains below major three-star resistance. Due to this technical headwind coupled with fundamental events over the next 24 hours, we believe it is prudent to remain Neutral in our Bias. However, we view pullbacks as buying opportunities.
Resistance – .9237-.9255***, .93215**, .9480***
Support – .9164**, .9089-.91035***, .9043*, .8998-.9006**, .8946-.8957**
Session close: Settled at .8083, down 18 ticks
Fundamentals: The Aussie retreated slightly today as metals and energies were under pressure. Furthermore, Aussie NAB Business Confidence missed expectations last night. Price action stabilized from overnight weakness on U.S Dollar weakness which has been a key driver in Aussie strength. Outside of the U.S Dollar, the next 24 hours is about just as critical for the Aussie. Of course, because it trades against the U.S. dollar but Aussie CPI data and Private Sector Credit is due at 6:30 pm CT. At 7:00 is Manufacturing and Non-Manufacturing from Australia’s number one trade partner, China.
Technicals: A weaker session today marked a clear close below major three-star resistance. Price action could not crack first support which is a major three-star level at .8033-.8037 with an early session low of .8042. We maintain that the Aussie has the best risk vs. reward to the downside due to not only its overbought conditions but soft fundamental picture and ties to commodity prices that are also vulnerable to the U.S Dollar strengthening from the most oversold on a weekly chart since November 2007.
Resistance – .8100-.8125***, .8151*
Support – .8033-.8037***, .7998**, .7962**, .7874-7881***
Session close: Settled at .8119, down 0.5 tick
Fundamentals: Though the Canadian is tied to commodity prices nearly as much as the Aussie. We believe the Canadian dollar has less downside risk on a strengthening dollar due to NAFTA talks holding back recent gains. Now that there is a good vibe on these talks moving on to the next round, the focus will be Canadian growth data along with RMPI tomorrow. Yes, it will remain susceptible to the U.S, dollar strengthening on President Trump’s State of the Union or tomorrow’sFed policy, however, we believe there is the least amount of downside in the Canadian at this time.
Technicals: Price action has struggled against major three-star resistance at .81005-.81195. There is a potential bull flag building after what was essentially an outside bullish reversal today. There is also trend line support that is rising and expands the range of first key support. Regardless, we do believe that the U.S Dollar is overdone in the near-term and remain patient for a pullback to use as a buying opportunity. We would like to use pullbacks against major three-star support at .7931-.7949 to buy against. Of the four currencies discussed on this report, we have the most conviction on the upside in the Canadian and believe it could test to .8524 this year.
Resistance – .81005-.81195***, .8163**, .8290***, .8524****
Support – .80505-.8070**, .7996**, .7931-.7949***, .7903**, .7752-.7787***