Session close: Settled at 1.24475, up 6.5 ticks
Fundamental: The State of the Union and FOMC policy meeting are both in the rear-view mirror and the euro has gotten away with minimal volatility given these circumstances. The price rose through the evening before peaking early this morning after strong ADP Payroll and Chicago PMI. Before these, Eurozone CPI was in line with expectations, as always. The euro incurred slight selling pressure upon the release of an upbeat policy statement from the Fed.
Without saying it in so many words, the Fed’s trajectory seems to be four hikes this year. They expect inflation to move up this year and stabilize around 2%; this will be key in achieving four hikes. If inflation continues to lag, their path will be more ‘gradual’. Regional Manufacturing PMI data is due out of Europe ahead of the Eurozone read at 3:00 am CT. In the U.S. weekly Jobless Claims, Nonfarm Productivity and Unit Labor Costs are due at 7:30 am CT. Manufacturing PMI at 8:45 while the key ISM read is at 9:00. Of course, Nonfarm Payroll is the key risk to close out the week.
Technicals: The range remains extremely well defined by our first resistance and support which we have had in place all week. Traders could have been playing this from both sides. Today’s session high was 1.2511 before settling right in at the key pivot level after the Fed. We continue to believe that the conditions in the euro are overbought and those in the dollar are oversold and the risk is an inverse move of their respective recent directions. However, this does not go to say that one could not trade the euro from the long side on short-term swings. We remain long-term bullish, but our bias is neutral for now and we would like to see lower price action to position long.
Resistance – 1.2514**, 1.2608***
Pivot - 1.2434-1.2436***
Support – 1.2349-1.23685**, 1.2307*, .2209-1.22135***
Session close: Settled at .9189, down 28.5 ticks
Fundamentals: The Japanese yen began a slow trickle lower last night. After a bright spot with Industrial Production data early, Bank of Japan board member Iwata eluded to the Yen rising quicker than anticipated and this being a potential concern. On the heels of his comments, Household Confidence and Housing Starts both missed expectations. Adding to pressures in the yen was new lows in the Treasury complex.
However, longer end Treasuries recovered well from session lows and ultimately the Yen traded higher after the Fed statement. Considering the domestic weakness in the Yen and our belief that the risk in the dollar is to the upside, we view the near-term risks in the Yen to be lower and have adjusted our Bias appropriately. It is important to keep an eye on the 10-year JGB auction tonight at 9:45 pm CT.
Technicals: The yen has failed against major three-star resistance at .9237-.9255. Waves of selling pressure are being held by first support at .9164 and this will be a critical trade to watch over the next 24 hours and ahead of Nonfarm payroll. We now have a slight Bearish Bias in the yen and view .9089-.91035 as a potential downside target.
Resistance – .9237-.9255***, .93215**, .9480***
Support – .9164**, .9089-.91035***, .9043*, .8998-.9006**, .8946-.8957**
Session close: Settled at .8049, down 34 ticks
Fundamentals: The Aussie traded sharply lower early last night after both domestic CPI and Private Credit data missed expectations. Chinese Manufacturing PMI also missed. However, U.S. dollar weakness continues to be a pillar in this overbought Aussie trade. There is still a lineup of domestic data to come tonight; AIG Manufacturing improved to 58.7, Building Approvals and Import/Export Price at 6:30 pm CT along with the private Caixin Chinese Manufacturing PMI at 7:45 pm CT. The U.S. dollar will play a critical role in this trade over the next 48 hours and a strong U.S. dollar coupled with weak data out of Australia would back for a sharp price correction.
Technicals: Price action continues to struggle against major three-star resistance at .8100-.8125, however, it just cannot break below major three-star support at .8033-.8037. Our Bias remains slightly Bearish as we believe if it knocks on this door enough, it will break through and longs will quickly jump ship.
Resistance – .8100-.8125***, .8151**
Support – .8033-.8037***, .7998**, .7962**, .7874-7881***
Session close: Settled at .81325, up 13.5 ticks
Fundamentals: The Canadian put in a solid session against the U.S. dollar. Monthly GDP data was in line with expectations while a beat from the Raw Material Price Index added to Canadian strength immediately. Canadian jobs data does not come out along with Nonfarm Payroll on Friday. Tomorrow is RBC Manufacturing data at 8:30 am CT but going forward the Canadian trade will be more reflective of U.S. dollar strength or weakness and this is a key reason why we would like to see lower price action in the near-term to present a longer-term buy opportunity.
Technicals: We remain neutral in our bias while price action managed to settle just out above our major three-star level at .81005-.81195. Given the upcoming fundamental risks, we will continue to watch this level through the weekly close before we form a stronger near-term bias.
Resistance – .8163**, .8290***, .8524****
Pivot - .81005-.81195***
Support – .80505-.8070**, .7996**, .7931-.7949***, .7903**, .7752-.7787***