Session close (Tuesday Feb. 20): Settled at 1.23565, down 83 ticks
Fundamentals: The euro has had a tough two-session run since edging a new swing high early Friday at 1.25795. The price has reversed about 1.7% ahead of tomorrow’s FOMC Minutes and Thursday’s ECB Minutes, both from their late January meetings. The catalyst, mostly technical does boil down to some fundamentals. After a slightly better read on U.S. CPI last week, U.S. housing and consumer confidence data was much better than expected Friday. It is also important to note that the yen was the leader on this most recent leg higher into Thursday night and was the first to begin fading (details below).
Now, you will begin hearing all the dollr bulls who were essentially wrong three times in January and many times in the months before screaming for vindication on this small pull back. But lets please remember that they have been wrong, at the bare minimum, for the last 5% and some even 10%. In Sunday’s Tradable Events this Week, we discussed how both the FOMC and ECB Minutes are expected to move markets.
Much of this recent pull back is due to positioning and traders paring positions ahead of not only these releases but key Fed speakers throughout the week. Gaining new traction is the potential of German Bundesbank President Weidmann becoming the next ECB President. We believe that this old card that was always in play, but newer hawkish development has not even begun to be priced in and could be a key catalyst in sending the Euro above 1.30 later this year.
Tomorrow, we look to German Manufacturing data at 2:30 am CT and the Eurozone read at 3:00. Philadelphia Fed President Harker speaks at 8:00 am CT, Manufacturing, Markit Composite and Services PMIs are all due at 8:45 and Existing Home Sales is at 9:00. The FOMC Minutes will be released at 1:00 pm CT and we look forward to what hike dissenter, Minneapolis Fed President Kashkari says at 7:15 pm.
Technicals: On Thursday evening, we said the longer price action stays above 1.24805-1.2514, the more bullish it becomes; after edging a new high and testing major three-star resistance, it was trading back below this level by 6:00 am CT Friday morning. What does that mean? Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels.
Session close: Settled at .93365, down 85 ticks
Fundamentals: The yen has led the way lower on this two-session U.S. dollar resurgence ahead of tomorrow’s FOMC Minutes. Price action ran into our rare major four-star resistance late Thursday night and this move is a combination of technicals and the underestimated power of officially reappointing BoJ chief Kuroda, which also came that evening. It was essentially a foregone conclusion that Prime Minister Abe was going to reappoint Kuroda, the architect of Japan’s ultra-loose monetary policy, but it was unnerving to those who position massively in the space that the official reappointment was delayed; was it a signal that policy tweaking or tightening was coming later this year?
Japanese Trade Balance data Sunday night showed the first trade deficit since May though it was not as high as expected. Many are praising this as a sign of economic good times with rising imports, however, this read is more seasonal. Furthermore, imports missed expectations. Tonight, we look to Manufacturing PMI at 6:30 pm CT and Industries Activity data at 10:30. Also, Board Member Funo is due to speak at 7:10.
Technicals: We use major four-star levels only rarely to emphasize their importance and furthermore, we had no other resistance above here. We said Thursday evening that traders should capitalize against this level.
Session close: Settled at .7878, down 28 ticks
Fundamentals: The Aussie dollar retreated on the session but held well when compared to its peers versus the U.S. dollar. RBA Minutes last night were upbeat at best mentioning reduced unemployment and a pickup in global growth and inflation. However, they believe that further progress in inflation will only be gradual. Ultimately, we are seeing a bounce in the U.S. dollar with the failure in the Yen leading the way. This is a consolidation ahead of tomorrow’s FOMC Minutes. Out of Australia tonight is MI Leading Index at 5:30 pm CT and Wage and Construction data at 6:30 pm CT. The rest of the week is quiet on the Aussie data front.
Technicals: Friday’s session clung to our pivot level but today’s close was clearly below and though this opens the door for the sellers.
Session close: Settled at .7913, down 57 ticks
Fundamentals: Volatility in equity markets continue and this does not bode well for the Canadian dollar. This was a poor session that saw crude oil hold ground well. The U.S. dollar is strengthening as shorts take profits ahead of tomorrow’s FOMC Minutes. There is no major data out of Canada until a key Retail Sales read on Wednesday. Tomorrow morning’s U.S. data, as well as the action in crude now that the March contract has fallen off the board, will be critical for the trade.
Technicals: Price action settled below major three-star support, a level that we have been eyeing as a line in the sand for quite some time. This level was rejected just about a week ago.