Daily FX Wrap: A good day for the USD as wins seen across the board. USD/JPY takes out 114.00, but gains against the EUR strained. Cable holds 1.2900. AUD and CAD weakness persists.

We saw a very strong turn in the USD today, as fresh market reports on the US data run turned a little more positive than the muted response we saw in reaction to Friday’s jobs report. US Treasuries were hit as the mid dates largely led the move, with the 5yr now cleanly through 1.90% and 10yr piercing 2.40%.

As expected, USD/JPY led the charge, and by pm London time we saw the spot rate taking out 114.00, but we expect 115.00 to provide a sterner challenge as we get a sense that the market is running ahead of itself once again. The steady risk mood may add to JPY weakness, but this is proving modest as yet, given the respective gains in the cross rates.

USD gains have also been enough to see EUR/USD testing down into the initial support area at 1.0850-80, and price action from here is likely to be a slow grind at best as Euro zone proponents have been encouraged by the latest run of data, including the recent inflation stats.

The data schedule has been relatively light today, though we did see Mar US JOLTs rising to 5.743M, up from a revised (lower) 5.682M. However, IBD/TIPP optimism dipped to 51.3 vs 52.3 expected, and wholesale inventories rose by 0.2% – but the latter data can be viewed either way. Even less to note on Wednesday, with the usual run of Fed speakers, generally offering more of the same as is expected on the rate profile through 2017.

In Europe, we have French trade and industrial production to look to, but we expect more of a reaction to the Norwegian inflation data, seen rising modestly in the headline and core. This could arrest some of the NOK weakness, more so against the EUR, but the USD rate is currently testing 2017 highs. Swedish unemployment rate also due.

The ECB’s Draghi is due to speak in the Dutch parliament, so there may be some ‘interesting’ questioning to contend with.

Little of note in the overnight session ahead other than the Japanese leading index and coincident indicator, but the JPY perspective has been all but negligible in driving the spot and cross JPY pairs.

More weakness of note in the commodity currencies, but less so in the NZD, where Thursday’s RBNZ meeting is keeping trade here relatively neutral. In the meantime, AUD weakness at the hands of the USD has been augmented by the heavy Copper prices, while Oil prices cannot catch a break at the present time despite ongoing talk of a production cut extension. As a result, CAD is on the back foot again, with the USD rate pressing on the mid 1.3700’s. We still see strong resistance from 1.3800, but this is all about Oil at present, with 10yr CAD tracking the US.

GBP weakness creeping back in if we look at the USD, but elsewhere, we are holding onto better levels, notably the EUR and CAD. Traders are all looking to Super Thursday, so currency counterparts driving trade to a larger degree. Expect more of the same on Wednesday, if not a little weaker on event risk jitters.

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Dollar Index Daily

Price continued moving higher today pushing through the 21 EMA and now approaching resistance between MPP and MM3. Market is still sideways due to our 21 and 55 being flat and our stochastic indicates further bullishness.

Dollar Index H4

In yesterday's post our two scenarios were price coming down off of resistance at WR1 and finding support at WPP or a breakout with a view for price to return to the top of the previous range and then head higher. Price has hit the weekly target after coming off of WM2 and breaking through resistance with no pullback. Note the confluence between MPP and WR2 - a price level where we expect to see profit taking. Price action shows a level of support at previous high, marked in green just below WM4, with the top of the previous range at WR1. Our 21 and 55 are converging though have not crossed yet though market is becoming bullish. H4 is notably overbought.

US10Y Daily

Bearishness in the price of the US10Y continues as yields rise higher. We expected to see this based on fundamental and technical analysis. In yesterday's post we identified support at MS1, which is where price is at the moment. With MS2 as the bearish target, price could certainly move lower though as mentioned in yesterday's post - keep a close eye on the S&P500, NK225 and the Vix. Note that the Vix as at it's lowest level since 2007 so there is complacency in the market.

US10Y H4

With a target of WS2 (just abvoe MS2) price is expected to continue moving lower and risk on is expected to continue in the market. That means more Yen, CHF and Gold weakness. Fundamentally there is no reason for the market to turn risk off though as mentioned on the daily chart - keep a close eye on the stock markets. With the Vix being so low no one is hedged and if we get a correction in stocks, it's going to turn market sentiment quickly. This is definitely worth paying attention to when one takes note of the price levels on the Yen pairs, CHF pairs and Gold. For more info watch Wayne's webinar from earlier today.

S&P 500 Daily

Price is still in the resistance zone highlighted in red which is drawn off of the previous high in Feb '16. Note that price has not broken above yesterday's high. The daily stoch has rolled over.

S&P500 H4

Yesterday price was contained in the bearish sell zone. Today price moved higher though further upside was halted by WM3 with price making a lower high. Price is not bearish until we break support at WPP/ WM2. The Vix is currently moving higher from WS2. Let's see how this plays out over the near term.

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