The greenback struggled to find any real direction in the session, consolidating in the day’s range. USD/JPY has managed to get some traction, however, breaking intra-day highs prior to the Wall Street bell. Excluding the often phycological resistance levels in USD/JPY, the May and July resistance levels could come into focus, with offers likely stacked around this 114.37 area. The dollar has struggled against the other safe-haven however, with buyers not so eager against the franc, as Japanese geopolitical concerns seemingly have lowered the demand for the Yen.

EUR/JPY and EUR/CHF trade in a similar way, with many preferring to take short positions against the JPY. Morgan Stanley’s trade of the week is evident of this, long from 133.09. EUR/USD continues with its long-term uptrend and a recapture of 1.21 could see another leg higher if the FOMC choose to avoid a hawkish tone on Wednesday.

Sterling trade has slowed following last week’s bullish run sparked by the BoE. Much of the anticipation will be on BoE’s Carney, expected to pre-release text at 16:00 BST, with many looking out for any indications on whether the next hike will mark the commencement of a hiking cycle or a ‘one off’ move from the BoE. EUR/GBP bears will look for a hawkish aid for an attack on the 0.8745 area, with any seemingly unlikely expectation dampening from the head, a retest of 0.89 could be seen.
Cable has broken out of the post Brexit range, and trades back within these levels, however, a dovish tone from Carney could see GBP/USD trade back within these levels.

BoE Governor Carney says any prospective increases in the Bank Rate would be expected to be at a gradual pace and to a limited extent and to be consistent with monetary policy continuing to provide substantial support to the economy
– Repeats views that some withdrawal of stimulus is likely to be appropriate over the coming months.
– In the UKK, large exchange rate moves create price dynamics that are relevant to the policy horizon.
– There remain considerable risks to the UK outlook related to the process of EU withdrawal; MPC will respond to the developments as they occur insofar as they affect the behaviour of households and businesses and the outlook for inflation.
– UK growth looks set to remain weaker than G7 average until mid-2008.
– Remaining spare capacity is being absorbed a little more rapidly than expected; inflation likely to overshoot to overshoot 2% over next three years.
– The bar for changing monetary policy frameworks (e.g. inflation targeting) should be very high.
– Equilibrium rates can be expected to settle at levels significantly below pre-crisis levels.

News source:

Dollar Index H4

We had price coming down to MS2 in our last post (confluence with WS1), support at MM1 held with confluence at WM2. As we discussed in yesterday's post, we expect price to make its way back to MPP by the end of the month - we have MPP at this week's WR2. Market is currently ranging and price is bullish. We are coming up to some resistance at WM3 with the next level of resistance at the previous high from last week. Should price move to the bottom of the range, support is eyed at MS2/ WS1.

US10Y H4

I have marked MS1 with a red cross, this is the target as discussed in our post yesterday. As far as weekly pivots are concerned, a break of WM2 indicates that price is headed towards our weekly target. We have confluence of support at WS2 as this price also marks MM1 and a support level of July.

S&P500 H4

Price has made a higher high with confluence of resistance at WR2 as this price also marks MM4 (marked by the green arrow).

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