Dollar shrugs off negative news

EUR USD (1.2625)
The single currency was already under pressure in the early European morning session on Friday. However, later it managed to briefly rush almost to the $1.27 level from where it was sent straight down to a 1.2625 fresh low for the month.

The euro’s drift lower on the last trading day of the week took place in the absence of negative news. Of note is that the geopolitical concerns used by market participants to buy the euro the day before, was used as a selling argument on Friday. As traders started scratching their heads to make sense of it all, the dollar bulls seemed not to have been too concerned about the skyrocketing price of crude. The stepped up attacks by Israel on Lebanon were also seen as part of safe haven flows rather than as a threat to the US. Even economic data from the US which came in rather on the weak side lost its punch. The knee-jerk reaction was to buy the single currency on the weaker retail sales, but soon afterwards the upside attempt ran out of steam. In addition, the dip in expectations for another Fed hike after the release of the softer retail number and the weaker University of Michigan survey could not change things around for the euro. However, the steady loss over the whole of last week, could indeed point to some truth in the rumours about official selling.

After the single currency’s dip below our 1.2660 risk-limit, we re-adjust the position to neutral. For today we reckon with risk to 1.2545 (critical), while a recovery will meet resistance at 1.2710.

USD JPY (116.40)
The current objective remains a return to the upper border of the current range (113.45 - 116.70). Be on the lookout for our second target thereafter at 118.50. The yen could hardly muster support from the BoJ rate hike on Friday, instead it hit a five-week low against the dollar as traders started to become concerned that this could have been the first and last rate hike for the year. This is hardly anything new as there has been talk all along that a slow pace would follow the first hike. Nevertheless, for the time being traders seem to be much more interested in the BoJ rhetoric, economic growth and inflation. With Japan being out on a public holiday today, one can also expect volumes to be rather on the thin side. To the downside, we are counting on two demand points at 115.50 and at 115.00. The first support also acts as our tightened risk-limit.

EUR JPY (147.05)
The euro remains agile and is still in a position to deliver fresh all-time highs at 147.70 and thereafter to as high as 148.60, which also mark the next reliable resistances. On a dip, we expect to run into support at 146.10 and at then at the critical 145.00 level.

EUR GBP (0.6880)
The cross continued its downward correction on Friday. Any subsequent persistence to the downside will encounter support at 0.6860/70. This also marks the point where we would turn bullish with a tight limit below. Of note is that below there, the demand situation becomes unreliable ahead of 0.6730. Overhead, we expect bouts of selling at 0.6920 and at 0.6965. The latter also marks the objective in the event of a bullish strategy.

GBP USD (1.8370)
Sterling could still not manage to escape Wednesday’s range and it remains overall in a neutral, but stable position. On the upside, we are still requiring a break beyond 1.8520, which will also serve as a sign that that another immediate challenge of 1.8775 is underway. Any weakness will run into some buying interest at 1.8275/90 with the latter also representing the best support. Below there, the risk would be for 1.7930.

AUD USD (0.7515)
Traders still subscribe to the idea that the RBA will be the next central bank to hike rates. The Aussie recovered and remains overall in a neutral position. Beyond 0.7565, one can reckon with another squeeze being underway, which will lift the AUD to 0.7605 and thereafter to 0.7650. On a dip, supports are visible at 0.7485 and 0.7445.