Euro’s upside break runs into supply

EUR USD (1.2680)
Yesterday in the European session, the single currency picked up from where it had left the day before and continued to loftier levels, but it briefly edged lower when some of these positions were thrown out. With the euro optically lower and the euro bulls ready to jump in, they quickly pushed it to a 1.2770 peak. However, the liquidation of these positions sent it almost a big figure lower in NY.

With the euro on the way up in the European morning session, traders enthusiastically waved the Beige Book as the reason. But this has already been in the market for some time, and against the backdrop of the Bernanke address, it just had the same to offer. After the better-than-expected US durable goods number and weekly jobless claims, the euro only briefly dipped. While some traders were scratching their heads, others simply said that the dollar fell out of favour and that it was definitely the end of the Fed’s tightening cycle. By then, chatter had already started about today’s GDP number from the US, which could see the euro rallying to as high as $1.30. However, the eagerness with which the single currency was bought after the release of the US data, had less to do with the numbers and more with the short-term euro bulls having already decided to buy and the dip thereafter just provided the right opportunity to do so. On top it is also possible that some medium-term* profit-taking could have been behind he euro’s sell-off thereafter.

The single currency did nothing but to test our 1.2765 resistance. As we have already mentioned, a recovery would be hampered also at 1.2845. The second resistance, however, serves as the trigger for an assault of 1.2980 (June high) and even beyond. Downside support appears to be thin ahead of 1.2580 and 1.2510 this morning, which is the current risk.

USD JPY (115.55)
Yesterday’s dip to 115.60 allowed us to enter a bullish strategy for target 117.90. The weakness was largely inspired by talk about the further appreciation of the renminbi, which was again a discussion point on Thursday. This time it was all about a perception that pressure is building in China itself as well as internationally for more steps to be taken in this direction. From the US side, the whole issue of imposing tariffs on Chinese exports is back on the agenda, but it remains debateable to what extent this will really solve the problem. Intermediate resistance is visible at 116.20. As already indicated, the limit to the positive orientation must be kept tight at 115.35. For today, we reckon with critical support at 114.40.

EUR JPY (146.55)
The euro continued its upward march yesterday where it hit an all time high at 148.05, but it corrected sharply lower to 146.50 in Asia this morning. For the time being the cross finds itself in neutral territory. Any further weakness can count on supports at 146.10 and at 145.60. The last point must be treated as critical for a more severe sell-off (143.00). To the upside, supply is lurking at 147.50 and at 148.50.

EUR GBP (0.6830)
The euro retreated yesterday after having tested our 0.6860 risk limit to the bearish orientation. Whilst below there, the target remains 0.6730. Intermediate support is visible at 0.6800. Beyond the pivot, the position will be neutral in which case the next hurdle can already be expected at 0.6880.

GBP USD (1.8575)
Sterling initially romped higher yesterday, but later on retreated in line with the EUR/USD. With strong UK mortgage approvals and mortgage lending the highest on record, some traders had a reason to jump in and buy. Nevertheless, the outlook remains stable and in line with what has already been said, the upside is still open for the Pound to push to the lofty 1.8775 level due to a lack of supply ahead of it. To the downside, expect to run into supports at 1.8530 and 1.8430, of which the last mentioned is also the gatekeeper for short-term stability.

AUD USD (0.7625)
The current objective remains at 0.7670/75 (missed by a mere 10 ticks so far). Once the AUD clears that, our second target stands at 0.7790 (also the May peak), which should not render any good resistance at all. On a dip, we expect to run into support at 0.7570. The limit, however, within the positive orientation must be tightened again to 0.7605.