Currencies: 26Apr Quiet news flow (so far) and a somewhat quiet economic calendar opened .
See below for specifics.
The Yen will experience a large dose of economic data and the BOJ announcement.
As we have mentioned in past comments, the “authorities” will make forays into the traded markets to prevent collapse, using more than actual monetary policy execution, but also the power of the press to change market conditions. This effect is maximized as the US Fed is now in a situation where another round of QE is being publicly debated.
This is another example of our common theme of the push-pull of the European and American debt/economic situations trading places on the front burner.
Risk-off trading will still tend to favor the USD and Japanese Yen.
Aussie: 26Apr The currency is sustaining yesterday afternoon’s break out (and settlement) above our declining trend line drawn from the 2/29 peak (1.0280). This targets the 38.2% retracement (1.0405) of the decline since the end of Feb. There are also plenty of additional rest stops at 50% retracement (1.0435) and the preceding series of highs: 27Mar 1.0461; 19Mar 1.0529; 08Mar 1.0552; 05Mar 1.0611.
We see 1.0180 a significant support level and 1.0150 below that.
Watch the declining 21-day moving average (1.0270) for support. We also continue to eye the relatively flat 200-day Moving Average. The Aussie has periodically struggled at that level for almost a month. Stay attuned to directional indications for global trade, especially out of Asia, as that is what Australia’s economy depends on as a commodity exporter.
Seasonal Snapshot: The 5-year pattern trends generally higher until April 30th but with more day-to-day choppiness. The 15-year pattern is in a rising trend until May 4th. The 30–Year pattern is consolidating before heading higher on 01May.
British: 26Apr The second consecutive month of GDP contraction signals “recession” for the U.K, but opens the door for more stimulus and seems to be supporting the currency, as of this writing:
We update our noted levels from yesterday’s Comment:
The 31Oct high (161.58).
Rising trend line resistance that extends back to last Dec (161.40).
The +2 STD above the 21-day moving average (162.00). These Bollinger Bands are widening.
All of our technicals point to higher action. This break out above targets the Aug high at 1.6500. A failure keeps the market inside of what may be a rising wedge formation that is currently bound by 1.5870 to the downside. Of concern is the continued Overbought condition (currently 84). The 200-day moving average is trying to turn higher after falling since mid November.
Seasonal Snapshot: All three patterns are biased to rising action until April 30.
Canadian: 26Apr The market is riding the expanding +2 Standard Deviation (1.0160) over the 21-day moving average (1.0045), trying to sustain yesterday’s break out above an area where it has struggled going back to late Feb. Watch for developing Overbought conditions (currently 74).
Rising trend line resistance (currently at 1.0300) extends back to early Dec.
If the global economic outlook improves, the Loonie should be able to sustain this break out above this range. Speculation that the BOC will remove any accommodation would also be a positive factor, although their next scheduled announcement is not until 05June.
Seasonal Snapshot: All three patterns are in a positive bias that lasts well into May.
Dollar Index: 26Apr Modest weakness continues, threatening the 03Apr low (78.795).
Since peaking on 4/6 and failing on 4/16, DX has been in a short-term falling pattern. A move below the recent low would keep it in this formation and target the 200-day moving average (78.20) and the 29Feb low (78.12).
Trend, Momentum, ROC, and RSI are all falling, but watch developing Oversold conditions (currently 30).
Watch for any evidence the Dollar is not the safe haven under crisis market conditions. This would change existing assumptions dramatically.
Seasonal Snapshot: All 3 patterns exhibiting falling action seasonal patterns until April 30th.
Euro-FX: 26Apr Disappointing European economic sentiment had the Euro on its heels, but the US session “melt up” has the currency registering another daily higher high and low. All of our technicals point higher, but look for resistance to start showing up, probably coupled with a resumption of debt crisis news, near 1.3250 then at the +2STD (1.3335). The 200-day moving average is well above (1.3495) and continues to fall.
The light economic calendar will start to perk up next week with consumer and manufacturing data featured.
Volatility has been falling recently and is now firmly in the Low range (-1 STD or lower below the 150-day Moving Average).
Seasonal Snapshot: All three patterns are trending higher until the end of April.
Yen: 26Apr The impending BOJ announcement will be accompanied by a large dose of economic data for March:
· Household spending
· Employment situation
· Industrial production
· Retail sales
The currency still has not been able to sustain a break out above the 38.2% retracement (1.2360) Feb through Mar dip.
With the BOJ on record as looking to weaken the Yen, this looks to us as if the Yen is due to roll over and resume its falling trend. Our Trend and Momentum indicators are poised to roll over as well.
A return of the recent strength would target the 50% retracement (12510). This level coincides with a triple top (23, 24 & 28Feb) and may offer some resistance.
Volatility is rising towards the +1 Standard Deviation from our Average measurement. This is where we classify it as High.
Seasonal Snapshot: Modest weakness in all three patterns will turn positive for a week on 1May, then consolidation into the first part of June.
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