Currencies: 10May Lack of additional negative news from Europe has markets consolidating and in some cases rebounding modestly. Most of the currency markets are close to unchanged. Aussie’s ability to rebound despite weak Chinese data is noteworthy.
Aussie: 10May Today’s material Aussie rally is impressive if for no other reason than it I occurring in the face of the crummy Chinese trade data. However, the rally merely rebounded the Aussie up to levels where it found modest support on the way down on Monday and Tuesday.
Yesterday’s pressuring of the –3 STD under the 21-day moving average has abated. It’s back to hugging the –2 STD. The technicals remain quite negative. Despite the bounce, its chart remains in the same pattern that has seen the Aussie fall relentlessly for 2 weeks.
We reiterate the comment we made regarding the technical measured move we are seeing as a possibility if the market plays out a bearish flag follow through.
Longer term, it appears the Aussie may be looking at another material move lower. There is the break below the bear-flag in chart action and the 200-day moving average has rolled negative.
If the break below off the bear-flag plays out, classic analysis calls for a move of approximately .0600 points lower from near the break out point of 1.0240-1.0250. This would target somewhere in the area of 0.9650. This is very near the lows from 11/22/2012.
All our technicals point to a clear negative bias that is accelerating.
Volatility remains in the low average range but is rising.
With indications of slowing economic activity in Asia, the Aussie is likely to remain under some pressure.
Seasonal Snapshot (cash): The 5-year pattern has a negative bias until 26May.
The 15&30yr patterns chop higher until 10May, then both fall out of bed throughout the rest of the month.
British: 10May The British Pound has stopped its severe downside probes, but that doesn’t mean it has reversed and headed higher. It remains in a negatively biased pattern, failing to get back to Tuesday’s highs, and currently having failed to maintains its price above the 1.6155 bottom put in on 5/3 and 5/4. With the Trend indicator having turned lower, Momentum just at the beginning of its run in negative territory, and RSI still falling and now below 50, this market’s negative bias remains formidable.
We look for support 1.6110, 1.6075, and 1.6050. We see resistance at 1.6160, 1.6185, and 16200.
Seasonal Snapshot (cash): All three patterns have a quite negative bias until the end of May.
Canadian: 10May The Loonie is stuck in consolidation like many of he other currencies. Yesterday’s possible bullish hammer is not showing signs of playing out at this time. The negative technicals, however, remain pointing South. One again, this market ran into the –2 STD below the 21-day moving average and bounced. Support is seen near .9950, at about the 200-day moving average. Additional support is seen near .9930, where it bounced from yesterday and maintained itself above since late January. We see resistance at 1.0010, near today’s highs, and then 1.0050.
We note that since peaking on 4/30, it has experienced the largest decline of the year. Its entire directional indicator set is pointing lower .
Our overextension (Oversold) indicator shows a steep decline since peaking in the Overbought column on 4/27.
Seasonal Snapshot (cash): All three patterns have a choppy, negative bias until 26May. The 30yr’s is more protracted than its shorter-term counterparts.
Dollar Index: 10May Like other currencies, the DX is set in consolidation today. After the recent rapid run up, this is not unexpected. Especially o, given the market has run into the +2 STD over the 21-day moving average. Technicals are all pointing higher, ad the RSI is quite Overbought at 84. Watch today’s chart pattern, as there is a possibility of a bearish hanging man forming.
The market is currently holding just below the 80.35 resistance. Next resistance at 80.60, then 80.75. We see support at 80.00. Below that we start seeing gaps getting filled.
We see several stopping points on any move down: 21-day moving average (79.485); -2STD (78.66) below the average; 200-day moving average (78.478).
Bigger picture, we remind readers of our past comments:
“Watch for any evidence the Dollar is not the safe haven under crisis market conditions. This would change existing assumptions dramatically.”
Seasonal Snapshot: All three patterns peak in mid-May. The 15&30yr patterns then consolidate in choppy fashion until the end of the month. The 5yr declines during this period.
Euro-FX: 10May The Euro has and probably will probably remain under pressure so long as the political crises continue to roil the Euro-zone.
Today’s action, while not falling does little to change the negative technical picture. Indicators point down and today’s action is setting up as a straight consolidation. Additionally, it has been unable to get back above the –2 STD below the 21-day moving average.
We show support at yesterday’s low, just above the 1.2900 psychological support. Below that, the –3 STD is at approx 1.2880 today.
It looks as if the long-range trading period may be over and may be seen as a 3 ½ month-long pennant. This would set the Euro up for a more material move down. A story we saw on the wires today indicated traders might be looking at the Euro falling to 1.2300. We counsel our readers to remember that any move of that magnitude will not be in straight line. Always use appropriate risk controls AND be willing to change your mind.
We leave some of Tuesday’s comments in place for context into our views and opinion.
As we noted last week, the action for several months can be characterized as several weeks of building Euro strength followed by several days of violent falling action. Each move lower has been preceded by a turn in our Momentum indicator. The last several days have been no exception. The currency is also flirting with historically Oversold conditions (currently 24 vs. 23 on 06Apr).
Our longer-term view, however, has the currency in a large consolidation range, specifically into a symmetrical triangle that extends back to early Feb, bound by 1.3000-1.3300. Last night’s decline probed below the lower boundary, but the market has since recovered this level.
Seasonal Snapshot: All three patterns decline until mid-May, when the 5&15yr patterns consolidate. The 30yr pushes lower until the end of June.
Yen: 10May The Yen continues to retain its safe-haven status as weak global economic news casts a bit of a pall over risk-on markets. Today’s negative action has the June Yen falling back into an area where it struggled some o the way up. Support is seen at 12500. Resistance is seen at 12560. We see additional support at the old 1.2460 resistance.
The question is now before the market of when does the BOJ come back to the table as the Yen is rising to levels the BOJ does not want to see. With the BOJ on record as looking to weaken the Yen, when does it intervene?
Seasonal Snapshot: Mode TO vo roist 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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