Despite a decline during the Asian trading session, the Japanese Yen managed to hold on to gains made on Thursday; the safe haven currency was bolstered by continuing investor concerns over mounting fiscal problems in Euro-zone countries and doubts over the pace of the worldwide economic recovery. Also helping the Japanese Yen was repatriation of the currency by Japanese importers in advance of the month’s end.
With both of the heaviest news items for the EUR/USD canceling each other out, with good and bad news for the Dollar, let's turn to the technicals for some insight into how the market movers might justify their trades today. Only the StochRSI is high, each of the other indicators is asking yesterday's rise to continue, the trend will likely override that request.
The current relative strength of the Dollar against Sterling and the Euro has as much to do with concerns over the European currencies rather than confidence in the Greenback; US economic performance data has hardly been stunning of late. The Euro is under pressure because of worries over the Greek debt position and to a lesser extent over the debt levels in Spain and Portugal.
The 4th channel target of the ST up-cycle (light blue) proved to be the end of the ST cycle, and likely the end of the correction that began Friday after the bottom at 1.3587. The subsequent decline made a lower low at 1.3531, but it was part of a sideways trade that now appears complete.
USD/JPY got the test of the 91.27 high we mentioned yesterday in our daily report, topping at 91.38 before declining overnight. That 91.27 level also happens to be the top of the 2nd channel of the LT angled up-cycle (dark green).
With the trend able to bend the daily chart's Bollinger Bands, Full Stochastics, StochRSI and RSI, it best to trade with it. Today's largest news item for this pair also helping the greater trend, should also help convince you to trade with it, today at least. The technical indicators give a idea about the sentiment of traders, they do not tell the future. They are often based on averages and will creep back to their centerlines even though the trend has long been moving up or down.
The consistent angle of the Bollinger Bands has been the only unceasingly correct directional indicator in the recent downtrend for the EUR/USD on the daily chart. Full Stochastics, StochRSI and RSI have all waned in their efforts to give us lagging truth. The trend and the B.B.s still direct us downward.
Heavy news is favoring the Euro today for a change. The likely retracement that might follow the recent rise in the last four trading days however does not. The Bollinger Bands, Full Stochastics, StochRSI and RSI rising higher than they have in recent weeks could mean this high period for the EUR/USD will make traders uncomfortable and this pair will be kept range bound or moving downward.
Yesterday’s price action increases the chances of the MT up-cycle having completed at 92.14 (light green) with three channels-plus-extension. We fell short of the LT target, which would come in at 92.43 today, but it remains a possibility if a rally takes hold.
EUR/USD very nearly reached an important target on Friday, followed by a rally to resistance at 1.3653. Overnight we briefly rallied above that level, but quickly dropped lower, as the euro tries to find a bottom to rally off of. We may find support today at the 1.3535 area, or test the bottom at 1.3444. Beyond that, there are targets at 1.3333 and 1.3310. A rally above 1.3691 should find resistance at 1.3790.
