The euro continues to hold ground although it has failed to truly advance from the lowest region since breaking out to the upside, writes Bill Baruch, President of Blue Line Futures.
Euro (ESH)
Session close: Settled at 1.13845, up 25.5 ticks
Fundamentals: The euro continues to hold ground although it has failed to truly advance from the lowest region since breaking out to the upside in June 2016. Strength in the British pound due to conceivable progress on Brexit has helped keep a bid under the euro. Furthermore, upbeat sentiment on the U.S and China trade front has encouraged a risk-on approach to kick off the week which is also favorable for the Euro. From the U.S, Wholesale Inventories missed but Dallas Fed Manufacturing came in much better than expected. Fed Vice Chair Clarida commented on strong labor participation and the strength he sees in inflation. Dallas Fed President Kaplan said he was ok with letting the economy run hot. Although today was fairly uneventful, things pick up tomorrow. German and then French Consumer Climate is due at 1:00 and 1:45 am CT. ECB Executive Board Member Mersch speaks at 8:30 am CT. From the U.S, Building Permits and Housing Starts are out at 7:30 am CT. Case Shiller Housing is due at 8:00 am CT and Consumer Confidence at 9:00 am CT. The highlight of the day is Fed Chair Powell’s Congressional testimony. He speaks before the Senate Banking Committee at 9:00 am CT and his testimony is expected to be released 15 minutes prior. His comments will be closely watched to see whether he confirms the recent dovish rhetoric.
Technicals: Price action has struggled to hold major three-star resistance at 1.1374; a close above here continues to lay constructive groundwork in a recovery. Additionally, there is a bull-flag or sloppy cup and handle formation developing. The most important aspect here is not the conciseness of the pattern but the impact it creates on the market profile while lining up with major three-star resistance. The consolidation lower with slightly lower lows and lower highs over the last three sessions since recovering from the Feb. 15 low will provide additional buying upon its breakout. For this reason, we have removed minor resistance at 1.1409 and instead now have a pocket of resistance at 1.1374-1.13965. The bulls have held our pivot at 1.1331 on pullbacks which has left them with a clear upper hand on this recovery, a failure to do so will quickly neutralize the tape and a move below 1.13005 is a fresh failure.
Bias: Bullish/Neutral
Resistance: 1.1374-1.13965***, 1.1442-1.1453**, 1.1485***, 1.15575-1.1563***
Pivot: 1.1331
Support: 1.13005**, 1.1283*, 1.1245-1.1261***
Japan (JYH)
Session close: Settled at .90125, down 36.5 ticks
Fundamentals: The Japanese yen fell back today on less safe-haven demand now that everything is ok in the world. The Shanghai Composite surged more than 5% and U.S equity markets roared out of the gates to start the week while President Trump is headed to Vietnam for talks with his North Korean counterpart. Although we are being facetious, the yen clearly could not find any bidders, but traders should pay attention to how today’s soft finish in equity markets carries into Asian hours and if this wakes up the currency.
Technicals: The yen has struggled to lift from major three-star support at .9011-.9032 as it continues to sit directly at this level. The strength late last week could not get up to first key resistance and the tape quickly became unenthusiastic at the onset of this week with the positive news out of Washington. The Yen is not broken but there is no reason right here, right now to believe it wants to go higher in the immediate-term.
Bias: Neutral/Bullish
Resistance: .9091**, .9114-.9116**, .91555-.9186**, .9238-.9249***
Support: .9011-.9032***, .8919-8931**, .88355-.8845***
Australian dollar (ADH)
Session close: Settled at .7179, up 42 ticks
Fundamentals: The Aussie dollar battled back from broad global weakness Thursday to finish the week on a strong note as talks between the U.S and Australia’s number one trade partner China extended into the weekend. With the positive news rolling, benchmarks in China surged more than 5% and the Aussie traded more than a penny from that Thursday low. With price action across asset classes finishing a bit softer than they were trading last night in Asian hours, the Aussie may slip early on; Crude finished in the red while Copper and U.S equity benchmarks gave up the bulk of their gains. Fed Chair Powell’s testimony tomorrow will be a market moving event.
Technicals: We have held a minor Bullish Bias when the Aussie was battling off major three-star support at .7063-.7082, however, we see little value in the .7200 region given today’s close across asset classes. We will now be outright Neutral in a more cautious approach and a move back below .7137-.7150 could be the early sign of a failure.
Bias: Neutral
Resistance: .7179*, .7208**, .7278- .7300***, .7407****
Pivot: .7137-.7050
Support: .7063-.7082***, .7001-.7024**, .6825***
Canadian dollar (CDH)
Session close: Settled at .7583, down 32.5 ticks
Fundamentals: The Canadian dollar peaked just before President Trump tweeted, “Oil prices getting too high. OPEC, please relax and take it easy. World cannot take a price hike - fragile!”, sending it into a bit of a tailspin. Adding insult to injury is the course of tariffs between the U.S, Canada and Mexico being played out as they shore up the new North American trade agreement. Tomorrow’s deluge of U.S data, Fed Chair Powell’s testimony and Crude’s retreat will all be at the forefront tomorrow.
Technicals: The currency ran to a high of .7630 before it fell off sharply. Not only did new fundamental developments take place but the Canadian ran head-on into major three-star resistance and a level in which it failed on Feb. 1, the 200-day moving average. The failure at this landmark momentum indicator signals that the Loonie is still fighting a longer-term downtrend. Today’s failure leaves the door open for a direct test down to major three-star support at .74875-.7505 if it slips below first key support at .7565-.7581.
Bias: Neutral
Resistance: .7593-.7615**, .7649***, .7716-.7725**, .7835
Support: .7565-.7581**, .74875-.7505***
For a full view of our technical outlook on these market and more, including specific support/resistance levels throughout the week go to Blue Line Futures.
