Tech Targets: EUR/USD, GBP/USD, AUD/USD, NZD/USD, USD/JPY

EUR/USD: Bearish: To take partial profit at 1.1055.

EUR continues to trade in a relatively calm manner and this has resulted in a rapid loss in downward momentum. That said, another leg lower to the major 1.1055 support cannot be ruled out just yet (shorts to take partial-profit at this level). Stop-loss on shorts should remain unchanged at 1.1200 but a break of 1.1170/75 would be an early indication that a short-term low is in place.

GBP/USD: Shift from bearish to neutral: Pull-back to extend further to 1.4400/05. 

The break of the 1.4550 stop-loss yesterday indicates that the recent high of 1.4738 is the extent of the bullish phase in GBP (target at 1.4770 not met). Despite the sharp drop, we prefer to hold a neutral view for now but the current decline clearly has scope to extend further to the major 1.4400 support. Overall, this pair is expected to remain under pressure in the coming days unless it can move and stay above 1.4600.

AUD/USD: Neutral: In a broad 0.7180/0.7365 range.

The recent build-up in downward pressure has fizzled out with the clear break above 0.7235 yesterday. While the rebound has been very rapid, the sharp rise appears to have room to extend further to 0.7300 and possibly 0.7365. That said, the overall price action is deemed as part of a broader consolidation phase and not a bullish reversal. A sustained up-move is likely only upon a daily close above 0.7365. Overall, this pair is expected to remain underpinned in the coming days with solid support at 0.7180.

NZD/USD: Neutral: Bullish only if daily close above 0.6840.

NZD tried but failed to move below the major 0.6665 support and the current swing higher is approaching the key 0.6840 resistance. A clear break above this level would indicate that the 2-weeks neutral phase has shifted to bullish. This seems like a probable scenario unless there is a move back below 0.6700 in the next few days.

USD/JPY: Bullish: Target 111.85/90.

We just shifted to bullish USD stance yesterday and there is no change to the view. Immediate target is at 111.85/90 and stop-loss at 110.00.

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Setups: EUR/USD, USD/JPY, GBP/USD, USD/CHF, AUD/USD, NZD/USD

EUR/USD: We are overall bearish and would prefer to sell upticks. A break above nearby resistance in the 1.1220 area would signal room towards 1.1300/50 before sellers emerge. Our downside targets are towards 1.1095 and then the 1.0990 area.

USD/JPY: The break below support in the 109.10 area encourages our bearish view towards initial targets near 108.20. Below 108.20 would signal further downside towards our next targets in the 106.40 area and then 105.20.

GBP/USD: The recent sell-off on increased trading volumes (see Fig. 2) endorses our bearish view. We expect resistance in the 1.4670 area to cap a move towards 1.4330 and then lower towards the 1.4005 area.

USD/CHF: No change. We are neutral and would prefer to buy dips towards support in the 0.9830 area (100-dma). Our upside targets are towards parity and then the 1.0100 area. 
 
AUD/USD: We are clinging to our bearish view. Wednesday’s spike higher and subsequent low close signals buyer capitulation. A low close today would endorse downside towards 0.7040 and then the 0.6825 year-to-date lows. A sustained break above 0.7260 would signal a squeeze higher towards 0.7370 before sellers emerge.

NZD/USD: We are overall bearish following May’s monthly bearish engulfing candle. We look for resistance near 0.6850 to keep the focus lower. Our downside targets are towards 0.6665 and then 0.6545.

USD/JPY drops sharply to 108.50 on JP reduced tax rates news

The yen demand returned to markets and dragged USD/JPY sharply lower, with the major extending its four-day winning after a brief correction seen in early Asia.

USD/JPY hits fresh 2-week lows

The dollar-yen pair met fresh supply near 108.85/90 region and gave-up 30-pips instantly in response to the latest headlines reported by the Japanese LDP, citing introduction of reduced tax rates with 2019 sales tax hike.

The news was read as negative for the Japanese stocks on the back of renewed growth fears surrounding Japan, particularly after the sales-tax hike delay decision announced by PM Abe earlier this week. At the time of writing, USD/JPY drops to fresh two-week lows of 108.54, down -0.28%, while the Nikkei trims gains and trades +0.17% around 16,590 levels.

Looking ahead, markets now look forward to the US jobs data lined up for release later today, with an upbeat NFP and wages print likely to bolster June/ July Fed rate hike bets.

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USD/JPY Technical levels to watch

In terms of technicals, the immediate resistance is located at 109.13/16 (daily high/ 50-DMA). A break above the last, the major could test 109.71/84 (20 & 5-DMA). While to the downside, the immediate support is seen at 108 (round number) and below that at 107.84/50 (Apr 28 Low/ psychological levels).

Week Ahead: Staying Bullish USD Vs Commodity FX Into Yellen, RBA, RBNZ

May nonfarm payrolls rose by a paltry 38K. The gain followed a downwardly revised 123K increase in April (originally reported +160K). The May unemployment rate dipped to 4.7% from 5.0%. May average hourly earnings rose 0.2%, and stood 2.5% above year- earlier levels. The average workweek or all employees remained sub-par at 34.4 hours though the factory workweek improved to 40.8 hours. Fed policy implications: No June rate hike expected but a July FOMC meeting hike remains in play.

Next week’s data calendar is fairly light and investors will focus on the upcoming Fed speeches. Indications, especially from the Fed Chair on Monday that rates will be going up before long could help the USD recover some gains.

We remain selective in our view and continue to see further USD outperformance mainly against G10 commodity currencies.

Indeed, the outlook for global commodity prices could worsen further from here on the back of returning oversupply concerns after the latest OPEC meeting. Demand fears may resurface as well if upcoming Chinese trade data disappoints next week. We further suspect that investors will adopt a more cautious stance on NZD, and especially on AUD ahead of the upcoming RBNZ and RBA meetings. Economic activity data releases out of Canada and Norway could further add to the headwinds for CAD and NOK.

The JPY seems to be rallying for all the wrong reasons and, that said, bad reasons – risk aversion, growing market disillusionment with Abenomics and deepening investor conviction that the BoJ has run out of tools to boost growth and inflation. Potential disappointments from next week’s data out of Japan could add to the market gloom and keep JPY close to the recent highs. In the longer-term, we still think that the BoJ could ease further as a way to complement recent government growth policies. Persistent policy divergence between the BoJ and the Fed should ultimately help lift USD/JPY over the longer-term.

EUR, CHF, GBP, CAD, AUD, NZD: Weekly Outlook

EUR: Dovish ECB. Neutral.

The ECB was more dovish than expected, leaving growth and inflation forecasts for 2017/18 unchanged despite higher oil prices, underlining concerns about future growth prospects. However, this supports our risk-bearish view, which will keep EUR supported due to inflation expectations falling faster than nominal yields, resulting in rising real yields. Given our expectations for USD appreciation, we believe EURUSD will continue to range trade, and would prefer trading the currency via long EURGBP positions.

GBP: Bearish Reversal. Bearish.

Recent GBP weakness has been driven by a turnaround in the latest Brexit poll results, which we believe will remain volatile in the run up to the referendum. However, we stay bearish on GBP for structural reasons. First, recent UK economic data has remained sluggish. Second, we expect commodity prices to come under pressure, which does not bode well for GBP given its high positive correlation with commodity prices. We like expressing our view through selling GBP against EUR and USD.

CHF: Focus on Risk. Neutral.

Given our risk bearish view, we expect CHF to appreciate helped by rising real yields and its status as a safe haven currency. With many upcoming European risk events in June, including the German Constitutional Court ruling on the OMT, EU referendum and Spanish elections, we look for opportunities to sell EURCHF. We expect USDCHF to remain driven by the USD leg determined by the markets' repricing of a Fed rate hike.

CAD: Fade CAD Strength. Bearish. 

We maintain our bearish view on CAD following the BoC meeting as we believe it was not as hawkish as the market took it and expect further economic weakness will cause markets to price a higher chance of rate cuts. The BoC did not have a large shift in tone, but some dovish changes on capex and the wildfires open the door for a larger shift at the July meeting (which is accompanied by an MPR). Canada's rotation away from the resource sector is in doubt, with weak March trade showing non-commodity export volumes falling an additional 2% after their nearly 5% fall in February. This week's poor GDP data points to a weak 2Q and we are watching tomorrow's trade data closely for signs of further deterioration.

AUD: RBA Easing to Push AUD Lower. Bearish. 

We remain bearish AUD and expect the RBA easing to push AUD lower. We believe the market overreacted to the RBA minutes, and the SMP makes clear that the RBA stands ready to act further, given the very weak inflation trend. Given the worrying inflation trend, falling house price growth and iron ore prices resuming their downward trend, our economists are now expecting 75bp more rate cuts. RBA Governor Stevens' comments last week echo our view that the RBA will gladly watch AUD depreciate in order to help the difficult adjustment, and the underlying details of this week's GDP print point to still weak nominal growth which is largely being supported by housing related demand. We continue to like holding AUD short positions.

NZD: Looking to Sell. Bearish.

We like selling NZD in this current USD rally as we expect high-carry commodity currencies to underperform. NZD has benefited in recent days as the RBNZ's financial stability report pointed to rising house prices as a risk and pointed to the possibility of more macroprudential policies. While this, along with some better-than-expected data, has caused the market to price out the probability of RBNZ cuts, we expect this to reverse. However, we don't think macroprudential policies will preclude the RBNZ from cutting, given New Zealand's pressing inflation problem and that the elevated NZD TWI remains too high. With our expectation for commodity prices to fall as well as the RBA's recent dovish turn, we believe the RBNZ will stay dovish and limit currency strength.

EUR/USD: Dollar Glued Near 3-Wk Trough as Yellen Warns of Uncertainties

The US dollar was unchanged near its recent three-week low on Monday, following the closely-watched speech by Federal Reserve (Fed) Chair Janet Yellen, in which she dropped previous assurances that she expected the Fed to raise its benchmark interest rate "in the coming months".

The EUR/USD pair traded 0.08% lower at $1.1355 after Yellen's comments. That's close to its lowest level since May 12.

Speaking in an event in Philadelphia, Yellen continued to say the US central bank still needs to lift rates, but she stepped back from putting a time period on that plan.

Setups: EUR/USD, USD/JPY, GBP/USD, AUD/USD, NZD/USD, USD/CAD

EUR/USD: Lack of upside follow through and the subsequent “spinning top” candle has prompted us to pare our short-term bullish view. A low close today would endorse the top and reduce risk of a squeeze higher towards the 1.1420/50 area. Overall, we are bearish against 1.1620.

USD/JPY: We are sticking with our overall bearish view and would prefer to fade upticks towards 108.90. A move below 106.35 would signal lower towards 105.50 and then our targets are in the 105.35/105.20 area. Further out, we see room towards 100.70.

GBP/USD: We are bearish and look for a move below the 1.4330 area to signal a double-top under the 1.4770 highs. Our initial targets are towards the 1.4090 area. A move below there would signal downside towards 1.4005.

AUD/USD: Short-term risk is a squeeze higher in range towards the 0.7490 area. We are neutral and look for signs of a top as daily studies are becoming stretched.

NZD/USD: We are neutral. Overall, we prefer to sell upticks against the 0.7055 range highs. Our downside targets are towards 0.6675 and then 0.6545.

USD/CAD: The break below support near 1.2910 signals a larger top under 1.3190 and room lower towards our targets near 1.2675.

Tech Targets: EUR/USD, GBP/USD, NZD/USD, USD/JPY

EUR/USD: Bullish: Target 1.1400, 1.1450.

EUR traded within a tight 1.1336/1.1380 range yesterday leading to a slow-down in short-term momentum. However, looking further out, the strong rally that started late last week appears incomplete and we continue to expect a move towards 1.1400 where a break would shift the focus to 1.1450. Stop-loss for the bullish view remains unchanged at 1.1250 for now (even though 1.1300 is already a strong support).

GBP/USD: Neutral: In a broad 1.4350/1.4730 range.

The extremely wild swings in recent days have resulted in a mixed outlook for GBP. We have held a neutral stance since the middle of last week and there is no change to view. Further choppy trading is still expected in the coming days, likely within a rather broad 1.4350/1.4730 range.

NZD/USD: Bullish: Target 0.7000.

There is no change to our bullish NZD view and we continue to expect a move to 0.7000. A break above this level would shift the focus towards the year-to-date high of 0.7055. Stoploss is adjusted higher to 0.6860 from 0.6830 even though 0.6890 is already a strong short-term support.

USD/JPY: Bearish: Target 106.00.

There is no change to our bearish USD view as we continue to expect a move to 106.00. Stop-loss for this view remains unchanged at 108.10 (high of 107.89 yesterday).

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Tech Targets: EUR/USD, GBP/USD, AUD/USD, NZD/USD, USD/JPY

EUR/USD: Bullish: Next target at 1.1450.

As mentioned yesterday, while short-term momentum does not appear to be very strong, the strong rally that started late last week appears incomplete. The immediate target of 1.1400 was exceeded and the focus is on 1.1450 now. At this point, we are not advocating partial-profit taking as a clear break above 1.1450 would considerably increase the odds for further up-move towards 1.1495/00.

GBP/USD: Neutral: In a broad 1.4350/1.4730 range. [No change in view]

The extremely wild swings in recent days have resulted in a mixed outlook for GBP. We have held a neutral stance since the middle of last week and there is no change to view. Further choppy trading is still expected in the coming days, likely within a rather broad 1.4350/1.4730 range

AUD/USD: Bullish: Target a move to 0.7545.

We just turned bullish yesterday and there is no change to our view. The break of 0.7500 bodes well for our bullish view and the immediate target remains unchanged at 0.7545 (next resistance at 0.7600). 

NZD/USD: Bullish: To take partial profit at current level of 0.7120.

We turned bullish on Monday with an immediate target of 0.7000. In the aftermath of RBNZ’s statement earlier this morning, NZD soared to high of 0.7139 as of the time of writing. While from a longer-term perspective, further up-move towards 0.7190 would not be surprising, short-term indicators are at extreme levels. Those who are long from Monday should look to take partial profit at current level. 

USD/JPY: Bearish: Target 106.00.

While USD has eased off from the recent high of 107.90, downward momentum is not strong. That said, the bearish phase is still intact and we continue to anticipate a move to 106.00.

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AUD/USD slides further to 0.7410, 100-DMA back on sight

The AUD/USD pair is seen extending its Thursday's reversal from 0.7500 handle and is currently trading in the vicinity of 0.7400 handle amid broad risk-off trade.

On Thursday, the pair failed to sustain its move above 50-day SMA and reversed sharply to erase Wednesday's gains as disappointing Chinese inflation data resurfaced concerns over China led global economic slowdown. 

Being Australia's largest trading partner, Chinese economic data has a lasting effect on the Aussie. A bunch of macroeconomic data, which includes Industrial Production, Fixed Asset Investment and Retail Sales, are slated for release from China over the weekend, which could further affect commodity-linked currencies, including the Australian Dollar.

From a technical perspective, failure to decisively conquer 50-day SMA and a subsequent break below 100-day SMA immediate support could turn the pair vulnerable to further corrective move in the near-term.

Technical levels to watch

From current levels, 100-day SMA near 0.7385 region seems to provide immediate support for the pair. Weakness below this immediate support could take the pair back towards retesting 0.7315-0.7300 support area.

Meanwhile on the upside, 50-day SMA near 0.7460 region remains immediate resistance to conquer. Momentum back above 50-day SMA resistance, leading to a follow-through strength above 0.7500 handle, now seems to pave way for continuation of the pair's near-term upward trajectory towards its next round figure mark resistance near 0.7600 level.