Forex Market News | Friday 10th June, 2016
Since the start of 2016, significant turns in the direction of the AUD/USD have worked as a good leading indicator to trend changes in the other G-7 currency pairs and the USD, in general.
Some foreign exchange commentators pin this forward looking correlation to the fact that over the last six months the AUD/USD trend has been acutely sensitive to Central Bank policy expectations and price swings of commodity metals and minerals ….Which have also driven the USD versus the other G-7 pairs.
Recall that the AUD/USD bottomed out at around the .6850 level in Mid-January over a month before the EUR/USD turned higher from the 1.0820 level in early March. More recently, the Aussie peaked out at .7835 on April 21st while the broader turn in the Major pairs didn’t reach the highs until May 3rd. Further, over the last two weeks, the AUD/USD bottomed on May 24th while the others didn’t turn until May 30th.
This is significant because the AUD/USD rejected the .7500 level during yesterday’s Asian session and posted a key reversal lower during the NY session with the close below .7430. And while the RBA held on rates on Tuesday, the price of copper extended its recent slide to 4-month lows just above $2.00 per pound.
Whether or not AUD maintains its role as a leading indicator for price action will be determined over the next few sessions as the next key support level is in range at .7380; a break of which would point to the .7260 level. Our suggestion from Monday to sell at .7420 was stopped out at .7435 but we still prefer the short side of the pair. Short-term traders can look to sell AUD/USD at .7430 with an initial target of .7280 with a .7475 stop.
The EUR/USD traded up to 1.1415 before reversing on comments from ECB chief Mario Draghi that interest rate and QE policy measures will remain active until EU inflation begins to show signs of improvement and blamed the lack of EU structural reforms on the lack of progress, thus far. Those comments, combined with better weekly US jobless claims pushed the EUR/USD down to the 1.1300 level by the NY close.
Technically, the 4-hour parabolic has turned short at 1.1360. However, until the 1.1260 level is broken, the sharp run up from last Friday’s poor jobs data is only consolidating and a significant top can’t be confirmed. We suggest medium-term traders look to sell the EUR/USD at 1.1350 with an initial target of 1.1080 with a 1.1465 stop.
The USD/JPY has failed to crack the 108.25 level and has been trading in broad ranges over the last several session. Intra-day weakness in the Nikkei has kept the ¥en “safe haven” trade intact but with the sharp slide in JGB yields the price of shorting the USD is rising. Of these two countervailing forces, it’s more likely that the correlation of the USD/JPY to global equities will diminish before the impact of divergent yields between the US and Japan.
As such, Synergy FX suggests accumulating USD/JPY below 107.00 with an initial target of 109.60 with a 106.10 stop.
The GBP/USD has traded in a 300 point range over the last 24 hours as speculation over the UK referendum continues to spill across political party lines and permeates all social stratifications in Great Britain. From a technical perspective, this has reduced the logic of picking buy and sell levels in the Sterling to a coin toss as FX platform managers begin to raise margins on spot positions.
Synergy suggests staying on the sideline into the weekend.