The strong US jobs data on Friday failed to provide any positive inspiration for the US$ and for the time being it still looks a little heavy heading into the news week. The metals liked the dollar’s weakness, while the S+P and DJI finished the week back at their recent highs. WTI ended in neutral at the end of the week.
As far as Monday is concerned, the dollar has gapped higher following the news of increased US tariffs on China, commencing this coming Friday. This means there are gaps in the charts, which at some stage need filling. It will be a nervous start to the week so plenty of caution is required on Monday. In terms of the economic calendar, the RBA/RBNZ decisions this week should provide the catalyst for further volatility for the Aud/Nzd, ahead of the major event of the week, the US CPI figure, on Friday.
EurUsd: having dipped to a session low of 1.1134 following Friday’s jobs data, the Euro squeezed back up to 1.1200 on Friday, but is opening the week at 1.1170 on the Back of the latest trump Tweet, regarding China tariffs. The medium term momentum indicators remain in neutral, suggesting further choppy consolidation in the week ahead although I still prefer the downside. Minor resistance is now seen 1.1200, 1.1220/30 ahead of Thursday’s high at 1.1265, beyond which would then target 1.1300 and 1.1318/25(61.8% of 1.1447/1.1110/17 April high). Near term support sits at 1.1150/60 and then again at Friday’s low of 1.1135, which lies ahead of the recent low at 1.1110. Below 1.1100 would target 1.1060/65, where the base of the descending wedge should see decent bids. A downside break would then open the way to 1.1020 (minor) and to 1.1000. I still prefer to look for levels to be long US$/ short Euro.
US$Jpy: Japan will be back from Golden week to find that the US$Jpy has been choppy, but ultimately confined to a range of 111.05-70 until this morning’s gap lower to the current 110.70 where the (100 WMA/rising trend support/61.8% of 109.75/112.40) would provide some support, but below which would open the way to 110.50 (minor) and to 110.35 (76.4%). On the topside, minor resistance will now be seen at 111.00 ahead of 111.40 and then at 111.70 ahead of 111.80/85 and at 112.00 (200 WMA) and then, possibly, 112.40, albeit it that this is a long way off now. The momentum indicators look a little heavy, so trading from the short side seems to be the initial plan, and selling rallies towards 111.00 seems to be the plan for Monday.
AudUsd: The Aud regained some lost ground on Friday, and after having made a brief new trend low following the NFP, at 0.6985, it then recovered well to end the week at 0.7020, but has gapped lower early Monday, to trade at 0.6970. A volatile ride seems likely ahead of tomorrow’s RBA Meeting at which a rate cut is very possible, Resistance now lies at 0.7000 ahead of Friday’s close at 0.7020, which currently looks a long way off but if wrong 0.7055 (38.2% of 7206/0.6965), 0.7070, 0.7100, and then 0.7120 (100 DMA) will be levels to watch. On the downside, 0.6965 now provides the near term support, below which would open the way for a run towards 0.6950 and eventually to 0.6900 and lower. My longer term objective is 0.6650/0.6700. I prefer to sell rallies as we close the chart gap, in anticipation of the inevitable rate cut, which may/may-not come this month, but will eventually be a formality, after the election. Even if the RBA don’t cut in May, providing a probable spike higher, the RBA are only kicking the can down the road, so look for levels to sell into.
Look to buy US$ dips – if we see any – agains the Aud$ and the Euro in particulalr. I will post trade levels later.