Since the FOMC meeting, forex markets markets have been highly volatile, with a sharp dollar sell-off only to be almost entirely retraced. This has meant that several important supports and resistances have given way as traders try to recalibrate their expectations. My medium to long term outlook remains for continuing dollar strength to drive forex majors. However, for the near term there is a lack of direction now, so what do the key markets need to generate new trends?
After 24 hours of broad consolidation, EUR/USD has started to pull higher again. There is a near term uptrend forming , which is also using the rising 89 hour moving average as the basis of support. This move has taken the euro above $1.0700 which had been holding back the renewed recovery. I am now looking at a 25 pip band of resistance $1.0800/$1.0825 as the key level to watch now. If this recovery can break though this level which has been pivotal in the sell-off and also acted once more during the volatility, it would be a key move. I now view $1.0650 as the support for the bulls to build from. This is a breakout level but also where the 89 hour ma is currently.
Much as it has done in recent days, Cable is lagging the euro in its recovery once more. Although there has finally begun to be some upside traction today, there is still much that needs to be done by the bulls. The resistance band on GBP/USD that needs to be breached for the outlook to turn more positive again is a 50 pip band between $1.4850/$1.4900. I have added once more the 89 hour moving average as it provided such an important resistance during the sell-off and could also be an important gauge near term. It is interesting that there is again a near term uptrend that is forming on Cable and this could become the basis of support for the bulls.
Dollar/Yen is interesting as it is bucking the trend of moves against the dollar today. However I see there needs to be three factors which need to hold for teh bulls to consider themselves in control once more. There has been an initial move higher to challenge the band of resistance 121.00/121.10 which is a key level near term. This initial move appears to be rebuffing the bulls, but whilst the support at 120.60 remains intact the outlook will continue to improve. I also see then need for the hourly RSI to hold consistently above 60 and the MACD lines to push solidly into positive territory. These three factors being seen and I would be happy to back the bulls once more.
Of the other forex majors:
- NZD/USD – probably the most positive outlook having broken above 0.7440. This is a level that now needs to hold
- AUD/USD – struggled to break decisively through 0.7650 but until there is a breach of 0.7740 resistance then the outlook will not be positive near term.
- USD/CAD – Loonie bulls still need to hold a break below the support band around $1.2665