Despite the slight gains on Wall Street last night, driven by positive results for Netflix, Asian trading was extremely cautious overnight with a mixture of flat to slight losses. The geopolitics of Ukraine remains a key issue for investors as forex trading is facing a slight flight to the safe haven of the Yen this morning at the expense of both the dollar and the euro, while gold is also slightly in positive territory. The only exceptions to this safe haven shift come in the form of the Australian and New Zealand dollars.
With European indices mostly closed yesterday for the Eastern bank holiday, many of these markets are playing catch up today, hence the positive open. Whether this can last though with an air of caution to trading today.
Traders face little major European economic data this morning, with Eurozone Consumer Confidence the only real release at 10:00BST; whilst Existing Home Sales data for the US will be the main driver this afternoon.
Chart of the Day – EUR/JPY
The recovery in Euro/Yen has been rather gradual and lacked any real conviction and is increasingly at risk of falling over. A breach of the reaction high at 141.55 has never really been backed by the bulls and with the daily momentum indicators rolling over once more, the prospect of another downside shift is increasing. The uptrend on the daily chart comes in at around 141.00 and this could be tested soon. The intraday hourly chart shows this picture more clearly. With early selling pressure in Asian trading hours the key support near term at 141.24 has been broken to mark a two day low and open the next important support at 140.94. With hourly momentum indicators increasingly in negative configuration, using rallies as a chance to sell looks to be a good way to play this now.
After a series of negative candlestick patterns on the daily chart the pressure for a correction is growing. The support at $1.3778 would mark a one week low and this now represents the key near term low as a breach would re-open the key April low of $1.3671, with a retreat towards the 144 day moving average at $1.3675 increasingly likely now. Momentum indicators are in a slight negative drift and also back this assertion. The intraday also reflects the increasing near term negative pressure, trading below all the hourly moving averages and momentum indicators suggesting rallies are being sold into. There is now a solid band of resistance $1.3800/$1.3830 that should be seen as a chance to sell. There is small support at $1.3738 but little meaningful support until the key low at $1.3671.
Despite last week’s move above the key high at $1.6822 this has come with a slight air of disappointment as the move has been taken with very little real conviction (this could be simply due to the Easter break though), with a high having been left at $1.6841. The tight trading ranges could therefore be a warning sign that the run higher could be susceptible to a correction now. If a retest of the high today does not come with a decisive upside break then the bulls could tire and profit taking become an issue with daily momentum indicators showing signs of fatigue. The hourly intraday chart shows that $1.6770 is a key near term support as hourly moving averages and momentum indicators become increasingly neutral. The sense is that going with a decisive move will be the best way to play Cable near term.
After six days of successive higher lows the recovery in Dollar/Yen is progressing well and despite being a little sluggish in Asian trading this morning, there should be little reason to suggest that this will not continue. However, watch for yesterday’s low at 102.36 to act as an early warning sign should there be a breach. The intraday hourly chart shows a solid and considered recovery flanked by rising moving averages and positive configuration in the momentum indicators. However, there has been a slight move to the downside in the past hour which needs to be watched, with the hourly RSI now at a three day low. As with the daily chart, the hourly chart suggests that a breach of yesterday’s low at 102.36 could open a correction.
With the continued downside pressure of the past few days, the gold price is once more back into range of a test of the key 144 day moving average (currently $1282.95). Daily momentum indicators are not especially positive though and suggest that downside pressure is a problem still and a retest of the early April low at $1277.29 should not be ruled out. The hourly intraday chart shows that much needs to be done for the bulls to regain control, with rallies increasingly now being sold into. There is now resistance in the band $1300.90/$1304.30. Expect further pressure on yesterday’s low at $1281.40.