27/05/2014: US Dollar is under pressure as traders return from public holiday

Market Overview

With Wall Street closed for Memorial Day public holiday yesterday there was now steer for the Asian markets which were subsequently missed in trading. However, after the completed Ukrainian presidential elections over the weekend, Ukraine and Russia are already negotiating over settling the outstanding bill for gas contracts. This is though going on with the backdrop of continued skirmishes in the eastern Ukraine city of Donetsk. European markets are looking corrective in early trading after strong gains yesterday, with the exception of the FTSE100 which is playing catch up after also being on public holiday yesterday.

Forex trading shows the dollar is under pressure today against all major pairs. This is pulling the Dollar Index back from the key resistance level around 80.4 which has been holding back a greenback recovery in the past few months. Traders will be mostly looking out for the US Durable Goods Orders which are announced at 13:30BS, with a fall of 0.7% expected. This afternoon also shows US Consumer Confidence which is forecast to improve slightly to 83.0 from 82.3.

Chart of the Day – DAX Xetra

In the absence of trading from Wall Street or London the DAX has burst to a new all time high. The gap higher at the open breached the previous all time high at 9810 and the DAX never looked back in a strong session. The early trading is showing some correction but there is strong support at the 9810 breakout level. Daily momentum looks positive and this is now the big test of whether the bulls can sustain the breakout which has been a long time coming. There is near term trend support at 9650.

DAX   27052014

EUR/USD

Having completed the top pattern with two consecutive closes below $1.3671 the medium term outlook for the Euro suggests continued correction. However there have been signs of near term support in the last two days with the Euro finding a low at $1.3614. Despite this it should merely be a near term bounce. The daily momentum indicators remain in negative configuration and this could just be the pullback rally underway. There is a band of resistance with the $1.3671 neckline and the 144 day moving average at $1.3701 which having been the basis of support now turns into resistance. The intraday hourly chart shows resistance at $1.3668 overnight and should the support at $1.4640 give way then the selling pressure could resume. There are several overhead resistance levels that would need to be overcome to abort the bearish control, coming in initially at $1.3687, and then $1.3723.

EURUSD   27022014

GBP/USD

The near term corrective pressure on Cable abated slightly yesterday as support was formed at $1.6810. However with both UK and US on public holiday there will be more of an indication of how strong this support is when trading ramps up this morning. The daily chart retains a positive outlook but the bulls need to decide whether this near term correction is the opportunity to buy again. The momentum indicators are still corrective and a failure of $1.6810 would re-open the $1.6729 low again. Holding above support at $1.6832 will be the initial aim today for the bulls. The intraday hourly momentum is encouraging and a move above $1.6875 would re-open the $1.6920 high.

GBPUSD   27022014

USD/JPY

The rally in the pair is now testing the resistance around 102.00. This means that we have arrived at an important junction as 102 has acted as an important pivot level in the past few weeks. A move through the pivot level now would suggest that the bulls were winning control once more. This would also be confirmed on a move above 102.11 and 102.36. The daily chart shows RSI is now at 50 which suggests momentum has unwound and this also backs the suggestion of a pivot point. Should the recovery bulls continue to fail in their attempt to push Dollar/Yen above 102 then the downside pressure will begin to grow and this rally will be viewed as another chance to sell. Below 101.74 would re-open the downside once more.

USDJPY   27022014

Gold

The price has now broken the lower of the two converging trend lines as the price has continued to consolidate sideways. The tight trading in the past two days has now shown signs in early European trading today of a build up in selling pressure. The momentum indicators are now showing for the first time in over a week signs of a deterioration. This is angling for a test of the initial support at $1283, however if the price acts as it has done over the past few weeks, there will be a bounce back later in the session to take the price back above $1290 once more. Watch for a close decisively below $1290 for signs of an acceptance of the move, otherwise this could be yet another false move. Below $1283 opens $1279.60.

Gold   27022014

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