Aside from today, there is plenty going on this week that could significantly impact on currencies. However, if the charts are to be believed, this slight rally in the dollar today should be viewed as a chance to sell once more.
With the initial moves of the European trading session beginning to calm down, and a quiet day with lower volumes in prospect due to the US on public holiday for Presidents Day, it is giving me some time to evaluate.
I am still looking to sell USD/JPY around the neckline of the intraday top pattern around 102. The reaction following from the disappointing Japanese GDP data is petering out and the technical levels remain intact. The only issue with this might be the Bank of Japan’s monetary policy update tomorrow morning.
Perhaps a less volatile trade could be on EUR/USD. The dollar has so far failed to make much of an impact this morning and the outlook continues to suggest a move on $1.3739. The next economic data is at 10:00GMT on Tuesday with the German ZEW.
Cable is a harder play as the run higher on GBP/USD remains strong, however the price action so far today suggests that it is susceptible to profit-taking having reached the highest since November 2009. With momentum indicators stretched on the daily chart, this increases the risk of a bigger correction.