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'Investors in the currency options market are less worried about the outcome of the French election run-off than they were before the first round.' – Vassilis Karamanis, Bloomberg

Pair's Outlook

Due to the hawkish announcement by the Fed on Wednesday, the common European currency was trading below the 1.09 mark against the US Dollar on Thursday morning. The pair seemed to have rebounded against the support, which is provided by the weekly PP at 1.0890 level. If the situation does not change and a surge persists, the currency exchange rate will reach the weekly R1, which is located at the 1.0958 level. On the other hand, the pair might decline to the support cluster below it that begins at the 1.0835 level.

Traders' Sentiment

Traders remain bearish, as 59% of open positions are short on Thursday. Meanwhile, 52% of trader set up orders are to sell the Euro.

'Looking at a longer timeframe modelling of the Pound's fair-value, ING say the GBP/EUR exchange rate is now materially undervalued' – Gary Howes (based on PoundSterlingLive)

Pair's Outlook

GBP/USD opened red on the daily chart Thursday morning, setting a downside target at 1.2829 in sight. The area is represented by the daily S1 and is most likely to be up for solid tests today. Because of the proximity to the area, the cross might lack general volatility today in order to respect the area. In case of severe downside volatility around 15:30 GMT when the US unemployment claims data comes out, 1.2762 might be the level more likely to cut the movement with more demand at 1.2729. Upside risks are currently limited to 1.2898.

Traders' Sentiment

There are 50% of traders holding short positions today (previously 52%), whereas 56% of all pending orders are to acquire the Pound.

Weekly




    •    Last Candlesticks pattern: Shooting star



    •    Time of formation: 5 Sep 2016



    •    Trend bias: Down

Daily




    •    Last Candlesticks pattern: Hammer



    •    Time of formation: 14 Mar 2017



    •    Trend bias: Near term up


 

 

NZD/USD – 0.6974



Kiwi resumed recent decline from 0.7376 and has remained under pressure, suggesting the fall from there is still in progress, hence further decline to 0.6780 (50% Fibonacci retracement of 0.6074-0.7486) would be seen, however, near term oversold condition should prevent sharp fall below 0.6700 and reckon 0.6675 support would hold from here, price should stay well above 0.6610-15 (61.8% Fibonacci retracement), risk from there is seen for a rebound to take place later.
On the upside, although initial recovery to 0.6915-20 cannot be ruled out, reckon resistance at 0.6969 would limit upside and price should falter below 0.7000, bring another decline later. Only above resistance at 0.7056 would suggest low is possibly formed instead, bring a stronger rebound to indicated resistance at 0.7090, a daily close above there would provide confirmation, bring at least a retracement of recent decline from 0.7376 to the upper Kumo (now at 0.7133), however, break there is needed to retain bullishness and encourage for further subsequent rise to 0.7185-90 but resistance at 0.7247 should remain intact.

Recommendation: Stand aside for this week.

On the weekly chart, as kiwi ran into renewed selling interest just around the Tenkan-Sen and has slipped again this week, suggesting recent fall from 0.7486 top is still in progress for further weakness to 0.6780 (50% Fibonacci retracement of 0.6074-0.7486) and later towards previous chart support at 0.6675, however, reckon downside would be limited to 0.6610-15 (61.8% Fibonacci retracement) and price should stay above 0.6550, bring rebound later.

On the upside, expect recovery to be limited to the Tenkan-Sen (now at 0.6969) and bring another decline later to aforesaid downside target. Above last week’s high at 0.7056 would abort and suggest low is formed instead, bring test of the Kijun-Sen (now at 0.7126), then towards the upper Kumo (now at 0.7171) but resistance at 0.7247 should remain intact and price should falter well below 0.7300, bring further broad consolidation later.

'The dollar stood at 112.765 yen JPY=, slightly higher than Wednesday and at its strongest level since March 20. ' – Nichola Saminather (based on Reuters)

Pair's Outlook

USD/JPY put an end to the strong climb that had been extended towards the upper boundary of the senior channel that has prevailed since mid-December 2016 with a small red candle on Thursday morning. Risks for our base scenario lie below, meaning that today is most likely to be a turning point in the motion as a break above 112.84 is very unlikely. The first level to the downside rests at 112.35 and is an appropriate target for today. In case the cross continues to stick to the upper bound of the channel, we might see some more upside potential in the future.

Traders' Sentiment

Market sentiment is relatively neutral, as 57% of all open positions are short and the remaining 53% are long. At the same time, the number of orders to buy the Buck slipped from 49% to 48%.

'The Fed concluded its two-day meeting with a bullish statement that downplayed weak first-quarter economic growth.' – Marcy Nicholson and Zandi Shabalala, Reuters

Pair's Outlook

As the FOMC published their statement, the yellow metal's price declined and passed two significant support clusters. The fall stopped exactly at the lower trend line of the long term ascending channel pattern. Initially this move was expected to occur later. On Thursday morning the commodity price was squeezed in between the trend line and a resistance cluster just above the 1,240 level. However, it is most likely that the resistance cluster will be broken and the metal will begin to approach the 1,250 mark.

Traders' Sentiment

SWFX market sentiment is almost neutral, as 51% of open positions are short. However, 73% of trader set up orders are to buy the metal.

'This glass-half-full statement leaves the door wide open to a June hike, provided, of course, that the recent data letdowns are indeed transitory.' - Michael Feroli, JPMorgan Chase & Co.

As markets expected, the US Federal Reserve left its monetary policy unchanged at its meeting on Thursday. However, policymakers signalled that 'the path of gradual tightening' remained in play despite an economic slowdown registered in the March quarter. Although the Fed did not provide any clues on the timing of the next interest rate hike. Nevertheless, according to market forecasts, the next hike will likely appear in June. Solid inflation growth and the strong labour market pleased policymakers and offset sluggish economic growth. The next Fed meeting will take place on June 13-14 in Washington. Other data released on Wednesday showed that US services activity rose more than expected in April. The ISM reported its PMI for the nation's services sector came in at 57.5, up from the previous month's 55.2. In the meantime, markets anticipated a slight increase to 56.1 points in April. Earlier that day, ADP reported that US companies created 177K new jobs last month, roughly in line with forecasts. Meanwhile, March's gain of 263K new positions was revised down to 255K.

'April's survey reveals a positive start to the second quarter of 2017, with a robust upturn in civil engineering activity helping to boost the construction industry.' — Tim Moore, Markit

British construction activity hit its four-month high last month, suggesting that the economy began a slow recovery after a sluggish start. Markit/CIPS reported on Wednesday that its Purchasing Managers' Index for the UK construction sector came in at 53.1 in April, up from the preceding month's 52.2, while analysts anticipated a slight decrease to 52.1 in the reported month. Activity in the civil engineering sub-sector rose at the fastest pace in more than a year and growth in the house-building sub-sector reached a four-month high. The latest PMI surveys are set to provide significant support to the UK Prime Minister Theresa May ahead of the June 8 National Election. Moreover, the PMIs are expected to please the Bank of England, which is due to meet next week. However, today's release of the Markit Services PMI will provide a better picture of the current economic situation in the country, the services sector contributes around 70% to the nation's GDP. Wednesday's data showed that new orders and output both rose at the fastest pace of this year, whereas unemployment advanced at the strongest pace since May 2016.

The Aussie remains under strong pressure and extended weakness on Thursday and hit fresh multi-month low at 0.7392 (the lowest since 11 Jan), pressured by trade balance data from Australia and Services PMI from China.

Australian trade balance narrowed in March, compared to the forecast, while Chinese Caixin Services PMI also missed the forecast.

The pair fell sharply on Wednesday, losing around 1.5% for the day on the biggest one-day fall since 09 November.

Loss of previous low and key support at 0.7438 has increased strong downside pressure from firmly bearish technical studies, as the pair is now pressuring next important support at 0.7386 (Fibo 61.8% of 0.7163/0.7747 ascend.

Wednesday's long bearish candle weighs heavily on the market, with the pair looking for break below 0.7386 for potential attack at another key support at 0.7329 (weekly cloud base).

Broken former low at 0.7438 now offers immediate resistance, with falling daily Tenkan-sen (currently at 0.7487) expected to cap upside attempts.

Res: 0.7438, 0.7487, 0.7535, 0.7554
Sup: 0.7386, 0.7329, 0.7298, 0.7271

The dollar surged after Fed on Wednesday, gaining 0.68% for the day and closed above 112.67 (Fibo 61.8% of 115.49/108.11 descend) which was strong bullish signal. Bulls extended on Thursday and cracked daily cloud top (112.85), coming ticks ahead of next strong barriers at 112.92/113.00 (falling trendline connecting 118.59/115.49 tops/psychological barrier). Strong bullish setup of daily technical studies is supportive and so far ignores strongly overbought conditions of slow stochastic. Close daily cloud top will generate bullish signal for further upside action through falling 100SMA (113.23) for extension towards 113.75 (Fibo 76.4%). However, corrective easing could be anticipated in the near-term with solid supports at 112.14 (daily cloud base) and 111.80 (broken weekly Tenkan-sen) expected to ideally contain correction.

Res: 113.00, 113.23, 113.53, 113.75
Sup: 112.64, 112.14, 111.80, 111.36

Cable closed firmly in red on Wednesday and extended dips below key supports at 1.2866/67 (daily Tenkan-sen / 10SMA), driven lower by hawkish FED and rising Brexit fears.

Although there was no clear break lower so far (dip to the session low at 1.2829 was quickly reversed as thick 4-hr cloud continues to underpin), bearish signal has been generated on Wednesday's Bearish Engulfing which may trigger stronger easing.

Close below Tenkan-sen / 10SMA would be seen as additional negative signal for extended correction towards next key supports at 1.2770/55 (lows of former consolidation) and 1.2725 (rising 20SMA).

Conversely, bounce back above 1.2900 handle would ease immediate downside pressure, while return above past three days highs at 1.2940 is needed to neutralize and re-focus barriers at 1.2963 and 1.3.

Res: 1.2900, 1.2945, 1.2963, 1.3000
Sup: 1.2829, 1.2800, 1.2770, 1.2755