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USD/CHF Sharp bounce.

USD/CHF keeps on declining despite strong volatility. The short-term technical structure is negative as long as prices remain below the hourly resistance at 1.0171 (07/03/2017). Monitor hourly support is given at 0.9955 (30/03/2017 base low) then 0.9814 (27/03/2017 low).

In the long-term, the pair is still trading in range since 2011 despite some turmoil when the SNB unpegged the CHF. Key support can be found 0.8986 (30/01/2015 low). The technical structure favours nonetheless a long term bullish bias since the unpeg in January 2015.

USD/CAD Consolidating.

USD/CAD has increased sharply this week. The pair is now consolidating. There is still a strong upside momentum. Resistances can now be found 1.3535 (09/03/2017 high). Hourly support can be located at 1.3456 (04/04/2017 high) then 1.3353 (20/01/2017 high).

In the longer term, there is a golden cross with the 50 dma crossing the 200 dma indicating further upside pressures. Strong resistance is given at 1.4690 (22/01/2016 high). Long-term support can be found at 1.2461 (16/03/2015 low).

AUD/USD Failing to find demand.

AUD/USD is still trying to bounce off strong support at 0.7473 (12/04/2017 low). However, as long as prices remain below the resistance at 0.7608 (17/04/2017 high), the short-term technical structure is negative. Key resistance stands at 0.7681 (30/03/2017 high).

In the long-term, we are waiting for further signs that the current downtrend is ending. Key supports stand at 0.6009 (31/10/2008 low) . A break of the key resistance at 0.8295 (15/01/2015 high) is needed to invalidate our long-term bearish view.

EUR/USD Rally after first round.

EUR/USD is pushing higher. Hourly support can be found at 1.0682 (21/04/2017 base) then 1.0576 (11.04.2017 low). Stronger support can be found at 1.0494 (22/02/2017 low). Resistance given at 1.0906 (27/03/2017 high) has been broken.

In the longer term, the death cross late October indicated a further bearish bias. The pair has broken key support given at 1.0458 (16/03/2015 low). Key resistance holds at 1.1714 (24/08/2015 high). Expected to head towards parity.

GBP/USD Slightly lower.

GBP/USD is consolidating lower after sharp bullish rally. Resistance stands at 1.2905 (18/04/2017 low). The pair is now monitoring hourly support at 1.2775 (21/04/2017 low) as a break would confirm a weakening short-term bullish momentum. Hourly resistance is located at 1.2905 (18/04/2017 reaction high).

The long-term technical pattern is even more negative since the Brexit vote has paved the way for further decline. Long-term support given at 1.0520 (01/03/85) represents a decent target. Long-term resistance is given at 1.5018 (24/06/2015) and would indicate a long-term reversal in the negative trend. Yet, it is very unlikely at the moment.

USD/JPY Moving higher.

USD/JPY has drifted higher. Hourly resistance at 109.10 (18/04/2017 high) has been broken. Other resistance can be found at 110.11, while a key resistance stands at 112.20 (31/03/2017 high). Next support can be located at 108.22 (17/04/2017 low). Other key supports lie at a distant 106.04 (11/11/2016 low).

We favor a long-term bearish bias. Support is now given at 96.57 (10/08/2013 low). A gradual rise towards the major resistance at 135.15 (01/02/2002 high) seems absolutely unlikely. Expected to decline further support at 93.79 (13/06/2013 low).

The Euro eased back to 1.0820 zone after opening with nearly two-hundred pips gap higher, boosted on anticipated win of presidential candidate Macron in the first round of French election.

The single currency hit fresh high of over five-month at 1.0916, on opening on Monday and briefly extended above key short-term barrier at 1.0905 (27 Mar high).

Strong bullish sentiment that has been established is expected to keep the pair supported in the near-term, as long as today's gap remains unfilled.

Broken 200SMA is still acting as valid support at 1.0836, despite being dented overnight on extension to 1.0821 (session low), with fresh upside attempts to be expected while the latter support is holding.

The pair may hold in extended consolidation until markets fully digest recent news, but will remain bullishly aligned on positive sentiment.

Firmly bullish daily studies are also supportive for fresh attacks at 1.0916 peak and possible extension towards psychological 110.00 barrier which is sen as near-term target.

Conversely, firm break below 200SMA would weaken near-term structure and increase risk of filling today's gap and return to neutrality zone of former 1.0700/77 congestion.

Res: 1.0876, 1.0916, 1.0950, 1.1000
Sup: 1.0836, 1.0819, 1.0777, 1.0752

Unnoticed this morning, Euro made a double top, which means USD/JPy may have better value going forward.

We won't dwell on Macron's victory yesterday as much has and will be written. The overall effect should be neutral to small bullish on European bonds, stocks and equities as he will not control the legislature after the Parliamentary elections. This will mean compromises and coalitions and almost certainly a policy agenda that will move as fast the French civil service.

Naturally, it has been a risk on day with Asia indices rallying along with Yen crosses. EUR gapped nearly 200 points higher from Friday to trade as high at 1.0907 before spending the day drifting back to 1.0850. USD/JPY gapped higher as well, trading above the 110.00 level as EUR/JPY also gapped.

The reason I keep mentioning gaps is because they're well, gaps. Have we gaps on charts everywhere thanks to the EUR/USD and USD/JPY jumping in the twilight hours of the morning. EUR/GBP, GBP/JPY, AUD/JPY/ CHF/JPY, EUR/TRY, you pretty much name it. If it has an EUR or a JPY in it has a gap on its charts this morning. Have a look at your one-minute charts, and you will see what I mean. The problem with gaps is that from a technical and purely trading perspective, they usually get filled back in. Particularly ones that happen at the market open at 2 am on a Monday in Singapore.

This is not always the case I must qualify, but it is very often the case. In Euro's case, the gap is much bigger then JPY's and potentially more damaging to Euro bulls technically as we shall see. Traders, in fact, may find the USD/JPY and XXX/JPY set-up more intriguing than EUR/USD over the next few days.

EUR/USD

Almost unnoticed this morning, EURO jumped nearly 200 points from the New York close and then spent the rest of the day drifting lower. In the process, it traced out a potential double top at 1.0907. I say potential because it will only be confirmed if we are under 1.0907 at the New York close.

This does bear watching though, especially in the context of my comments on gap filling above. The formation itself also appears to still be an ascending wedge/triangle in a greater downwards trend. This is a bearish consolidation pattern for technicians. Thus the double top could be quite significant if it holds in the bigger picture.

Euro has resistance at the 1.0907 level, but a daily close and consolidations above open the way to 1.1300 in technical terms.

Support lies at 1.0730, then the 100-day moving average at 1.0635 followed by the rising trendline at 1.0610.

USD/JPY

In the Euro noise today, USD/JPY went about its business quietly. Gapping some 100+ points higher to 110.60, it broke some important technical levels and had consolidated above them.

Firstly its downtrend at 109.50 was taken out and then the all important pivot, 110.00. These now become support.

Resistance lies at 111.60 with the 100 DMA at 113.50. The higher they climb, the harder they fall, and with a larger gap, Euro has more potential to fall should it fill that gap up.

EUR/JPY

Don't let all the lines and colours scare you, concentrate on the big picture.

EURJPY has gapped from 117.10 to 120.60 this morning before retracing its way back to 119.35. Along the way, it broke its downtrend line at 117.40, and the 200-DMA at 117.85. These now become support albeit quite far away. (Hence gap filling can be a little scary)

Today's high at 120.35 is the first resistance followed by the 100-DMA at 120.65 before another resistance line at 122.25.

The Ichi moko cloud, although rather scrawny as it sits at 121.00 will also provide some resistance.

Overall the EUR/JPY has a lot more wood to chop technically than the USD/JPY.

AUD/JPY

The AUD/JPY is one of the highest beta crosses to investor risk appetite, and it didn't disappoint today. Breaking out of its month-long down channel at 82.30 before proceeding straight to go, reaching a high of 83.95. 82.30 along with formerly interim resistance at 83.35 become support.

Resistance lies at 83.95, the daily high, and then the congestion region around the 85.00 level.

SUMMARY

Also, the attention has been on the EURO today, from a technical perspective, USD/JPY and the JPY crosses have all had more constructive days. The 1.0907 double top in EUR has the potential to become a very significant level now. Traders should also “mind the gaps” on many crosses and the EURO after this morning's price action.

EUR/JPY - 119.82

Recent wave: wave v of (C) ended at 94.12 and major correction in wave A has ended at 149.79

Trend: Near term down

Original strategy:

Sold at 118.40, stopped at 119.00

Position: - Short at 118.40
Target: -
Stop: - 119.00

New strategy :

Stand aside

Position: -
Target:  -
Stop:-

The single currency opened sharply higher today on risk appetite, signaling a temporary low has been formed at 114.85 early last week, hence gain to 121.00 cannot be ruled out, however, as the low at 114.85 is viewed as the 2nd wave a, upside should be limited to 121.80-85 and resistance at 122.26 should remain intact, bring another decline later.

On the downside, although the pullback from 120.88 may bring pullback to 118.95-00, reckon downside would be limited to 118.40-50 and previous resistance at 117.82 (now support) should hold and bring another rise later. Below 117.30-35 would suggest top is possibly formed instead, then test of Friday’s low at 116.46 would follow but only a break below this level would provide confirmation.

Our latest preferred count is that wave (ii) is ABC-X-ABC which ended at 123.33 and wave (iii) is unfolding with wave iii ended at 100.77, followed by wave iv at 111.57 and wave v as well as the wave (iii) has ended at 97.04, followed by wave (iv) at 111.43 and wave (v) has ended at 94.12 which is also the end of the larger degree v, this also implied the major wave (C) has also ended there, hence major correction has commenced from there with (A) leg unfolding in its lower degree wave c which has possibly ended at 145.69. Under this count, A-B-C wave (B) has commenced with A leg ended at 136.23, wave B at 143.79 and wave C has possibly ended at 149.79.

Our larger degree count is that the decline from 139.26 is wave (C) and is sub-divided into a diagonal triangle i-ii-iii-iv-v with wave i - 105.44, wave ii- 123.33, wave iii - 97.03, wave iv - 111.43, followed by the final wave v as well as the end of wave (C) at 94.12, this also mark the bottom of larger degree wave B. Under this count, major rise in wave C has commenced as an impulsive wave with minor wave III ended at 145.69, wave V is still in progress for further gain to 150.00. Having said that, this so-called wave V could well be the first leg of larger degree 5-waver wave C and this wave C should bring at least a retest of wave A top at 169.97 (July 2008).

The euro rallied on Sunday after the French presidential election, which showed Emmanuel Lacron and Marine Le Pen advancing to the second round. EUR/USD has paused in the Monday session, as the pair trades quietly at 1.0870. On Sunday, the euro touched a high of 1.0934, its highest level since early November. On the release front, German Ifo Business Climate improved to 112.9, beating the forecast of 112.4 points. In the US, there are no economic releases on the schedule. On Tuesday, the US releases CB Consumer Confidence and New Home Sales.

Almost 40 million French voters went to the polls on Sunday, and for the markets, expected news was good news indeed. The first round of the presidential election featured 11 candidates, and the vote whittled the field down to just 2 candidates – centrist Emmanuel Lacron and far-right Marie Le Pen. Lacron garnered 24% of the vote and Le Pen 22%, which was what most polls leading up to the election predicted. The runoff vote takes place on May 7 and French voters will have a clear choice between Lacron, who served as an economic minister, and Le Pen, who is running on an anti-EU platform. The markets breathed a sigh of relief, as the nightmarish scenario of a runoff between Le Pen and far-Left candidate Jean-Luc Mélenchon was averted. We can expect daily opinion polls to be market-movers, as was the case before the first round. Lacron goes into next week’s vote as a heavy favorite, and two candidates in the first round have thrown their support behind Lacron – center right François Fillon and Socialist Benoit Hamon.

What’s next for Janet Yellen and Co.? The Federal Reserve has broadly hinted that it will gradually raise rates in 2017, but it’s unclear how many times Janet Yellen will press the rate trigger. Most analysts are expecting two more moves this year, but there have been calls from some Fed policymakers for three more hikes. However, soft retail sales and CPI numbers in March have made the Fed more dovish, and on Tuesday, the Atlanta and New York Federal Reserve lowered their outlook for US economic growth for the first quarter. The Fed can point to a labor market that is close to capacity as well as strong consumer confidence, but surprisingly, this has not translated into stronger consumer spending, a key driver of economic growth. Will the Fed raise rates in June? The CME Group shows the odds of a June hike have dropped to 50%, compared to 64% earlier in April.

AUD/USD – 0.7580

Recent wave: Wave 5 ended at 1.1081 and major correction has commenced for fall to 0.7000 and then towards 0.6500-10

Trend: Near term down

New strategy :

Stand aside

Position: -
Target:  -
Stop:-

As aussie found good support at 0.7491 and has staged a strong rebound from there, retaining our view that further consolidation above this month’s low at 0.7473 would be seen and another bounce to resistance at 0.7611 cannot be ruled out, however, break there is needed to signal the fall from 0.7750 to 0.7450-55 (50% Fibonacci retracement of 0.7158-0.7750) but reckon downside would be limited to 0.7380-85 (61.8% Fibonacci retracement), risk from there is seen for a rebound later.

On the upside, only break of said resistance at 0.7611 would signal low has been formed at 0.7473, bring a stronger rebound to 0.7650 but resistance at 0.7680 should hold from here, price should falter below 0.7700-10, bring another decline later. As near term outlook is still mixed, would be prudent to stand aside in the meantime. 

On the 4-hour chart, the move from 0.8066 is the wave 5 with i: 0.8860, ii: 0.8315, wave iii is an extended move ended at 1.0183, iv: 0.9706 and wave v has ended at 1.1081 (also the top of entire wave 5). The subsequent selloff is the major correction which is unfolding as ABC-X-ABC and 2nd A leg has ended at 0.8848, followed by a-b-c wave B which ended at 0.9758, hence, 2nd C wave is now in progress and indicated downside target at 0.7000 and 0.6950 had been met, so further fall to 0.6710-20 cannot be ruled out.

Relief rally amid French vote

Financial markets across the planet welcomed the result of the first round of the French election, with the qualification of Le Pen and Macron for the second round. European equities rallied massively this morning with the CAC 40 jumping 3.40%. Financial stocks performed the best on Monday with Société Générale rising 8.9% and Crédit Agricole up 7.90%. Financials across Europe extended gains with Barclays, UBS and Commerzbank up 4.10%, 3.80% and 9.50% respectively.

In the FX market, the euro was better bid and gapped at opening. EUR/USD opened at 1.0859 on Monday, up 1.22% compared to Friday's close (1.0728). The risk-on move triggered a sell-off in safe-haven assets, with the Japanese yen and gold falling 0.95% and 1% against the USD, respectively. In contrast the Swiss franc edged slightly higher as it gained 0.25% against the greenback. It may seem odd to investors that the Swiss franc did not suffered more; however it is coherent with the behaviour in the past few weeks. Indeed, the SNB was extremely active over that period as it tried to mitigate the CHF appreciation. By comparison, the JPY rose 2%, while the CHF surged 0.60% between April 1st and last Friday.

Overall, investors switched to risk-on mode and started reloading on risk. We expect the risk rally to continue gaining traction over the next few days as market participants sell US assets - especially bonds - and move towards European and emerging market assets. The hunt for yield is far from over, especially now that Trump's reflation trade is losing traction.

Le Pen through to second round but Macron's final victory now looms

Financial markets feared a second round between Jean-Luc Mélenchon and Marine Le Pen who was likely to trigger some volatility. Marine Le Pen's final result below 22% is disappointing as she was expected in various polls to reach between 27% and 30%.

The failure of Le Pen or Mélenchon to sway undecided voters or unlock closely-guarded voting behaviours will come as a major relief to investors fearing uncertainty over whether the second round would bring a new set of complexities. At present, extreme volatility has been avoided. Emmanuel Macron and Le Pen will move forward to the second round run-off on May 7.

The result is very market-friendly. The failure of Marine Le Pen or Jean-Luc Mélenchon to surge on voting day should be viewed as a vote for the EU. Eventually, Emmanuel Macron is now very likely to become the new French president. Most of the runner-up such as François Fillon who scored around 19%, are calling for a Macron vote for the final vote in two weeks. Even Mélenchon, which program was very similar to Marine Le Pen's has been calling, through his lieutenants, to vote for Emmanuel Macron.

There had not been a massive relief, if any, in financial markets tomorrow. However the single currency may appreciate slightly against the swiss franc. There's defnitely no fear for the second round. First final results estimates are now calling for a 62% Macron's victory for the second round. European Union seems to win a battle and attention should carefully shift towards the German's election in August.

We anticipate no extreme volatility in the FX market, with marginal Euro buying (as markets had positioned for this outcome) as exit polls become official results. We nonetheless remain long EURCHF on a rejection of an anti-EU vote.

'French voters face two radically different visions of the country's future after centrist Emmanuel Macron and far-right nationalist Marine Le Pen won the first round.' – Bloomberg

Pair's Outlook

Due to the French election induced certainty in the Euro the EUR/USD currency exchange rate began the week at 1.0923, which is almost 200 base points higher than the Friday's closing price. Although this is a fundamental shift, the move is still consistent with the large scale ascending channel pattern, as the upper trend line of the channel has not been reached. On Monday morning profit taking was occurring, as the rate had dropped down to the 1.0826 level. It is most likely that the rate will soon find support and stop before the future direction is revealed.

Traders' Sentiment

SWFX traders are bearish on the pair, as 56% of open positions are short. Meanwhile, 52% of set up orders are to sell the Euro.

'We read the technical indicators as suggesting there is scope for addition gains, but suspect the $1.3000-$1.3050 may be difficult to overcome.' – BBH (based on FXStreet)

Pair's Outlook

Downbeat UK Retail Sales were unable to relieve the British Pound of its strength, as it erased all intraday losses and held its positions above the 1.28 against the US Dollar on Friday. However, further upside momentum seems unlikely, as the 1.2850 level keeps providing relatively strong psychological resistance, now also bolstered by the upper Bollinger band. At the same time, a sharp bearish development is doubtful, due to the weekly PP and the monthly R1 forming a tough demand area at 1.2745. Until a solid market mover is presented the Cable is expected to remain within this trading range, namely between 1.2750 and 1.2850.

Traders' Sentiment

Market sentiment remains in perfect equilibrium today, but the share of buy orders is higher-taking up 60% of the market (previously 57%).