USDJPY may showing the way for US dollar bulls. The short-term uptrend is intact while prices are above 110.50, which is guarded by the break above 111.40 targets 113.50. Intraday resistance comes into play at 112.50. A higher than expected US Michigan Consumer Sentiment Index reading (forecast 92.2) would support additional gains.
Chart: USDJPY daily
Source: Mocaz charts
Asia FX markets are opening on a mixed tone compared to yesterday’s open. The Swiss franc and Japanese yen were the biggest losers against the US dollar, indicating a broad improvement in the risk tone. The commodity currency bloc rebounded, but they are well below yesterday’s best levels EURUSD and GBPUSD opened this morning right around yesterday’s opening levels.
The positive sentiment arose from China/US trade developments, strong US economic data and sharp gains on Wall Street. Bloomberg reports that senior Chinese and US officials are working to reopen stalled trade negotiations. Wall Street liked what they heard, and equity markets rallied, supported by expectations of a robust “earnings season” which starts tomorrow.
Fed Chair Jerome Powell delivered an upbeat outlook for the US economy but acknowledged trade issues could be a problem. Philadelphia Fed President Patrick Harker (non-voter) and his colleague Cleveland Fed President Loretta Mester suggested that the US economy could handle a total of 4 rates hikes in 2018.
China/US trade issues have hogged the headlines all week. China Trade data will be the focus today, and AUDUSD will be caught in the crossfire. AUDUSD is in a minor uptrend while prices are above 0.7395. A break above resistance at 0.7420 suggests further gains to 0.7460, which will serve to “fill the gap” from the July 10, Asia open, gap down. The catalyst could be a Friday profit taking rally. A break below 0.7395 would lead back to 0.7350.
Chart: AUDUSD 1 hour-Note the “gap.”
Source: Mocaz charts.
EURUSD may revisit its recent lows. This week’s failure to break above 1.1800 and the subsequent breach of support at 1.1690 ( which is now resistance) suggests a retest of the June low. Better than expected US data could trigger the sell-off. At the same time, EURUSD could rally on a pre-weekend profit-taking/position squaring move.
Chart: EURUSD 1 hour
Source: Mocaz charts