Overnight, most major APAC stock indices closed higher on the day (Nikkei +1%, Shanghai Comp 1.95 %), while precious metals & oil fell slightly. In FX, USD weakened against the Yen, Aussie & Kiwi Dollar, but gained against the remaining major currencies. No important data releases ahead in the EU session, but we will get the US Existing Home Sales data later today. Further, ECB President Draghi will be speaking in the afternoon, but we are not expecting to hear anything new from him.
It is likely to remain choppy in FX as the market is still digesting the latest FOMC meeting. While I don’t think the Fed has done a significant damage to the USD bull trend, we could see some USD weakness in the near-term amid crowded positioning. However, I try not to get too biased on the USD, but rather focus on those choppy ranges and play the markets accordingly. In EUR/USD, my focus is on the 1.0600-50 area, which has been a significant tech support/resistance in the past two months. I’d be happy to buy some Euros if we see a test of that area, risking 1.0570 for a move back towards the upper part of the range. To the topside, 1.0880 and 1.0920 should be decent resistance in the near-term and I’ll be looking to fade any fakeouts at that area.
GBP/USD is quite similar, with 1.4980 & 1.5020 the key levels to the topside, and 1.4770 & 1.4710 to the downside. On the USD/JPY, I’m feeling quite bearish on the pair. It has failed to hold momentum above 121.00 and it’s hard to imagine for me that we won’t go for another test of the 119.20 level. I’ll be watching the 120.40-60 area like a hawk and unless we get a clear break above there, I’ll be a seller in that area with a stop near 121.10 for a move back towards 119.20.
Another pair, I’m keeping an eye on is NZD/USD. The pair had a strong break above 0.7610 resistance overnight, but has given up quite a lot of those gains by now. I missed the opportunity to sell it up there, so now I’ll be waiting to see where we will close on the day. A close sub-0.7610 and a topside pin bar would be quite bearish and suggest a move back towards the mid-range area around 0.7430.
In Silver, I’m quite sure we will get a pullback to the 16.10-25 area and I’ll be a buyer if that area holds well.