Look for USD strength to continue in coming sessions

  • USD/JPY is set on challenging recent trend highs at 103.70;
  • Cable looks overbought to me in shortish-term and could be ripe for a retracement;
  • EUR/USD has put in an interim top at 1.3625, a 61.8% retracement level, and this could signal that a down-trend is beginning?

Lots of unknowns as usual but after a long phase of cross trading, we may be about to see the focus return to the Greenback. The safest play (if there is such a thing) is to play EUR/USD from the short-side keeping strategy stops clearly above 1.3650.

  1. Hi Sean

    Could you please elaborate on why EuroUSD is a good sell – Is it predominately to do with USD strength ?

    I’m trying to think macro themes for the Euro and the only thing I can think of is the forward rate debate and the latest cut in Interest Rates down to 0.25% which started the original down move- I’m thinking that’s probably the key.



  2. Extract from IFR

    ~~~Now there is some speculation in certain quarters that the ECB meeting on Thursday may produce some easing action or at least a strong signal the ECB is ready to take further easing measures.~~~~~

    ~~~While few believe the ECB is ready to entertain negative interest rates or quantitative easing – they may be ready to take steps to increase liquidity through a launch of a conditional LTRO program. This speculation should keep the EUR on the back foot through to Thursday.~~~

  3. Hi Brady, think EUR/USD could get hit with double whammy- increased USD strength across board and increasing EUR weakness against the GBP in partic but also emerging against AUD and NZD. Just a thought at this stage as mkt only developing but worth considering

  4. I don’t know if the would cut rates or ease in any way on Thursday, but I’m almost 100% sure that Draghi will be dovish. There is a little more optimism than last time, the inflation was slightly adjusted on the upside, there were some other positive news coming out of Eurozone, but I think that this won’t change the bigger picture and Draghi will try to push the euro down. And as Sean already said, the increased USD strength is only helping.

    @Brady: Draghi might mention LTRO, negative rates or some other tools they have at their disposal. Not that they would implement them right away, just to scare the markets and surpress euro recent strength.

  5. ECB has talked for lower rate, LTRO, etc for many month from July. Eur-usd failed to drop. I believe some buyers there running e-usd upside. Current up channel from 1.3300 is accumulation pattern of somebody build of position. If pop up (higher odd), then, 1.3950 to 1.4000 may be hit before Xmas Then, Xmas, new year — thin market, e-usd may be pushed to 1.4570 level — historical significant level. Of course, if this pattern be killed, then, e-usd may slip down.

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