Hero to Zero for the Dollar

Well, it certainly was a lively day yesterday with a number of events/headlines/drivers all coming into the mix. The EURUSD was probably the most volatile I have seen it for quite a while, with a day’s range of nigh on 150 pips and withreversion at both ends of that range before the session was over.

The fact that the ECB did pretty much as expected yesterday and cut the deposit rate by 10bp was one reason to sell it, but then again that was was surely baked in already. However, what wasn’t was the fact that ECB announced a ‘open ended’ EUR 20 billion monthly renewed bond buying program. It was that news which really stopped the initial upside rebound in the EURUSD to as high as 1.1070. The subsequent sell-off to as low as 1.0927 was as much about that bond buying program as it was about intraday players being wrong-footed.

That subsequent rebound move to back above 1.1050 was helped by some relatively negative dollar comments from the US Treasury secretary in addition to fresh EURJPY demand that was greatly assisted by fresh positive US/China trade talks speculation.

However, and as is usual these days those headlines were later denied. Irrespective of that the upshot yesterday was that the EURUSD spiked from what is now a very clearly pronounced double bottom at 1.0926 (03/09) and 1.0927 (12/09) respectively. To better see that please take a look at a short term chart of that below.

What you can also see on this chart is the existence (as at 6.30am) of a previous, less pronounced double top at 1.1085-87 so I assume a sustained breakout above this level will be the first sign that the 1.0926/27 stuff has won out? Time will tell on that, but the latest price action, right now would suggest to me that the topside on this one is the more likely to give way in the short term.

Anyway, a similar, but less spiked reversal played out in the GBPEUR yesterday with the price rising from below 1.1150,very close to that resistance/retracement level I have noted a couple of times previously, at 1.1263. Well, the price managed to grind its way to a high of 1.1254 before that also did a volteface and headed back near to 1.1150 again. So, is it job done in terms of a technical correction for that pairing?

Personally, I think it might be, but of course this is still very much headline dependent, until we all know ultimately when theBrexit show is going to end up.

As for the GBPUSD? Well, so far that has managed to hold below resistance at 1.2385, but a break there again could easily trip stops just beyond there which are said to be in place at 1.24 and above. Naturally, I would assume that any upside move here could tie in with a break above 1.1085 on the EURUSD and in that sense is probably more about the US dollar than it might necessarily be about the pound itself, but we shall see.

Furthermore, all this information laid out today could be redundant, one way or another by the time you get to read this and that’s the problem with laying out such technical information so early in the mornings. If that is the case then I certainly won’t say, ‘I told you so’ as apart from anything else that would be rather pointless anyway.

Finally, a word about gold, which again shied off another attempt at rebounding back above $1525 yesterday and is back below $1500 again as I write this morning. Naturally the weaker JPY has helped to facilitate that relapse and all the time that the USDJPY remains elevated and above 108 then the metal is going to struggle unless the close relationship between the two significantly changes.

The fact that gold, has so far this week, resisted any downside break beyond $1480 doesn’t mean that I am ruling it out and one has to remember that the metal will be keeping a close eye on the equity space too. More especially in that regard the S+P 500 is the one to watch I guess, and watch carefully if it does manage to set a fresh all time high above 3026. Whilst I’m not a fan of that prospect I do respect the fact that it couldjust as easily happen.

However, and as yesterday lays clear testament to; it could easily be another trap-door laded session today too, so as always the headlines and fresh breaking news from the Donald could set the tone. It seems right now, that he’s much more amenable on the China front than he has been for a long while now, but as we know, it does all rather depend on which side of the bed he rises most days as to what he delivers next!

Important Economic Releases/Events Due Later Today

13/09- 1.30pm US August Advanced Retail Sales

13/09- 3.00pm US University of Michigan September Consumer Sentiment Index