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In the Zone
- There was not much news out the G20 last night, but I believe that the market will be waiting on some news that comes out of the much anticipated Trump-Putin meeting this afternoon.
On a busy day in the US, the data was mixed but encouraging. The softer data came in not too far from expectation whilst the PMI and ISM numbers were better than expected, the big data watched yesterday was the ADP employment number as often it is perceived to have insight to the NFP data. I am not a firm believer of this philosophy and you just need to consider last month as the perfect example.
The big news, and hence the big mover last night was in the EUR, the catalyst was the ECB minutes that hinted towards the ECB being more supportive of an unwind of QE. Later on in the day we heard both ECB members Weidman and Nowotny endorse this notion and the EURUSD took off. The EURUSD is trading at extremes which the market is generally not keen on leading into a major data release like NFP, but I have to assume this just means that traders are confident in the EUR. The pair yesterday found some sharp resistance at 1.1425 and this has to be a ceiling for now. The market this morning will eye 1.1400 as first major test for both buyers and sellers, unless the market is able to close below the either the 100 or 200 hour MA at 1.1370 and 1.1350 respectively, I suspect that the bulls will hold the bias.
I have been keeping an eye out on the USDJPY since Monday, it is no secret that I believe that this pair holds the key to unlocking the moves in all the other pairs. We peaked on Monday and any subsequent attempts higher over the last week has been rejected, and this suggests to me that momentum may be stalling a little bit here. There are a lot of support levels that could stall the initial move and so I believe that we will need to see price fall to around 113.00 before the bears get interested.
In my opinion, we are seeing that the dollar index is starting to consolidate ahead of next week. In conjunction with that, all the major pairs seem to be trading at extremes, most on the weekly chart. I am wondering if a strong NFP and positive Fed Monetary Report will provide the catalyst for some mean reversion in the dollar.
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