Please attribute the following commentary to Jeffrey Halley, senior market analyst at OANDA:
Sterling in the Spotlight as Asia Starts the Week
Trading in Asia is subdued today with China on holiday all week. The focus has been in GBP this morning with Theresa May announces that Britain will trigger Article 50 around March 2017 with a full exit of the EU by 2019. This has seen the GBP/USD under pressure this morning.
GBP bears may be once bitten and twice shy about loading up on shorts down here. Since Brexit selling near the bottom of the range has proved a heartbreaking exercise. With the resulting short squeezes moving to the 1.3400/1.3500 region.The key supports down here are 1.2900, 1.2850 and the Brexit vote low around 1.2800. So there is a fair amount of technical wood to chop to get us into a new trading range.
EURGBP is approaching long term resistance at 8710 with the Euro seemingly nonchalant to banking travails within the region. We have a slew of Euro-zone PMI’s out Wednesday and Thursday with important manufacturing data out in the UK on Friday. All this is likely to be a sideshow though to Fridays US Non-Farm Payrolls. However, I feel the UK data, in particular, could have an impact on the EURGBP cross. Weak prints giving potential impetus to break the 8710 level.
An interesting chart. A solid descending triangle pattern with the base sitting in the 128.70/129.50 region. Much like GBPUSD selling near the base in the last few months has been a bit of a heartbreaker from a trading perspective. The GBPJPY chart, though, has a much more classically bearish pattern worth keeping one’s eye on.
An uninspiring Tankan report this morning from Japan combined with anaemic inflation data on Friday shows the Bank of Japan still has its work cut out. This could possibly mean a stronger Yen this week saying the planets may align outside of pure technicals for a test lower.
USDJPY has had a good week past but as the longer term chart clearly shows, the trend has clearly and continues to be down! The triangle is more symmetrical here with the two key levels at 100.10 support and 102.00 falling trendline or the top of the triangle. It’s important to keep an eye on the big picture and not just the intra-day noise.
Daily support sits in the 7200 regions with 7135 the 100-day moving average behind that. Resistance at 7310. On a quiet day, it should be noted there is key event risk in the early hours of tomorrow morning, the Global Dairy Auction.
Also rangebound in Asia today. Tomorrow we have the first RBA interest rate announcement under new Governor Lowe. This promises to be gloriously non-eventful with the street 100% with no change and a cut/paste of the previous statements wording.
Keep an eye on commodities and a weaker USD, in general, this week as AUDUSD has trendline resistance at 7310 with a fair amount of bearishness built into the price already. Support is at 7590.
The USD has opened generally weaker today with the exception of GBP. GBP has some interesting technical set-ups worth watching both against the USD and the Crosses. Amongst other majors, USDJPY remains in a solid longer term down trend and watch for potential upside in high-beta commodity currencies. Tonight’s US ISM number will give insight into the main event of the week, Fridays US Non-Farm Payrolls.
For direct comment, please contact:
Jeffrey Halley Business Development and Market Strategist, OANDA Asia Pacific
Representative No. HJD300377750