Financial market research and analysis

A broad based dollar sell-off triggered a bullish breakout in EURUSD. The 200-day moving average was surpassed in a single move yesterday. The EURUSD rallied to 1.1167, even after the ECB President Draghi warned that tmonetary policy cannot be relaxed about any series of supply shocks and that adopting a wait-and-see attitude would also carry risks. As we edge towards overbought conditions (RSI 65%) on the back of Draghi’s words, but in the main on the rush to the perceived safety of the (mostly) negatively yielding Eurozone bonds, the euro market could well be handed back to the bears should the upside momentum reach exhaustion point. The 1.1017 (major 38.2% retrace on the present rally) should lend support to the positive momentum for a further bullish development toward 1.1260 (Fib 61.8% retrace on Aug-Dec decline).

USDJPY nose-dived to 117.06 on aggressive USD selloff. The formation of double dip at 117.06 on the hourly chart hints at intraday recovery. Surpassing 118.15 (minor 23.6% retrace from post-BoJ peak), the recovery could extend to 118.83 (major 38.2%). Low US yields will likely cap the upside at these levels and keep the bias on the downside. Only a step above 118.83, which also coincides with daily Ichimoku baseline, could hint at a bullish consolidation.

Cable was pushed into the bullish consolidation zone just before the BoE verdict and the QIR due today. GBPUSD extended gains to 1.4646 in London. Downside risks rise along with the pound however and recent gains could rapidly be retraced depending on the level of dovishness from the QIR. From a purely technical perspective, the bullish break should find support at 1.4515 (minor 23.6% off Jan 21 low of 1.4080) before 1.4432 (major 38.2%). Above 1.4432, gains could extend to 1.4707/1.4775 (50% and 61.8% ext. with 1.4432 base). Sliding below 1.4432, the bullish appetite could rapidly fade to pull the air to 1.4365 (Fib 540% retrace) before 1.4297 (Fib 61.8%).

AUDUSD cleared an important resistance at 0.7139/46 zone (50 and 100 day moving averages respectively and minor 23.6% retrace on May’15-Jan’16 depreciation) as the softening dollar encouraged carry traders to enter fresh long positions at this area. The 0.7055 (major 38.2% off Jan 20 low of 0.6828) should remain supportive of further gains toward 0.7240/80 (50%/61.8% ext.).
The RBA doves are expected to cap the upside below the key mid-term support zone, 0.7340/85 (major 38.2% on May’15-Jan’16 decline / Dec peak).

Gold broke resistance at $1030/1036 (200dma / Fib 61.8% on Oct-Dec decline) and rallied to $1145 on broad based USD weakness. With support at $1136, gold is expected to consolidate at about 1150/60 before any potential attempt to $1190/1200.

WTI gained 12% since yesterday on aggressive sell-off in USD. Key mid-term resistance is eyed at $34.50/35.50.