Friday, May 31, 2013

UST Bonds selloff boosted the USD. Retracement time now favors Long EURUSD & GOLD and Short USDJPY

Bond markets are the major market mover behind the USD strength in the past 2 weeks after the first article hinting FED’s planning a QE exit. US 10-Y Note is breaking down on Weekly charts with a first measured target around 127. While most look at the Global Stock markets the major FX moves are affected by the Bond markets because of the huge volume traded. As the FED is globally setting the price of money we should keep an eye on the developments there.

 The US 10-Y Note Yield is breaking above the last High and it’s signalling a rise in the implied US Interest Rates as a direct result of the assumed FED QE exit. This logically concides with the topping out of the Global Markets in the last week. Rising Interest Rates in the US are USD positive as the Interest Differential to the EU and other CBs is shrinking as the ECB & RBA are actually lowering the rates.

USDX – The Dollar Index is retreating from the recent High and is sitting comfortably at the Support around 83. I would assume it will be consolidating for the next week until it goes down to the Flat Support around 82.50 where it will meet the Lower Channel Support. That weakness is easily seen in the retracements in the currencies and Gold.

EURUSD Daily chart as mentioned before has broken above the psychological level of 1.3 and run into the real Resistance around 1.3040/50. The flat 200-Day MVA at 1.3115 is a powerful magnet and next week it will be touched with almost 955 probability. It coincides with the Higher Bollinger Band around 1.3130 and as a rule of thumb once the 20-Day MVA is broken with confirmation the price would travel to the other BBand. The ultimate Support is provided my the layered 8, 20 and 50-Day MVAs right below the spot price. The Momentum measured by the Stochastic Oscillator is giving confirmation to the upmove at the present moment.

GOLD Daily Chart – USD weakness translates into surge in Gold’s price. Technical breaking above the 20-Day MVA above 1410 it’s next target lays around 1460 with the 50-Day MVA. Momentum has turned positive and from a wider perspective Gold has already put a Higher Low around 1355 after the steep liquidations in April down to around 1320. The probability is favoring a surge to the upper Range of the last 2 months as noted by the 50-Day MVA and the Higher Bollinger Band around 1475.

 USDJPY Daily Chart – The Momentum has turned down and the Weekly chart is Turning as well. It coincides with the BOJ officials’ rhetoric that the current weakening of the YEN has been enough to make up for the former disbalances and they would be confortable with an assumed 95-105 range.

The multiyear Fibonacci retracement 50% level at around 99.50 is very important and will be pivotal going forward. The immediate support is lying at the Lower Bollinger Band around 98.90 and there is a good probability that we see these levels in the next 2 weeks. Given the Stock market weakness we can see more unwinding in the JPY pairs and witness USDJPY selling getting even steeper. The ultimate Support is at the Ichimoku cloud around 97.80.


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