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

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.

GBPJPY

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

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.

NZDUSD

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.

AUDUSD

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.

Summary

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.

 

 

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Currency Analyst
Based in Singapore, Jeffrey has over 25 years experience in the financial markets, having traded currencies, options, precious metals and futures. Jeffrey started his career at Barclays Bank in New Zealand. However he has spent most of it in London and Asia.Jeffrey focuses on the Asia time zone across asset classes. A regular commentator on business news TV and Radio, he is originally from New Zealand and holds an MBA from Cass Business School, London.