Dollar Surge Continues Despite Bullish Data from the Far East
EURUSD Market Correction | Short-term Retracement Levels
EURUSD is in a long-term downtrend but price appears to be bouncing off its recent lows and making a quick correction. Using the Fibonacci tool on the latest swing high and low on the 1-hour time frame shows that the 50% Fibonacci level might be a prime correction area.
The 50% level lines up with the 1.2600 major psychological mark while the 61.8% level is closer to the broken support at the 1.2650 minor psychological level. Stochastic is heading south, which suggests that selling momentum is picking up and that EURUSD could fall back to its previous lows near the 1.2450 minor psychological support.
Increased selling pressure might even lead to a break of 1.2450 and the creation of new lows around the 1.2400 handle. On its longer-term time frames, it looks like the next key support for the EURUSD pair is located around 1.2000-1.2050, which means that the pair has a long way to go in selling off.
On the other hand, a rally past the 1.2650 mark and 61.8% Fib might lead to a test of the previous resistance a t the 1.2800-1.2850 psychological levels. Gains past this area could signify the start of a reversal and a potential rally back to the 1.3000 area of interest.
USDJPY New Record Highs | Upside Breakout from 114.00
After a day of retreating, USDJPY is showing a return in buying momentum, as the pair has now broken past the 114.00 major psychological resistance. This pair’s rally has been very strong after the BOJ decided to increase asset purchases and expand its monetary base in order to ward off deflation and gear up for another sales tax hike next year.
The longer-term time frames show that USDJPY could head all the way up to the 122.00 area should the rallies persist. Catalysts for a move higher include the ISM non-manufacturing PMI, ADP employment change, and non-farm payrolls report from the US. There are no major releases from Japan this week.
However, remarks from Japanese officials saying that the currency has lost too much ground could keep gains in check. In that case, USDJPY could still retreat to the 113.00 major psychological support for a quick retracement while a larger correction could lead to a pullback until 110.00
Near term resistance is also located at the 115.00 major psychological level, another area wherein traders might be keen to book profits off their long positions.
GBPUSD Range Breakdown | Testing Support at 1.5950
GBPUSD is still hovering around the bottom of its short-term range visible on the 1-hour forex time frame. The pair has moved sideways just above support at the 1.5950 minor psychological level, as traders await more economic clues before pushing the pair in a clearer direction.
A bounce from the current levels might lead to a rally up to the resistance at the 1.6185-1.6200 area while a breakdown might lead to a selloff of as much as 250 pips, which is the same height as the range. This could be spurred by weak UK data, specifically the services PMI due today.
Strong US data might also spark a break lower, with the ADP non-farm employment report and ISM non-manufacturing PMI likely to set the tone for the NFP release later on in the week. Positive employment prospects could remind traders that the Fed is on track to tighten sometime next year, which could keep the US dollar afloat against its counterparts.
If the actual data comes in line with expectations, further consolidation could be seen for GBPUSD as the pair bounces back and forth in a shorter-term range between 1.6025 and 1.5950.