Dollar Surges as Dow Jones Edges Higher
EURUSD Simple Retracement | Resistance at 1.2450
After its sharp selloff last week, EURUSD had a chance to retrace yesterday when the German Ifo business climate report came in stronger than expected. Instead of showing a decline, the index actually indicated an increase in business optimism, which pushed EURUSD up from the 1.2350 area to 1.2450.
The pair might soon resume its drop though, as the 1.2450 minor psychological level lines up with the 38.2% Fibonacci retracement level and a broken support zone. A higher pullback might take EURUSD back to the 1.2500 handle, which lines up with the 61.8% Fibonacci retracement level.
There are no major reports lined up from the euro zone today, as only the German final GDP and Italian retail sales data are due, both of which might not result to strong euro moves. As for the US, the preliminary GDP reading and CB consumer confidence index are due.
If EURUSD resumes its drop, price could head back to its former lows around 1.2350 or perhaps create new ones at the 1.2200 levels. A rally past the Fib levels, on the other hand, could indicate that an uptrend is about to take place and possibly take the pair to the 1.2700 area of interest.
DJPY Bulls Return | Next Resistance at 120.00
USDJPY consolidated for quite some time, as traders booked profits off key levels last week and Japanese traders went on holiday yesterday. Their return today put the currency pair back in rally mode, as the BOJ minutes revealed that policymakers think that the recent round of easing might not have a strong impact like it did in the past.
This suggests that policymakers are keeping the door open for further easing if necessary, which means more downside for the yen. BOJ Governor Kuroda also had a speech but it didn’t contain any surprises or remarks that market participants have already heard.
With that, USDJPY could slowly grind up to the next resistance area at the 120.00 major psychological mark. The 119.00 handle is proving tough to break for now, as traders are probably waiting for more clues from the US and Japanese economy. The US is set to print its preliminary GDP reading today and possibly show a downgrade from the initially reported 3.5% to 3.3%.
If the actual figure comes in stronger than expected though, USDJPY might have more room to climb as traders could be reminded that the Fed is on track to tighten monetary policy next year.
USDCAD Descending Trend Channel | Resistance at 1.130
USDCAD has been trending lower on its 1-hour time frame, as a descending trend channel can be seen. Price recently bounced off channel support around 1.1200 and may be headed for resistance once more. If that area holds, another test of channel support might take place.
Data from Canada has been impressive in the past weeks, confirming the downward pressure on the USDCAD pair. Although oil prices have been falling and the US has been showing strong data as well, the fact that Canadian inflation has gone beyond the central bank’s 2% target is enough reason for market participants to talk about potential BOC tightening.
If so, USDCAD could retain its downtrend and possibly make an attempt to break below support at 1.1200 and go for the next floor around the 1.1000 major psychological mark.
On the other hand, a sharper decline in oil prices might revive selling pressure for the Loonie and lead to an upside channel breakout until the 1.1400 major psychological resistance. Stochastic is moving up for now, indicating enough momentum for a channel resistance test.