Traders Ditching the EUR/USD on all Fronts
EURUSD Trend Line Retracement | Downward Momentum Present
EURUSD is still moving in a downtrend despite the sharp pullback to the 1.2650 minor psychological resistance area, which lines up with a short-term falling trend line. If this holds as resistance, the pair could fall back to the previous lows around 1.2500 handle.
Data from the euro zone has been very weak so far this week, as German factory orders turned out to be a huge disappointment. Earlier today, the German industrial production report also showed dismal results, adding to selling pressure for the euro.
However, an upside breakout from the 1.2650 area could lead to a larger market correction for EURUSD, which has been grossly oversold in the past month. In that case, EURUSD could retreat to the 1.3000 major psychological level before drawing more sellers in.
Data from the US has been mostly stronger than expected, with the September NFP reading keeping the currency supported. The FOMC minutes are up for release this week and could contribute to dollar strength if the policymakers appear more hawkish than before.
Traders seem hesitant to push the pair lower for now, with a small pullback to the 1.2650 area still likely as support at 1.2600 holds. A break below this psychological level could confirm the downward momentum on EURUSD.
USDJPY Range-Bound Movement | Potential Breakout Scenario
USDJPY has had trouble breaking above the key 110.00 resistance, which has held in the past weeks. Price drew support from the strong US NFP release last week but hasn’t been able to sustain the rally as profit-taking took place.
With that, price could continue to move sideways around the 108.50 to 110.00 region, as traders wait for more market catalysts before letting the uptrend resume. The path of least resistance for USDJPY is to the upside, as the rallies have been very strong in the past months.
Apart from that, the rhetoric of the latest BOJ statement shows that policymakers are getting concerned about the slowdown in industrial production. BOJ Governor Kuroda refrained from introducing new policy measures but decided to downgrade production forecasts, as the economy struggles to recover from the April sales tax hike.
Further gains for the pair could take place once USDJPY breaks past the 110.00 major psychological level while a deeper market correction could ensue if the pair tumbles below the 108.00 mark.
USDCHF Bullish Divergence | Strong Uptrend to Resume
USDCHF made a strong pullback after the release of the US NFP report last week, as traders booked profits when the pair made new highs. The pair is currently finding support at a rising trend line forming on the 1-hour time frame and the 100 simple moving average on the same chart.
Switzerland has CPI, retail sales, and foreign currency reserves data on tap today. These could add to USDCHF volatility, which might lead to a return of buyers or a potential break below the near-term support zones. Weaker than expected data could lead to a strong bounce back to the previous highs while strong figures could lead to a downside break.
Bear in mind that the SNB is still being urged to ease further or to intervene in the forex market in order to ward off deflation. The upcoming CPI release should show whether further stimulus is warranted or not, with a reading below 0.2% likely to spur talks of easing.
Apart from that, the stochastic has formed lower lows while price made higher lows, creating a bullish divergence on the short-term chart. The oscillator is already climbing out of the oversold region, reflecting a pickup in buying momentum and the likelihood of seeing the uptrend resume.