The USD may remain under pressure ahead of the release of the FOMC March 21 meeting minutes on Wednesday. The modest and temporary price action of the USD following the better than expected March employment report shows that positive data surprises are not having a significant impact on the USD. With carry trades very much in favour, the USD is being driven via growth and interest rate differentials and in this current environment of positive growth in the eurozone followed by a hawkish ECB means that the medium term uptrend in EUR/USD should stay in place. Break of 1.3440, which has repeatedly been tested but failed to break should open the upside potential for a move to 1.3480, then 1.3550 and eventually target 1.3640. On the other hand, failure to break above 1.3440 will force traders to book profits and thus force the euro lower. A move below 1.3375 will be the first sign of a move towards critical support of 1.3285. A violation of 1.3285 will signal a move to 1.3125 and then even 1.3020.
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USD/CHF: The US Q1 earnings season kicks of this week and if the results prove weaker than expected we could see the USD come under further downside pressure. However, USD/CHF to move significantly lower would depend on how carry trade sentiment emerges. EUR/CHF is currently approaching the 1.6400 mark, but if US equity market worries filter through into other markets, EUR/CHF upside will be capped and USD/CHF allowed to move lower as risk appetite retreats. On the downside, we need a break below 1.2115 to trigger a move to 1.2070, then the previous lows of 1.1980 and 1.1880. Otherwise, anything above 1.2285 will frustrate and prolong the downmove by staging a corrective rally to 1.2355, then 1.2430.
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USD/JPY: The BoJ unanimously decided to keep rates unchanged, in line with market expectations. Governor Fukui expected to make moderate comments keeping rate expectations anchored. The 119.40 level was repeatedly tested but failed to break and has become the near-term top. As long as this level holds, we suggest short dollar positions for minimum target of 117.40 and perhaps even 116.20. Stops above 119.40 break to protect against a move to 119.90, then 121.10 to 121.60.
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GBP/USD: In the
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