Euro hit a fresh year-to-date low against the US Dollar, following the disappointing economic data from the Eurozone, Brexit’s uncertainty and the start of European elections.
The Japanese yen rises steadily on Thursday, as the growing concerns about the US-China trade war and Brexit’s uncertainty suppress the appetite for risk, thus boosting the security of the Japanese currency as a safe-haven asset.
The British pound headed to a record series of declines and there are not many investors who will stand in the way of future new losses. On Thursday, the British currency collapsed to a 4-month low. Worries about a possible Brexit without a deal rise after yesterday another minister left the government and Theresa May could not reach an agreement and satisfy MPs.
The US Dollar Index is extending the rally and is now closer to the key 2019 peaks in the 98.30/35 band. Adding to potential extra gains, the 10-day SMA has crossed above the 21-day SMA in the 97.73-97.78 band. There is no change in the broader picture, where the positive view should remain as long as DXY navigates above the key 200-day SMA at 96.39. This area of support is reinforced by the short-term line at 96.51.
The index is posting gains for the third session in a row on Thursday, always on the back of simmering US-China trade concerns in spite of the absence of fresh news in past days.
The buck also met extra support after the FOMC minutes showed the Fed is firmly committed to its ‘patient’ stance, while the Committee did not even mention the probability of rate cuts and considered the lack of traction of consumer prices as transitory. Further out, member reiterated the monetary conditions could be tightened further in case the economy keeps the forecasted pace.
The euro was coming under increased pressure to break lower following the publication of further soft Eurozone data this morning, with investors also dumping stocks, government bonds, and commodities amid ongoing concerns over trade wars and slowing economic activity.
Meanwhile, the first day of European Parliamentary Elections has begun with polls suggesting Le Pen’s National Rally party is leading Emanuel Macron in France, serving as a reminder that (far) right-wing politics is on the rise in Europe.
The pair EUR/USD is trading below 1.1150, which is the lowest in four weeks. The US-Sino trade tensions weigh on markets and the Fed’s minutes did not imply a rate cut. German PMI disappointed and the ECB has less confidence in the recovery.
After taking out a short-term trend line, the EUR/USD has today broken support around 1.1150, a level which had provided mild rebounds over the past few days. This level is now the first resistance that the bears will need to defend if we are to see a new 2019 low below 1.1111 soon (very likely in our view). The pair EUR/USD is trading below the 50, 100, and 200 Simple Moving Averages. The momentum is negative, and the Relative Strength Index is leaning lower yet without entering oversold conditions
For the bearish bias to become invalidated again, we will need to see the formation of a key reversal pattern or a break above an old swing high. Until that happens, the path of least resistance will continue to remain to the downside, even if we are to see small bounces here and there.
The level of 1.1135 USD, which was a low point in early May, is still fought over. Further down, the 2019 trough of 1.1110 USD is getting closer. The next levels date back to June 2017: 1.1025 USD and 1.0900 USD.
The EUR/USD resistance awaits at 1.1170 USD that capped recovery attempts late last week. Further above, 1.1190 USD was the high point this week. The next lines are 1.1225 USD and 1.1250 USD.
The USD/JPY pair is challenging the 110.00 level, as the Japanese currency rallies on the back of risk-aversion. Mounting tensions between the US and China coupled with Brexit political chaos in benefit of safe-haven assets and against high yielding ones.
Worldwide equities are sharply down, with US futures nose-diving. US Treasury yields are also falling, now standing at fresh 2019 lows.
The USD/JPY pair is bearish, as it broke below the 61.8% Fibo retracement of the latest daily run, also below the 20 and 100 SMA which stand together a couple of pips above the mentioned Fibonacci level, this last at 110.20.
Technical indicators in the mentioned chart have entered negative territory, maintaining their downward slopes. The pair so far found support at the 50% Fibo retracements of the mentioned rally in the 109.90 price zone, with a break below the level most likely anticipating further declines ahead.