Brocker.Org: Euro Strength, Yen Weakness Headline This Week’s Price Action Themes

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Talking Points:

– This week is relatively light on the data front, with the highlights being Euro Q1 GDP tomorrow, Japanese GDP on Wednesday evening, and Australian employment numbers on Thursday morning.

– Previous themes of Euro strength and Yen weakness remain interesting, as last week saw a pullback in both markets.

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EUR/USD Runaway

In Friday’s piece, we looked at EUR/USD trading near a rather attractive level of support around 1.0850. This level had previously helped to support prices towards the end of April, and with price action trickling down there last week as another wave of ECB dovishness hit markets, many had started to expect that the Euro would inevitably go back into a bearish state as the European Central Bank continues to try to talk down the prospect of tapering QE.

But those efforts appear to be falling on uninterested ears, at least for now, as the Euro continues to gain and prices are continuing to climb towards the post-Brexit high of 1.1011. This prior high of 1.1011 is an interesting level as we didn’t really see many trades there. The Euro gapped-higher above 1.1000 last week after the second round of French elections, but sellers jumped on the move fairly quickly to drive prices back-below the vaulted psychological level of 1.1000.

But after finding support around the 1.0850 level last week, bulls have re-gained control and pushed prices up to the key Fibonacci level at 1.0933, which offered a short bout of resistance as we went into last week’s close. As markets have re-opened for this week, that bullish move has continued and now price action is quite a ways from that prior point of resistance. For traders that aren’t yet long, looking for ‘higher-low’ support around 1.0933 could open the door for top-side plays targeting 1.1000.

Euro Strength, Yen Weakness Headline This Week's Price Action Themes

Chart prepared by James Stanley

Another Leg of Run for Yen Weakness?

Another interesting event from last week was that we finally saw a pullback in the recent run of Yen weakness. Yen weakness became popular again in mid-April, and this is after spending much of 2017 digesting post-Election gains. But as Yen-weakness returned, there was very little pullback as the trend continued without any significant retracement throughout much of the move. But Wednesday and Thursday of last week finally offered a respite to the bearish-Yen trend, and prices in pairs like GBP/JPY, EUR/JPY and USD/JPY pulled back to support.

The big question at this point is whether this retracement is yet over, and shorter-term charts suggest that we’re not quite out of the woods yet. After closing near swing-lows last week in USD/JPY, buyers have returned to push prices higher; but the move hasn’t been left unanswered as bears have come back to offer prices-lower around the prior swing-low of 113.62.

This can be a situation where a trader either a) waits for prices to break back-above 113.61, at which point they can look to use that level as support in the effort of catching a near-term ‘higher-low or b) wait for a deeper retracement to 113.00 or 112.50.

Euro Strength, Yen Weakness Headline This Week's Price Action Themes

Chart prepared by James Stanley

— Written by James Stanley, Strategist for DailyFX.com

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