19-Jun-2020

1) GBP/USD: Failure to Recapture Critical Support Pointing To Further Losses after BOE Blow
2) USD/JPY Buying Opportunity at 106.70/60
3) EUR/USD Holding Strong Resistance at 1.1220/10

1) GBP/USD: Failure to Recapture Critical Support Pointing To Further Losses after BOE Blow

Dead cat bounce – that familiar pattern where a financial asset picks up from the floor but does not go very far – best describes the cable’s behavior. It also resonates with UK Retail Sales figures for May, which showed a leap of 12% – nearly double the expectations – but still down over 13% yearly.

The economy is rebounding but may still stabilize at lower levels – a phenomenon seen also in the US. Initial jobless claims stopped their decline and stabilized at 1.5 million last week while continuing claims consolidated around 20 million according to data for the previous seven days.

Sterling’s biggest blow came from the Bank of England. The “Old Lady” settled for an increase of £100 billion in its bond-buying scheme, and hinted it is slowing down the pace of purchases. Less support from the BOE means fewer funds for the government to spend and provide relief in times of trouble. Moreover, one dissenter that opposed the expansion also weighed on the pound.

Prime Minister Boris Johnson has come under fresh criticism after abandoning plans to use a proprietary contact tracing application but rather technology developed by Google and Apple. The issue joins a long list of troubles as coronavirus cases and deaths remain at higher levels than European peers. The slow pace of exiting the lockdown is another downer.

US COVID-19 hospitalizations and infections continue rising in the Sun Belt, yet the pace is not as alarming as beforehand and markets seem calmer. Nevertheless, a rally planned by President Donald Trump in Oklahoma may turn into a “super-spreader” event according to some.

Rival Joe Biden is leading Trump by 12 points according to a poll by Fox News. Mishandling coronavirus and protests against racial discrimination are weighing on the president’s approval rating as the race to the White House accelerates.

Jerome Powell, who has cautioned that the recovery could be slow, will speak for the third time this week, late on Friday. He will likely repeat the same messages. Volatility will likely be more driven by Wall Street’s “quadruple witching” – expiry of four different types of options which tends to trigger price action.

All in all, pound/dollar is reaching the end of the week on the back foot.

The 1.2460 is proving a strong separator of ranges – it provided support early in the week and now caps any gains. Without overcoming that line, GBP/USD suffers further falls. Momentum on the four-hour chart is to the downside and the Relative Strength Index is above 30 – outside oversold conditions.

Cable is struggling to hold onto the 200 Simple Moving Average and falling below it would also trigger further losses.

Support awaits at 1.2405, the daily low, followed by 1.2360, which was a resistance line in late May. The next lines are 1.23 and .12250.

Resistance above 1.2460 awaits at 1.25, which provided support this week, and 1.2560, a resistance line before the recent fall.

2) USD/JPY Buying Opportunity at 106.70/60

USDJPY longs at 106.70/60 worked perfectly on the bounce to the first target of 106.95/99 with a high 10 pips above. Same levels apply for today.

EURJPY shorts at strong resistance at 120.35/45 worked perfectly on the slide from 120.53 to first support at 119.65/55 for up to 80 pips profit. We bottomed exactly here & longs were offered another 35 pips profit.

USDJPY buying opportunity at 106.70/60 with stops below 106.45. A break lower retests the May low at 106.00/105.95. A break lower is a sell signal targeting 105.70/60 then 105.20/10.

Longs at 106.70/60 target 106.95/99 & resistance at 107.25/35 with strong resistance again at 107.50/60, so a good chance we reverse within this band. Shorts need stops above 107.80. A break higher is a strong buy signal.

EURJPY holding strong resistance at 120.35/45 is negative again today targeting 119.90 & first support at 119.65/55. Again longs need stops below 119.30. A break lower is a sell signal seeing 119.55/65 act as resistance targeting 118.90/80 then a buying opportunity at 118.40/20 with stops below 118.00.

Shorts at 120.35/45 need stops above 120.65. A break higher targets 120.95/121.05.

3) EUR/USD Holding Strong Resistance at 1.1220/10

EURUSD traded from 1.1260/70 to hold support at 1.1220/10 up until the evening session. We are holding below 1.1220/10 over night so outlook is more negative.

USDCAD we wrote: sideways as predicted yesterday & likely to trade in a range from 1.3500/95 up to 1.3660/80 in the days ahead.

Sideways again yesterday as expected ranging from 1.3517 to the 1.3590/1.3600 target.

EURUSD holding strong resistance at 1.1220/10 is a sell signal targeting minor support at 1.1175/70. Below here is a more important sell signal targeting 1.1150/45 & 1.1120/10. A buying opportunity at 1.1090/80 with stops below 1.1060.

Shorts at 1.1220/10 need stops above 1.1235. A break higher targets 1.1260/70, perhaps as far as 1.1290/1.1300 for profit taking on any remaining longs. A selling opportunity at 1.1330/40 with stops above 1.1355. A break higher targets 1.1370/80 before retesting resistance at last week’s high of 1.1415/25. Try shorts with stops above 1.1445.

USDCAD main scalping levels today are 1.3500/95 (held the downside perfectly all this week) & 1.3660/80 with minor levels of 1.3600/1.3590 (hit yesterday) & 1.3550/40 in between as profit taking levels. A break below 1.3490 targets 1.3460/50 then 1.3400/90.

A break above 1.3690 targets 1.3760/70 then a selling opportunity at 1.3850/70, with stops above 1.3890.