FOREX: BBDXY Consolidates Overnight Rally
The broader USD holds onto the bulk of its overnight gains, with the BBDXY ~1% higher on the day at typing.
- USD outperformance comes after U.S. President Trump levied fresh tariffs on China, Canada & Mexico and pointed towards action against the EU.
- Initial cross-market reaction to the tariffs has eased a little since a WSJ report pointed to “a sign that China is eager to get trade talks going.”
- USD/CAD has pierced its ‘16/COVID double top, peaking at 1.4793 before fading back to 1.4700, ~160 pips higher on the day.
- USD/MXN was unable to challenge its ’22 high at 21.4676, peaking at 21.2932 before fading back to 21.0835.
- Note that Trump will speak with both Canadian & Mexican officials “this morning.” That news prevented further CAD & MXN losses, with some pointing to the potential for relief.
- EUR/USD printed a fresh cycle low at 1.0141 before recovering to 1.0230.
- JPY a little more shielded than G10 peers given the weakness in equities, although the move lower in USD/JPY has reversed. Spot last +40 at ~155.60 vs. session lows of 154.67. Initial support and resistance of note located at 153.72/156.75, bullish theme intact.
- Eurozone CPI, manufacturing PMIs and the U.S. ISM manufacturing survey provide the datapoints of note today.
- Fedspeak from Bostic & Musalem, as well as comments from ECB’s Simkus, also due.
- Note EU leaders will meet in Brussels, so we may also get some tariff soundbites from that event.
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Historical bullets
JGB TECHS: (H5) Returns Lower
- RES 3: 149.55 - High Mar 22 (cont)
- RES 2: 147.74 - High Jan 15 and bull trigger (cont)
- RES 1: 144.48/146.53 - High Nov 11 / High Aug 6
- PRICE: 142.12 @ 15:01 GMT Jan 03
- SUP 1: 141.65 - Low Dec 30
- SUP 2: 141.56 - 1.764 proj of the Aug 6 - Sep 3 - 9 price swing
- SUP 3: 141.05 - 2.000 proj of the Aug 6 - Sep 3 - 9 price swing
Markets slipped on the hawkish Fed and are yet to fully recover, touching 141.65 on the way lower. Medium-term trend signals on the continuation chart continue to point south. A resumption of the trend would pave the way for a move towards 141.56, a Fibonacci projection point on the continuation chart. A stronger recovery would open 144.48, the Nov 11 high. Further out, key resistance is at 146.53, the Aug 6 high (cont).
USDCAD TECHS: Bull Flag Highlights A Clear Uptrend
- RES 4: 1.4669 2.0% 10-dma envelope
- RES 3: 1.4539 3.382 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 2: 1.4508 3.236 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 1: 1.4467 High Dec 19
- PRICE: 1.4392 @ 15:50 GMT Jan 3
- SUP 1: 1.4336 Low Dec 20
- SUP 2: 1.4307/4232 20-day EMA / Low Dec 17
- SUP 3: 1.4136 50-day EMA
- SUP 4: 1.4011 Low Dec 5
USDCAD is unchanged and bulls remain in the driver’s seat. The latest pause appears to be a flag formation - a bullish continuation signal. Note too that moving average studies are in a bull-mode position, highlighting a dominant uptrend. Sights are on 1.4508 next, a Fibonacci projection level. Initial firm support to watch lies at 1.4307, the 20-day EMA. A pullback would be considered corrective.
AUDUSD TECHS: Southbound
- RES 4: 0.6471 High Dec 9
- RES 3: 0.6408 50-day EMA
- RES 2: 0.6341 High Dec 18
- RES 1: 0.6247/6282 High Dec 30 / 20-day EMA
- PRICE: 0.6204 @ 15:21 GMT Jan 3
- SUP 1: 0.6179 Low Dec 31
- SUP 3: 0.6158 1.236 proj of the Sep 30 - Nov 6 - 7 price swing
- SUP 3: 0.6100 Round number support
- SUP 4: 0.6045 1.500 proj of the Sep 30 - Nov 6 - 7 price swing
A bearish trend condition in AUDUSD remains intact and the pair continues to trade closer to latest lows. Recent weakness maintains the price sequence of lower lows and lower highs. Note that moving average studies are in a bear-mode position too, highlighting a dominant downtrend. Scope is seen for an extension towards 0.6158 next, a Fibonacci projection. Initial firm resistance to monitor is 0.6282, the 20-day EMA.
