US Dollar restores bullish undertone
DXY sharp reversal from 100 (13th April high at 99.99) passed through support zone of 95-96.50 for stretch into lower end of set strategic base at 93-94.50 (15th May low at 93.13) before recovery into 96.50. The downside trigger was from delay in FED rate hike shift, and back into bullish rhythm is from front-load of QE by ECB. What next? DXY focus is now at 94.50/95.50-98.50/100 in bullish consolidation mode with target into 98.50-100.
EUR/USD is at mid-point of 1.05-1.15 (at 1.10) post reversal from end of recovery zone of 1.1450-1.1500. The relief recovery from 13th April low of 1.0519 is seen to be done at 15th May high of 1.1466) shifting focus into 1.05-1.0750. For now, set focus at 1.07/1.0750-1.11/1.1150 with bias into lower end, ahead of hold at 1.0450-1.05.
USD/JPY held firm (and steady) at set strategic support zone of 118-118.50 (30th April low at 118.47) despite price volatility against other currencies. The recovery from here (in traction with DXY recovery) hit 121.56, short of set resistance zone of 121.85-122.00. Over all, it has been back-and-forth mode at 118.50-122 (against DXY swings at 93-100). The bullish momentum is good to take out 121.85-122.00 for 123.65-124.15. BOJ would be happy to see JPY at June 2007 levels from October 2011 high of 75.55.
GBP/USD had mirror impact with EUR/USD, first at 1.45-1.55 (Euro at 1.05-1.10), and then for upward shift at 1.50-1.58 (Euro at 1.07-1.15) before down at 1.5450-1.55 (against Euro at 1.10). For now, resistance at 1.56-1.5650 is seen to hold for test/break of 1.5450 into 1.51.
Rupee under pressure with most cues against
The moves since April is to the script! USD/INR bullish undertone identified at 62.00-62.15 for sharp recovery into 64.20-64.35 (end May'15 $ sell zone of 64.35-64.50) before correction into 63.20-63.45 (end June'15 $ support at 64.00). It's all done with 62.07 to 64.28 to 63.45 moves. What next? The short term outlook is retained for $ bullish consolidation at 63.20/63.45-64.60/64.85 against 12M $ sideways mode at 67.75/68-69/69.25. Rupee will be under pressure from external headwinds (diluted FII appetite for India, DXY bullish momentum and squeeze in India-US yield spread) and domestic cross winds (from growth-inflation conflicts and bearish undertone on equity & bond markets) to set up rest of 2015 trading range of 63-66 with immediate bias into higher end before recovery into 63 in H2/FYI6. With immediate focus at 63-64.50 (lower-half of big picture focus at 63-66), it is prudent to stay risk-off on imports (and short term carry-trade $ liabilities) at 63-63.50, while exporters await $ recovery into 63.85-64.00 and 64.20-64.35 ahead of 64.60-64.85. For the week, retain zoom-in focus at 63.45-63.95 (within 63.20-64.20). See huge $ bids at 63.20/63.35-63.50 from most stake holders including RBI.
EUR/INR traded to the script from 71.00-71.25 to 65.50-65.75 to 73.00-73.25 to now at 69.50-70.00. What next? Post the extreme price volatility at 66-73, it is now around mid point at 69.50. Combination of EUR/USD pressure into 1.05-1.0750 and USD/INR gains into 64.20-64.35, near term focus is set at 67.50-70.50 with bias into lower end. Hold short entry at 73.00-73.25 for 67.50-67.75 with trail stop revised down from 71.50 to 70.50.
Good luck & have a great week ahead!
Moses Harding
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