EURUSD surges and looks back toward the highs from last week. Above its 100 day MA.

Dollar selling as investors shun the safety of the USD.

Whether right or wrong, the Pavlovian reaction on risk on flows is for the USD to get hit. That has the EUR racing higher today. The range is currently 90 pips. The average over the last 22 days has been 77 pips. Good buying demand in the pair.  

Dollar selling as investors shun the safety of the USD.

Technically, going back to yesterday's trading, the pair start the week by falling below its 200 hour moving average for the 1st time since May 18. However a trendline connecting lows from May 14, May 15 in May 18 stalled the fall and once back above the 200 hour moving average, the price has stayed above that level (see green line).

In trading today, getting above the 100 hour moving average at 1.0931 area (blue line) give more confidence to the buyers. The price raced even higher. The last 4 hours the price has traded above and below its 100 day moving average at 1.09573, with a New York opening surge to new highs for the day at 1.09796.  

Close risk now will be eyed at the 100 day moving average at 1.09573. Stay above that level and the buyers are in full control. Move below and the waters are little bit more muddy, especially given the waffling above and below of the last few hours. The buyers are making another play above and away from the 100 day moving average. Staying above would give those buyers the most confidence (and scare the sellers).

Looking at the daily chart below, if the price can stay above the 100 day MA, the 1.09885 area will be eyed with the falling 200 day MA (marginally) at 1.10099 as the next key target.  The price has not been above the 200 day MA since March 30. 

EURUSD on the daily chart



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Nikkei 225 closes higher by 1.73% at 20,741.65

The Nikkei posts its highest daily close since 6 March

Nikkei 25-05

There is some sense of positive risk vibes to start the week, although the Hang Seng and Chinese stocks are seeing more outflows amid tensions surrounding Hong Kong. That said, the declines are off their earlier lows today.

The Hang Seng is down by 0.5% now with Asian investors not really shuddering as what we saw towards the end of trading last week.

That said, with UK and US markets closed today, it is hard to really gather much from the moves and major currencies are still looking lackadaisical for the most part so far.

Narrow ranges are prevailing with EUR/USD a tad lower at 1.0887 - but in a 22 pips range.



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Germany DAX looks for a break amid rise to fresh highs since 6 March

The DAX goes in search of another leg higher

DAX

The index is now gaining by nearly 2% on the session, looking to hold a break above the 30 April high @ 11,235.57. It is now trading to its highest level since 6 March.

The market is adopting a more risk-on approach to kick start the week, although that is largely limited to the equities space for the time being. European bonds and major currencies aren't really showing much enthusiasm throughout the session so far.

But from a technical perspective, this break could keep the run higher in the DAX going towards a test of its key daily moving averages now.

For some context, the DAX is trading up by nearly 37% from the low this year on 16 April.



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USD/JPY extends consolidation phase to start the week

USD/JPY is little changed close to 107.70

USD/JPY H1 25-05

The pair continues to consolidate around 107.50-80 for the most part since last week, with a firm break above 108.00 still proving elusive while downside momentum continues to be limited by the key hourly moving averages - in particular the 200-hour MA (blue line).

That is keeping buyers in near-term control for now despite some slightly positive risk tones in the market, although stock gains have pared back a little to start the session.

For USD/JPY, price action remains largely contained in a consolidation phase for now.

With UK and US markets closed, the pair is unlikely to find any real conviction to break away from that in trading today.

Looking ahead, the risk momentum remains key but the pair also has to balance out the action in Treasuries - which have been rather range-bound for the most part recently.

That said, the technical picture in USD/JPY is pretty clear. For buyers, they need to hold a firm break above 108.00 to challenge the key daily moving averages @ 108.32-42 next. As for sellers, they need to break back below the 200-hour MA to get the ball rolling.



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EUR/USD upside momentum begins to wane as buyers lose near-term control

EUR/USD continues to back away after a failed attempt to move above 1.1000

EUR/USD D1 22-05

The move higher this week managed to get above the 100-day MA (red line) but buyers could not do more to to break above 1.1000 or to test the 200-day MA (blue line) @ 1.1014.

As such, sellers have leaned on those levels and are helped by the more defensive risk flows in the market - amid risk-off vibes - to push the pair lower over the past few sessions.

The move now is also breaking below the broken trendline as seen above and is keeping under the 100-day MA, so that will give sellers more incentive to keep the move going.

Looking at the near-term chart:

EUR/USD H1 22-05

Things are also not looking good for buyers as we see price action now fall back under its 100-hour MA (red line). That means the near-term bias has turned from being more bullish to being more neutral currently.

The next near-term support is seen closer to 1.0900-02 before revisiting the 200-hour MA (blue line) @ 1.0878. The latter will be a key spot to watch as a break below that will allow sellers to seize near-term control and build further momentum.

As for buyers, the first immediate topside target will be to regain territory above the 100-hour MA @ 1.0933. There is still much work to do even after that, having to then chase the 100-day moving average @ 1.0965 before re-approaching resistance @ 1.1000-14.



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Cable falls to fresh four-day lows under 1.2200

GBP/USD slips to its weakest levels since the start of the week

GBP/USD H1 22-05

The pair is continuing to move lower as the dollar is seen extending gains to start the session, with risk sentiment continuing to stay sour amid Hong Kong-China tensions.

For cable, this sees price fall back under 1.2200 to its lowest since Monday as sellers look to keep below the near-term support at 1.2186 seen yesterday.

Notably, the topside moves over the past few sessions have been stalling around the key hourly moving averages and that is helping sellers to keep the downside pressure going.

Those levels remain the key line in the sand in the event of any threat of a return back to the upside in the pair ahead of the weekend (long weekend in the UK).

As such, sellers are now in near-term control and are looking poised to keep the downside momentum going amid the softer risk mood in the market.

The pound also has its own issues with short-term UK bond yields starting to get accustomed to negative territory amid more negative rates chatter by BOE policymakers.

That and Brexit risks will continue to pose challenges for the quid in the coming weeks.



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Dollar extends gains to start the session

The dollar and yen are continuing to benefit from the risk-off mood

AUD/USD H1 22-05

The greenback is advancing further across the board amid the continued selloff in risk as we begin European morning trade. AUD/USD is down to a session low of 0.6516 now with the dollar also seen rising to session highs against the euro, pound, and loonie as well.

Notably, AUD/USD is continuing to keep a break under its 100-hour MA (red line) with the next key support being at the 200-hour MA (blue line) @ 0.6500.

European stocks are pressured alongside US futures on Hong Kong-China tensions, with the Hang Seng index being down by over 5% adding to the worries so far today.

For AUD/USD, there is also some added support from the 100-day moving average at 0.6495. But break below the region of 0.6495-00 and sellers will seize back control.



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Cable claws back some losses but buyers still have more work to do

GBP/USD nudges higher to 1.2230 from 1.2200 earlier

GBP/USD H1 21-05

The lows today leaned on support from the 50.0 retracement level of the slight bounce higher during the start of the week, before making its way back above the 100-hour MA (red line) @ 1.2198. That sees the near-term bias keep more neutral for now.

Coincidentally, the nudge higher here comes after the UK PMI release earlier, which honestly I wouldn't ascribe this move to, but it is what it is.

Nonetheless, the near-term picture in cable remains more or less unchanged.

Buyers are now moving back towards a test of the 200-hour MA (blue line) @ 1.2236. Keep below that and the bias stays more neutral. Break above and the bias then turns more bullish, and buyers can try to work back some upside momentum.

That said, the resistance region around 1.2275-00 remains a key spot that sellers are holding on to as seen earlier in the week. That will represent the key line in the sand for the pair should we see this upside move extend, for any reason.

The risk mood is still keeping softer on the session and that is helping the dollar to stay underpinned for the most part. As such, cable buyers will have their work cut out for them to try and break the 1.2275-00 region if the current mood continues.

On the pound side of the equation, negative rates chatter, Brexit risks, and the UK's struggles to deal with the coronavirus outbreak are still negative factors to consider.



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Risk stays pressured to start the session

The dollar continues to benefit from the softer risk tones

DAX

  • France May flash services PMI 29.4 vs 28.2 expected

  • Germany May flash manufacturing PMI 36.8 vs 39.4 expected

  • Eurozone May flash services PMI 28.7 vs 25.0 expected

The euro area PMI releases didn't offer much insight on what to expect next as all it did is basically tell us that economic conditions in May are not as bad in April, but still some way off pre-coronavirus crisis levels.

The market had a more 'sensible' reaction as investors looked past the headline beats in the services and composite prints to digest the details instead.

As such, the risk mood is staying on the defensive as we have seen from Asia Pacific trading with US-China tensions stealing the headlines at the start of the day.

European stocks are down near the lows now, with the DAX falling by roughly 1.4%, as we see US futures also keep lower by around 0.7%. The S&P 500 remains a pivotal chart to watch, as the index closed in on a test of its key daily moving averages yesterday.

It is still early in the session to be drawing conclusions about how risk trades will play out for the rest of the day but for now, there isn't any change after the euro area PMI releases.




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EUR/USD stalls ahead of the key area around 1.1000/20

EUR/USD up 70 pips today

The euro today rose above yesterday's high of 1.0975 but has stalled ahead of 1.1000 and the May high of 1.1018. The chart is showing the same kind of range and triple-top formation as a number of assets. Some -- like AUD/USD and the SPX -- are tentatively breaking out and that might be dominoes falling.

EUR/USD up 70 pips today

Here's the view from JPMorgan's London FX desk:

Yesterday saw the euro shoot up to 1.0975 in the early part of our session, only to see it spend most of the remainder of the session on the defensive, battling what appeared to be an overhang of newly minted, very short term positioning. With equity markets robust in general and the macro community broadly short euro, even without the Merkel/Macron news a moderate, temporary correction to the topside would have been understandable, but the announcement of the proposal of the 500bn euro aid fund sped that process up. There remains plenty of scepticism out there that all 27 EU countries will agree on this proposal, which issues grants, not loans, based on need across the region, but the possibility of it has spurred an element of optimism. Meanwhile, re-openings continue to power forward, so far without any big surprises. This is helping equity market sentiment, although I do feel that the market is choosing to see the glass half full side of just about everything right now. This was evident yesterday as major doubt was cast on the legitimacy of the data released by Moderna around vaccine testing results. While the broad markets did sell off a bit on this, they have since bounced somewhat. This sort of price action has been typical recently and makes us want to remain biased towards a short USD stance, at least for now. The euro frankly did not feel great for much of yesterday and 1.1000/20 is a very important level, so I am back on the sideline there after a tactically bullish day trade. I would note that asset managers were buyers of euro yesterday, and if we see a persistence of this sort of flow against a backdrop of still ample spec shorts, I would consider revisiting a tactical long. I also continue to like running short USD positions versus other currencies like RUB and MXN. For the euro, 1.0910/20 is the area to watch below, followed by 1.0870/80. As mentioned above the topside area of focus is 1.1000/20. A break and close above the latter would put further pressure on shorts. 



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