Euro ended as the worst performing one after the post ECB rally faded quickly. It’s clear that ECB would lag behind other major central banks in stopping to add stimulus, not to mention raising interest rate. The selloff in Euro also dragged down Sterling, as both were sold off against Swiss Franc. Australian Dollar ended as the strongest after RBA gave up defending the yield curve control. New Zealand Dollar followed as next strongest on expectations of further RBNZ rate hikes. Canadian Dollar was also firm after hawkish BoC, but was capped by mild retreat in oil price.
Looking ahead, the broad outlook in Dollar and Yen would probably turn mix. On the one hand, there is prospect for Yen pairs to gyrate lower, in corrective way, if benchmark US yield reverses from current level. On the other hand, risk-on sentiment is set to continue with DOW, S&P 500 and NASDAQ making new record highs. That could also cap rallies in Dollar and Yen. The theme for the near term would likely be selloff in Euro, in particular against commodity currencies.
NASDAQ to target 15665 projection level first as record run resumed
In the US, all DOW, S&P 500 and NASDAQ finished October at new record highs, as buying stayed solid towards the end of the week. Near term outlook in NASDAQ will now stay bullish as long as last week’s low at 15070.74 holds. The index should target 61.8% projection of 13002.53 to 15403.43 from 14181.69 at 15665.44 next. Sustained break there should indicate upside acceleration, which sets up a Santa Claus rally till the end of the year. NASDAQ should then target 100% projection at 16582.59.
10-year yield lost momentum ahead of 1.7 handle
10-year yield has lost much upside momentum as seen in daily MACD, after hitting 1.691. A short term top is likely in place but consolidation should be relatively brief as long as 55 day EMA (now at 1.480) holds. But we’re also not expecting a break of 1.765 high soon. On the other hand, break of 1.480 could bring deeper retreat to 61.8% retracement of 1.128 to 1.691 at 1.343 to completion the falling leg from 1.691.
Dollar index stays near term bullish, drawing support from 55 day EMA
Dollar index stayed strong rebound after drawing support from 55 day EMA (now at 93.38). Such development keeps near term outlook bullish. Yet, it still needs to break through key medium term fibonacci level of 38.2% retracement of 102.99 to 89.20 at 94.46 to confirm buying momentum. Otherwise, consolidations would extend for while. Also, if DXY breaks to the upside without accompanying movement in 10-year yield, it’s probably more due to selloff in Euro rather than buying in Dollar.
Euro looking rather bearish in some crosses
EUR/CHF dived to as low as 1.0567 last week as down trend from 1.1149 accelerated. Near term outlook will stay bearish as long as 1.0694 support turned resistance holds. Next target is 100% projection of 1.1149 to 1.0694 from 1.0936 at 1.0481. Based on current momentum, 1.0505 low looks rather vulnerable. Firm break there will resume long term down trend from 1.2004 and target 61.8% projection of 1.2004 to 1.0505 to 1.1149 at 1.0223.
EUR/AUD’s fall also continued to as low as 1.5356. Near term outlook will stays bearish as long as 1.5523 resistance holds. Retest of 1.5250 low should be seen next. Firm break there will resume larger down trend from 1.9799 to long term fibonacci level at 61.8% retracement of 1.1602 (2012 low) to 1.9799 at 1.4733. It’s a bit to early to judge. But sustained break of 1.4733 could set the stage for medium-to long term fall to 61.8% projection of 1.9799 to 1.5250 from 1.6434 at 1.3623.
Outlook in EUR/CAD is not much better. Further fall is expected as long as 1.4440 resistance holds. Firm break of 1.4263 long term support level would be a rather bearish sign. That should set the stage to extend the down trend to 100% projection of 1.5783 to 1.4580 from 1.5096 at 1.3893 next.
EUR/USD Weekly Outlook
EUR/USD rebounded to 1.1691 last week, but was rejected by 55 day EMA and fell sharply from there. It’s also kept inside near term falling channel. Thus outlook in the pair stays bearish. Initial bias is now on the downside this week for 1.1523 support. Break there will resume the fall from 1.2265, and that from 1.2348 too, for long term fibonacci level at 1.1289 next. For now, further decline is expected as long as 1.1691 resistance holds, in case of recovery.
In the bigger picture, price actions from 1.2348 should at least be a correction to rise from 1.0635 (2020 low). As long as 1.1908 resistance holds, deeper fall would be seen to 61.8% retracement of 1.0635 to 1.2348 at 1.1289. Nevertheless break of 1.1908 resistance will revive medium term bullishness and turn focus back to 1.2348 high.
In the long term picture, EUR/USD has possibly failed 1.2555 cluster resistance (38.2% retracement of 1.6039 to 1.0339 at 1.2516) already. Long term outlook will remain neutral as sideway pattern from 1.0339 (2017 low) is extending with another medium term fall. For now, we’d hold back from assessing the chance of downside breakout, and monitor the momentum of the decline from 1.2348 first.