The pick of the day is USD/JPY. As predicted the pair danced down to the 50% Fibonacci level where I had previously set a bullish entry order. It hit my long position last Thursday and started dancing back up again. This 50% Fibo level seems to be really hard to break! If the pair breaks above the Ichimoku cloud, next targets could be previous tops at 104.129 and 105.440. Personally I’ve decided to be less greedy this time and have moved my limit order a bit lower than the target, because my accounts usable margin is thinning due to many open positions with high margins. Now a break below 100.3 would turn our bullish outlook to bearish, with 96.38 and 94.077 at alternative targets.

A quick word with our Japanese followers, 来月から日本語で為替市場レポートをお伝えしますから、是非日本語バージョンも見にきてください！！

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Weekend Summary & the week ahead

The weekend was filled with comments from ECB members about their desire for a weaker euro and the current strength of it being the cause of their problems. Speaking at the IMF meeting over the weekend, Mr Draghi and co. were singing off the same sheet, by where the ECB continues to stand ready for action and ‘further strengthening’ of the euro would lead to policy action. The continued rhetoric from the ECB comes down to talk being cheap; they’d far rather let well placed words do their bidding for them than have to go through, what could be, a political minefield if they were to actually implement asset purchases. The market isn’t stupid though and this strategy has become less and less effective, with this weekend’s open is a prime example; the euro dropped 35 pips on open and then got them all back again within a few hours. So perhaps ‘a little less conversation a little more action, please’.

Another market action from the weekend has been a flight to quality on news that gunfire has been exchanged between Ukrainian special forces and pro-Russian separatists. Gold is up by about $9 and energy prices also rose as the Ukrainian PM warned of a full scale anti-terrorist operation that could risk a full conflict with Moscow. A morning deadline has just passed in the Eastern town of Slaviansk for rebels to give up their arms, so we could see this now escalate very swiftly (minutes and hours rather than days). On what appears to be a less serious note than that, but is pretty big in its own right, Ukraine’s state run gas company as suspended payments to Russia until talks are concluded.

George Osborne voiced his opinion on Friday, that we “need to be ready for an increased level of volatility” in the market, but that it should be expected to return to normal at some point. Mr Osborne wants the City to be aware of this in the hope that they can price in these factors ahead of time to try and limit knee jerk reactions. He warned that future interest rate rises, sanctions against Russia and possible policy action from the ECB could create a triple threat to financial stability.

In UK economic news, there were some very disappointing construction data released on Friday. The numbers show anaemic growth of just 0.3% in the last quarter for the sector and activity being more than 13% down from its 2007 peak. Possibly due to this lack of output, house prices continue to climb and have hit another record high in April, having risen by an average of 2.6%. You’ll now have to part with £262,500 to buy an average UK house. The Telegraph has an interesting article that suggests that for the first time in six years wage rises are set to outstrip inflation. Data out this week, is likely to show that the rise in demand for labor, coupled with low inflation has led to long overdue inflation beating pay rises.

Looking to this week, investors will have a tough time making a decision with so much geo-political noise taking up the news wires. If we were to strip this out, we’d see a pretty steady stream of data that would otherwise be of note. US retail sales today are expected to show a decent level of growth which should put the adverse weather story to bed. We will also hear from Janet Yellen on Wednesday, along with the Federal Reserve’s Beige Book, which will give an idea of how the recovery is going on a region by region basis.

The UK gets quite a bit of attention, with retail sales and inflation numbers tomorrow and unemployment on Wednesday, so we could see some renewed interest in the Pound, which lost a lot of the ground that it made up in the middle of last week, thanks to those poor construction numbers.

The point of interest for us this week will be the US dollar. Over the last week we saw a pretty large exodus from the Greenback, which is counter intuitive when the market is risk averse. With Ukraine very much back in focus and stock markets looking to diversify, we’d be unwise to bet against Uncle Sam making a comeback.

Intraday Technical Levels

EUR/USD Intraday: the downside prevails.

Our preference: Short positions below 1.3865 with targets @ 1.38 & 1.377 in extension.

Alternative scenario: Above 1.3865 look for further upside with 1.388 & 1.3905 as targets.

Comment: The pair has broken below a rising trend line and remains under pressure.

Supports and resistances:
1.3905
1.388
1.3865
1.3827 Last
1.38
1.377
1.375

GBP/USD Intraday: key resistance at 1.676.

Our preference: Short positions below 1.676 with targets @ 1.6705 & 1.668 in extension.

Alternative scenario: Above 1.676 look for further upside with 1.679 & 1.682 as targets.

Comment: As long as the resistance at 1.676 is not surpassed, the risk of the break below 1.6705 remains high.

Supports and resistances:
1.682
1.679
1.676
1.6713 Last
1.6705
1.668
1.666

Our preference: Short positions below 101.9 with targets @ 101.2 & 100.8 in extension.

Alternative scenario: Above 101.9 look for further upside with 102.15 & 102.4 as targets.

Comment: The pair is posting a rebound but stands below its resistance.

Supports and resistances:
102.4
102.15
101.9
101.735 Last
101.2
100.8
100.45

USD/CHF Intraday: rebound.

Our preference: Long positions above 0.8755 with targets @ 0.8805 & 0.8825 in extension.

Alternative scenario: Below 0.8755 look for further downside with 0.8735 & 0.8695 as targets.

Comment: The pair is rebounding and is breaking above its resistance.

Supports and resistances:
0.8845
0.8825
0.8805
0.8789 Last
0.8755
0.8735
0.8695

NZD/USD Intraday: capped by a negative trend line.

Our preference: Short positions below 0.869 with targets @ 0.8625 & 0.861 in extension.

Alternative scenario: Above 0.869 look for further upside with 0.8725 & 0.8745 as targets.

Comment: The RSI is capped by a declining trend line.

Supports and resistances:
0.8745
0.8725
0.869
0.866 Last
0.8625
0.861
0.857

AUD/USD Intraday: bullish bias above 0.9375.

Our preference: Long positions above 0.9375 with targets @ 0.943 & 0.946 in extension.

Alternative scenario: Below 0.9375 look for further downside with 0.933 & 0.929 as targets.

Comment: Even though a continuation of the consolidation cannot be ruled out, its extent should be limited. The pair is supported by a rising trend line.

Supports and resistances:
0.954
0.946
0.943
0.9406 Last
0.9375
0.933
0.929

USD/CAD Intraday: supported by a rising trend line.

Our preference: Long positions above 1.0945 with targets @ 1.1005 & 1.103 in extension.

Alternative scenario: Below 1.0945 look for further downside with 1.09 & 1.0855 as targets.

Comment: The break above 1.0945 is a positive signal that has opened a path to 1.1005. The pair has broken above a declining trend line and is supported by a rising one.

Supports and resistances:
1.105
1.103
1.1005
1.0971 Last
1.0945
1.09
1.0855