Daily Forex Market Preview, 05/10/2016
The US dollar is trading strong against the yen with USDJPY now into a 6-day winning streak. Ahead of today’s ISM non-manufacturing PMI and ADP private payrolls data, the technical outlook in USDJPY is biased to the downside with a pull back to 102.00 remaining a possibility. The overall trend in USDJPY remains to the upside, with the possibility of the dollar reaching to 106.00 in the near term.
USDJPY (102.88): USDJPY broke out to the upside, clearing 102.00 resistance with the price now into a six day winning streak. Any pullbacks are likely to be limited towards 102.00 which could be tested for support, paving the way for further upside to 106.00. On the 4-hour chart, price action closed with a hanging man candlestick pattern which comes at the top end of the rally and near the short-term resistance of 103.00. To the downside, a pullback should see USDJPY fall towards 102.00 - 101.60 support but a breakout above 103.00 could signal continuation.
GBPUSD (1.2734): GBPUSD continued its bearish momentum after breaking down below August lows of 1.2874. The falling price channel shows the decline in the prices with the 4-hour sessions currently slowing both in momentum and the range. If the most recent 4-hour session's doji close is anything to go by, GBPUSD could be posting a correction in the near term with 1.2800 likely to be challenged. The bias remains to the downside, but a correction to retest 1.2874 for resistance is quite likely. The bearish view changes should GBPUSD managed to reclaim 1.2874 in which case the upside momentum could see the cable fill the gap at 1.2980.
AUDUSD (0.7635): The Australian dollar completed the head and shoulders pattern as prices fell to 0.7610 neckline support yesterday. However, the declines were quickly met by a strong reversal off the neckline support sending prices back higher. In the near term, the minor support at 0.7649 will now be challenged, and if the level turns to resistance, we could expect further declines, even potentially breaking out below the neckline support. However, should AUDUSD see a strong continuation with the bullish pattern above 0.7649, the head and shoulders pattern would be invalidated.