USD/JPY
Despite May’s 1 ¼ Big Fig losses, this week’s bearish signals for USD/JPY are cautious with prices trading close to their 200 day average rate. Monday’s initial deterioration did in fact attract buyers back to the market from just below the average, the recovery forming a daily Spring Hammer, a signal which usually highlights bearish exhaustion.
With this in mind, the outlook for Tuesday is to buy on the open and at 101.41, today’s low in Asia, with a stop loss at 101.23, the 200 day average rate.
Targets are to 101.67, yesterday’s high, 101.88, Thursday’s opening trade and then to 102.12, Thursday’s high trade.
GBP/USD
The rally from last week's low extended with the Cable bought to higher levels for a 2nd day in a row yesterday. This led to a further testing of the 13 day average but without that point being clearly exceeded. The result was limited net movement that leaves signals difficult to assess, especially with Asian price action being muted. However, while the 13 day avg caps, sentiment is likely to have a negative bias.
So, our call is Cautiously Bearish below 1.6847. The immediate objective is 1.6791, Fri’s open, and a move through that point should see the market focusing on 1.6766 and 1.6732, last week's bottom.
The risk is a move above 1.6847, yesterday's top, to 1.6868 then 1.6892, May 9th Marabuzo line.
FTSE
Despite Monday’s initial FTSE 100 losses extending a sequence of lower daily lows, investors have bought into weakness for sentiment to recover and close just modestly lower on the day. The FTSE 100-DAX spread is testing a weekly bear trend, a break which should see a downside correction. This hasn’t occurred yet though and yesterday’s sell-off has failed to end a long sequence of higher weekly lows, which is supporting sentiment.
With this in mind, but with intraday sentiment overstretched, the outlook for Tuesday is to buy modestly on the open and then at 6810.0, with a stop loss at 6786.5, yesterday’s low.
Targets are to 6852.5, yesterday’s high, 6880.0, Thursday’s 14 year top and then towards 6900.0.