A couple of things: as we end the week:
- Longer term: pillars of support still in place for EURUSD strength
- Shorter-term: CADJPY looks lower, GBPUSD also under pressure
Yield is still on the euro's side:
We have seen a bit of consolidation in EURUSD this morning, as the greenback has found its footing after a fairly lacklustre performance this week.
The currency pair is hovering between 1.3690 and 1.3720 as we wait for the US GDP for the fourth quarter, which is released later today.
However, the yield differential between Europe and the US is still firmly in favour of euro strength.
The chart below shows the spread between 2-year EUR and USD swaps (white line).The spread has broken above its previous peak back in October, when EURUSD was heading above 1.40. The spread is now at its widest level since early 2009.
While the euro may take a breather here, and could get hit if US growth for Q4, released at 1330 GMT, is as good as everyone expects, as long as this spread continues to widen then the trajectory for the single currency vs. the greenback is higher, back to the 1.4000 zone.
EURUSD (orange line) and EUR-USD 2-year swap rate.
CADJPY: Testing a key support zone at 82.90/95.
The yen has had a bit of a resurgence since yesterday, while the Canadian dollar is under pressure. The pair is currently testing 82.90 a key area of support: 200-hr moving average and Tenkan and Kijun lines on Ichimoku cloud chart. If this support fails, then we may see back to 82.50 and then 82.10 - the recent lows, and a complete retracement of yesterday's up-move. If support holds then we could back to 83.60/70 the 200-day moving average.
CADJPY Ichimoku cloud chart: if the pair can't hold support at 82.90 we could see it move back into the cloud, which suggests the uptrend is over.
GBPUSD: Ichimoku cloud chart suggests further weakness.
GBPUSD has fallen through key Tenkan support at 1.5905 - and the next support level lies at 1.5827- the top of the cloud. If the pair falls through the cloud then the up-trend in GBPUSD is considered over based on this technical indicator.
The candle stick chart is also looking like there may be further declines in GBPUSD. After forming a doji after Wednesday's bout of strength price action then moved lower. The market held its breath after Tuesday's large declines, but the bears ultimately won out, which leaves them in a strong position as we end the week.
Daily GBPUSD candlestick chart
Kathleen Brooks| Research Director UK EMEA | FOREX.com
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