16 Jul 2013
Flash: Short term risks point to follow-through USD weakness - JPMorgan
FXstreet.com (Barcelona) - The late-week reversal for the USD suggests a short term corrective phase is underway, notes Nial O'Connor, Currency Strategist at JP Morgan Securities.
The abrupt retreat off multi-month highs, according to O'Connor, "highlights the importance of the next line of key resistance levels including the 84.50/93 zone for the DXY, as well as the critical 1.28/1.2745 zone for EUR/USD and the 1.4835/1.4785 zone for GBP/USD." The fact that reversals from these levels developed with an impulsive bias, O'Connor thinks "the short term risks point to follow-through USD weakness particularly as the overbought short term momentum studies have yet to be unwound."
Consistent with O'Connor view of more corrective work in the USD looming, is the bearish reversal weeks against EUR, GBP, CHF, JPY and SEK, as well as the DXY. However, from a broader perspective, "we sense this retracement will be a short term development rather than a more protracted corrective as the improved medium term landscape remains supportive for additional USD upside" O'Connor added. JPMorgan and O'Connor continue to communicate to its clients their strategy to hold long USD positions against EUR, NOK, and CAD, although they admit, "we will await better levels to add to our core long position."
The abrupt retreat off multi-month highs, according to O'Connor, "highlights the importance of the next line of key resistance levels including the 84.50/93 zone for the DXY, as well as the critical 1.28/1.2745 zone for EUR/USD and the 1.4835/1.4785 zone for GBP/USD." The fact that reversals from these levels developed with an impulsive bias, O'Connor thinks "the short term risks point to follow-through USD weakness particularly as the overbought short term momentum studies have yet to be unwound."
Consistent with O'Connor view of more corrective work in the USD looming, is the bearish reversal weeks against EUR, GBP, CHF, JPY and SEK, as well as the DXY. However, from a broader perspective, "we sense this retracement will be a short term development rather than a more protracted corrective as the improved medium term landscape remains supportive for additional USD upside" O'Connor added. JPMorgan and O'Connor continue to communicate to its clients their strategy to hold long USD positions against EUR, NOK, and CAD, although they admit, "we will await better levels to add to our core long position."