Daily Forex Market Preview, 04/02/2016

The US Dollar saw a strong sell-off yesterday as investors questioned the health of the US Economy and the impact of a stronger Greenback. The currency markets yesterday saw most of the currencies posting strong gains against the US Dollar with the NZD and Yen surging strongly. USDJPY erased all its BoJ induced gains while Gold still remained strong touching a 3-month high near $1145. The weaker British Pound also rallied strongly to test $1.46.

EURUSD Daily Analysis

EURUSD (1.08): The Euro rallied to a 3-month high yesterday at 1.1145 as the US Dollar capitulated. As noted in the previous commentary, we were expecting to see a strong momentum led to break out in the EURUSD after weeks of sideways price action. EURUSD managed to break above the inverse head and shoulder's neckline resistance of 1.093 - 1.095 to make it to 1.1082, the 161.8% measured of the inverse head and shoulders pattern. A pullback from here is likely to see the single currency weaken on a decline back to test this newly broken resistance level for support. As long as prices remain above 1.093 - 1.095, EURUSD could be looking to make further gains.

USDJPY Daily Analysis

USDJPY (117.9): USDJPY erased all gains made from the BoJ's surprise negative rates announcement in late January. The Yen strengthened taking USDJPY back to familiar territory testing the established support at 117.25 - 117 region. Price action is currently stuck between 118.5 - 118.00 resistance through 117.25 - 117.00 support and it is quite likely that prices could stay consolidated into tomorrow's NFP release. The bias remains to the upside as long as the 117 support holds, which could see a rally back to 121.2 - 121.5 region, subject to a break in the 118.5 - 118.00 resistance and establishing support here.

GBPUSD Daily Analysis

GBPUSD (1.45): The British Pound surged strongly over the past three days to eventually test the resistance near 1.46.  The Stochastics on the 4-hour chart continues to point to a strong hidden bearish divergence which could see prices fall through down to 1.435 - 1.437 support. A test of support here on what was a previously established resistance level could pave the way for further upside in GBPUSD. In the event of a break below this support, GBPUSD could quickly turn bearish and look to testing the previous lows near 1.41

Gold Daily Analysis

XAUUSD (1142): Gold prices touched a 3-month high yesterday as the precious metal currently trades near the 1140 handle. The upside is likely to stall with resistance level seen near the 1140 - 1145 region. So far, price action has been stalling near the 1140's but a close below the hammer candlestick pattern's low of 1137.25 could signal a correction. Support comes in at 1110 followed by 1100, but there is a bearish divergence showing up which could see a move to the 1090 - 1080 levels. The minor median line plotted on the chart is the key to a breakout to the downside is required for price action to confirm a correction.