The EUR/JPY is closing in on the 76.4% Fibo

The EUR/JPY has been trading in a 200 pip range between the 136.00 level as support and the 138.00 level as resistance. The last time the price tested the 136.00 level, it bounced from that zone to the upside and so far it has retraced more than 61.8%. The next Fibonacci Retracement level to watch is the 76.4%, because this Fibo level is usually a good support or resistance area. Therefore, a possible visit to the 76.4% Fibo could cause the pair to stall there or even bounce to the downside again. But a continuation all the way to the 138.00 level is not completely ruled out.

Scotland’s independence effects

The British Pound has started the week to the downside with a bearish gap versus the Dollar and versus the Yen. This has been caused by the news that the recent polls have shown that during next week’s referendum in Scotland, there is a high likelihood of independence being approved by its citizens.

This has caused many investors to believe that for now the Bank of England will refrain from raising its interest rates and that is why we are seeing weakness on the Pound. The fact that the Bank of England has said that is has no contingency plan in place in case of a Scottish independence is really scaring investors, because nobody knows for sure how that British economy will react to the news.

For now, the Scottish leaders have not said if they will keep the Pound as their currency or if they will create their own currency. This uncertainty is prone to bring more volatility to the markets, especially on the British Pound.

NFP and the US interest rates

The Non-Farm Payrolls report for today came out worse than expected. The market was waiting for a reading of 226 thousand new jobs being created in the United States for the month of August, but the number came out at 142 thousand new jobs created. However, the unemployment rate dropped a little bit to 6.1%.

The weak NFP report has made investors think that the Federal Reserve will not raise its interest rates as soon as it was expected. Many analysts believe that the FED will now take a longer time before raising its interest rates, but we must take into consideration that the US economy is still in a sustainable expansion and in the long run the FED will have to raise its interest rates eventually.

For now the Dollar retraces a little bit versus its major counterparts, but this could just be a small retracement and for next week we may see more gains on the greenback.

The USD/CHF closes in on its 200 Week EMA

The US Dollar has strengthen so much that the USD/CHF is very close to touching its 200 period Exponential Moving Average on the Weekly chart, which is the blue line around the 0.9394 level. We can clearly see on the chart that on the last occasions that the price has visited this EMA, it bounces to the downside. Therefore, another visit to that EMA could have the price stop its rally there and possibly give us a correction.

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The USD/JPY breaks above the 105.00 level

The bullish momentum increases on the USD/JPY after the ISM Manufacturing PMI out of the U.S. came out at 59.0, when the market was expecting 57.0. This is clearly a better than expected reading and that is why the Dollar gains strength. The United States economy continues showing signs of a sustainable economic recovery, which actually supports the idea that the FED may be getting ready to raise its interest rates. This implies more strength for the greenback in the near future.

Technically and fundamentally, this pair still has a lot of potential to keep heading higher. However, in the short run we may see a correction to the 104.35 zone. At the moment the 105.00 level could become support and a pullback to that level could present investors with an opportunity to add to their long positions.

Another possible scenario is that the pair does not go anywhere and it stays consolidated around the current levels, just to catch some air before continuing higher. In that case, all what we can do is patiently wait and see if the prices continues to the 106.00 level.

The EUR/JPY back at the 137.00

The Euro has gone back to the 137.00 level versus the Yen and it seems like it has found a good resistance there. On the daily chart we can see that the price has formed like a Head and Shoulders pattern with two nice tops at the 138.00. In order for the pattern to confirm, the price would have to break the 138.00 to the upside, but another visit to that level could also give us a bounce to the downside. Let’s see if the price breaks above the 137.00.