RBA coming up today. Also Trade Balance, Services PMI .
Currencies traded in a narrow ranges today against the US$ as focus shifts to the central bank meetings, beginning today with the RBA and to be followed on Thursday by the ECB/BOE. Look for more of the same again, although the Aud$ may see some volatility, as aside from the RBA, we get the Trade Balance, the Services PMI, and from China, the HSBC Services PMI. NZ gets Jobs/Fonterra auction tomorrow. Later in the day the focus will be on the EU & US Services/Composite PMI’s, the US ISM Non-Mfg PMI and US Factory Orders.
EUR/USD: 1.3420
There is little to add today as the markets trade in tight ranges ahead of Thursdays ECB meeting, with only the US Non Mfg ISM, due later in NY, to provide any real chance of volatility.
The charts are pretty much unchanged, with the only difference being that the short term charts have now more or less unwound their oversold condition and should continue to flatten out in the coming session.
While the major downtrend remains intact, ahead of the likely dovish bias from the ECB, it looks as though we could continue to hang around current levels where the 200 WMA continues to act as a magnate. We could yet get a short term squeeze higher, above today’s 1.3430 high towards Friday’s high at 1.3445 (daily Tenkan). Beyond there, 1.3500 and 1.3515 – descending trend resistance/23.6% of 1.3993/1.3370 will see good sellers. If we get above here, which looks doubtful, the daily Kijun at 1.3530 will provide minor resistance, but above which there could be quite an acceleration given that the market is extremely short of the Euro – (CFTC figures show Euro shorts at a 2 year high) – and we could then see a run up towards the base of the previous wedge (blue line) at 1.3560 and on to the next Fibo resistance at 1.3605 (38.2% of 1.3993/1.3370/daily Cloud base).
As we previously said, the longer term bullish dollar trend remains intact and although I doubt that we head much below 1.3400 today, if/when we do see a sustained break, then we would see another run towards last weeks low at 1.3370. Below this would head towards 1.3340 (100 WMA) and 1.3294 (7 Nov ’13 low). More distant target would be at 1.3228 (61.8% of 1.2754/1.3993) and then 1.3104 (6 Sept ’13 low).
In the bigger picture, as we have said before, the eventual target for the dollar appears to be the 9 July low 2013 at 1.2754. Again, as before, don’t get too excited yet, if it turns out to be correct, I think it will be a choppy and relatively orderly progression and there should be plenty of opportunity to get on board into the odd, intermittent short squeeze. I think we are in the process of seeing one of these squeezes now and it could be that we have an opportunity ahead of us to sell the Euro in the 1.3500/50 area. Alternatively, shorter term traders may look for dips to be short term buy opportunities as the squeeze gathers pace.
Expect a similar day today, with the chance that the US data will provide some volatility, but the medium term strategy remains unchanged in looking for levels to buy dollars/sell Euros.
Economic data highlights will include:
EU Services/Composite PMI’s, US Services/Composite PMI, ISM Non-Mfg PMI, US Factory Orders
Meta Trader – AxiTraderEUR/USD: 4 Hour
USD/JPY: 102.55
US$/Jpy is unchanged today, after trading a 102.40/73, range and looks as though it could be more of the same ahead unless the US data/bond yields, later in the session, provide a reason for some volatility.
Technically there is little change, although the shorter term charts continue to unwind their overbought condition and it is possible that we could see a retest of today’s low, where support lies at the previous descending trend resistance at 102.40 (Friday’s low 102.34)and possibly to the 200 DMA (102.18) and 100 DMA (102.05). Below 102.00 appears unlikely for the time being, but if wrong, look for a run back to the Fibo level at around 101.75 which previously acted as a pivot.
On the topside, 102.70/80 is going to be immediate resistance ahead of 103.00, and the view remains that dips appear to be buying opportunities for an eventual resumption of the more medium term rally. If 103.00/10 – where the descending trend resistance currently lies – can be taken out, then we would most likely be in for an acceleration towards the 3 April high at 104.10. This looks to be some way off at this stage and I doubt that we see it this week but beyond 104.10 the next target coming into view would be the 21 Jan high at 104.74.
Look for another narrow session, using 102.35/102.75 as a guide
Meta Trader – AxiTraderUSD/JPY: 4 Hour
GBP/USD: 1.6858
Cable found good support at the 1.6813 low (1.6810; 76.4% of 1.6692/1.7191) and squeezed back up to finish at close to the day’s highs of 1.6860 (100 DMA). The UK Services PMI will provide the reason for any action today, and from a technical point of view it looks as though Cable could yet squeeze a little higher. The 4 hour charts continue to unwind their oversold condition and if 1.6860 can be overcome then we could see a run towards 1.6875 (daily cloud base) and possibly 1.6900 where Fibo resistance (23.6% of 1.7192/1.6815) lies.
On the downside, 1.6810 will again provide decent support. I doubt we head below here today, but if wrong, below 1.6800 we would head back into the messy consolidation, the base of which is at roughly 1.6740, but a break of which could see a return to the 29 May 1.6692 low.
As with yesterday’s outlook, ahead of the BOE meeting on Thursday, some more 1.6800/1.6900 would not surprise, and if today’s Services PMI is firm, then we could see Cable reasonably well underpinned as we head towards the BOE.
Economic data highlights will include:
UK Services PMI
Meta Trader – AxiTraderGBP/USD: 4 Hour
USD/CHF: 0.9065
US$/Chf is pretty much unchanged today in closing the US session at 0.9065.
As elsewhere, while the medium term dollar uptrend still appears largely intact, it looks as though the coming session could again be largely spent in consolidating the gains, ahead of Thursdays ECB meeting.
The shorter term charts suggest that we could yet be in for a test of minor support at 0.9035/40, a break of which may be the hint of the start of a deeper correction although I don’t really see it happening today. If wrong, below 0.9035 would take the dollar back towards the previous sticky level in the 0.8990/0.9010 range, which would need to hold in order to avoid a test of the rising trend support, currently at around 0.8950 and the 200 DMA at 0.8940.
While any decent move to the topside would appear to be on hold for the coming session, the longer term upside targets remain intact, if/when we can make a sustained break of 0.9100. That being the case, 0.9130 (23.2% of 0.9838/0.8698) would be the initial target, beyond which would head towards the 100/200 WMA’s, which both currently lie at around 0.9160.
Look for a run back towards 0.9040 and possibly to 0.9000 in the near term (although doubtful), which I think should then be an opportunity to buy it again, for a more sustained look at/above 0.9100, but probably not until after the ECB meeting.
Meta Trader – AxiTraderUSD/CHF: 4 Hour
AUD/USD: 0.9332
The Aud remains mildly underpinned but in reality is going nowhere fast until the RBA decision later today. Ahead of that we may see some mild waves created by the Trade Balance, Services PMI.
With no IR change expected the focus will be on Glen Stevens’s statement, who may well take the opportunity to talk the Aud lower once again. The law of diminishing returns suggest that should he try this again, he is likely to have little real impact, particularly given that US rates are pretty much unchanged and yield differentials have actually widened slightly in favour of the Aud.
Technically, the 4 hour charts continue to point higher as they unwind their oversold condition, but the upside is proving tricky in allowing the Aud to make much headway. If it does squeeze higher, then look for a run up towards 0.9348/53 (38.2% of 0.9471/0.9275 & daily cloud top). Above here would see a run back towards 0.9365 (200 HMA) although I would be doubtful of seeing it much above here today, unless the RBA are more hawkish than expected – doubtful . If wrong, 0.9400 is once again going to be a very tough nut to crack and if seen would, I think, be a decent sell opportunity, looking for an eventual retest of Fridays lows.
On the downside, the session low has been 0.9305 which will see decent buyers again. Back below 0.9300, would most likely test Friday’s 0.9275 base, below which would begin to test the important pivot line (red) that we have been watching for months, currently at 0.9260. If this breaks, then I think the Aud could be in for quite a serious move to the downside, and below 0.9260, the first target would be the 200 DMA/38.2% Fibo support of the rally from 0.8660/0.9505 at 0.9177, a break of which could see a much deeper move towards minor support at around 0.9135 and then to 0.9100. This is unlikely to occur for a while, and if 0.9260 holds it may not happen at all, but keep an eye on it.
Use 0.9300/50 as a guide, but fully dependent on what the RBA come up with.
Economic data highlights will include:
AIG Services PMI, Trade Balance, RBA IR Decision, HSBC China Services PMI
Meta Trader – AxiTraderAUD/USD: 4 Hour
NZDUSD: 0.8525
The Kiwi has squeezed a little higher today, having earlier tested 0.8500 (low;0.8495), but without doing too much, and there is not too much change technically, apart from the fact that the price remains underpinned while the short term charts unwind their oversold condition.
Today may see some action on the back of the RBA statement, but the domestic focus will be turning towards tomorrows Fonterra milk auction, which have recently seen a slide in demand/price, and the Q2 unemployment which is slated to improve to 5.8% from the previous 6.0%.
Technically things are much the same as before. If Fridays high at 0.8534 (200 HMA) can be overcome, the short term charts hint at the potential for a run up to the Fibo resistance at around 0.8545 (23.6% of 0.8835/0.8460) and possibly back towards 0.8585 (minor) and then the next Fibo resistance at 0.8602 (38.2% of 0.8835/0.8460). Beyond here would see good sellers at the 100 DMA at 0.8625 although it looks a little unlikely and if seen would be a decent sell opportunity I think.
Below today’s 0.8495 low would see the chance of a run back to 0.8460, beyond which would find bids at the 200 DMA (0.8450). Further support would then be seen at the major rising trend support at 0.8430 and then at the Fibo support at 0.8408 (38.2% of 0.7718/0.8835) and at the 4 June low at 0.8401. I don’t think we are heading down here yet, but if/when 0.8400 gives way, a deeper correction would most likely head quickly to 0.8275//0.8300,
In the short term 0.8485/0.8540 would seem to cover it.
Meta Trader – AxiTraderNZD/USD: 4 Hour
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