US$, bond yields heavy, JPY, CHF firm on increased Russia-Ukraine tension.

Aud, Kiwi remain firm, but dependent on risk sentiment flows.

Increasing tensions in the Ukraine  heading into the weekend caused a rise in safe-haven demand with the Yen and Chf being the main beneficiaries. US Bond yields headed lower, weighing on the dollar, which was not helped by generally soft data. Commodities and Equities also had a wild ride, although both generally recovered to finish largely unscathed. WTI was sharply higher. This week will be busy with the US CPI(Tues), FOMC Minutes (Wed) and Jackson Hole (Fri) all coming up and which will combine to be the main focus of the week. We also get Minutes  from the RBA (Tues) and BOE(Wed), the UK CPI (Tues) and the global PMI’s on Thursday. Looks like a busy week ahead, with the US$ initially under a bit of pressure.

EUR/USD: 1.3400

The dollar came under pressure on Friday, with the Euro retaining a bid tone for much of the session as shorts covered ahead of the weekend, accelerating higher after the US data (PPI/ Rts Mich consumer sentiment survey/NY Empire Mfg Index) all came in below expectations. US bond yields headed lower as traders sought safe haven assets after headlines began to emerge of increasing tension in the Ukraine, doing the dollar no favours and saw the Euro spike to a high of 1.3412, before diving back to 1.3375 in volatile trade and then closing back at 1.3400, in line with the previous weeks close.

Despite the recent speculation as to when the Fed may begin to raise rates, the recent run of soft US data appears to suggest that there is little reason for Janet Yellen to act any time soon, which will keep the dollar under some pressure.  We get the US CPI (Tuesday), the FOMC Minutes (Wed) and then the Jackson Hole Economic Symposium on Friday, so we will find out more as the week wears on, and thus, “Fed-watching” is going to be the main game for the coming week. The daily DXY though (see DXY report), is beginning to suggest that there may be a bit of downside for the dollar in the next few days and it appears that the Euro shorts will feel a bit more pain.

The Euro is not going to find it easy though to make headway, and the flash PMI’s on Thursday could well dent any upside potential, with Germany looking particularly vulnerable due to the sanctions on Russia, and we could yet see a test of the strong 1.3335 support.

Technically, 1.3415 remains important resistance a break of which would see an acceleration beyond the descending trend resistance, towards last Friday’s spike high at 1.3433 and then to the 1 Aug high at 1.3444. Above there, which looks a bit unlikely today, we could then be in for a run up towards 1.3470 (38.2% of 1.3699/1.3332) and possibly 1.3485 (23.6% of 1.3993/1.3332/ daily Kijun). Above this would see more stops triggered and could force a squeeze up towards 1.3500, which previously acted as strong support and should now provide good resistance. A break of 1.3500 would test 1.3525 (38.2% of 1.3993/1.3332), beyond which could head up to the base of the previous wedge formation (blue line), currently at around 1.3575.

On the downside, the 100/200 HMA’s are at around 1.3370, a break of which would see a decline back through the bids at 1.3350/60 and eventually to the increasingly important support at 1.3335, where sovereign bids were seen last week. Large stops lie below here though, which if triggered would drive the Euro towards 1.3294 (7 Nov ’13 low) below which, more distant targets are seen at 1.3228 (61.8% of 1.2754/1.3993) and then eventually at 1.3104 (6 Sept ’13 low).

The bigger picture remains unchanged. While the dollar uptrend remains intact (although this looking rather dubious at present), the eventual target for the Euro appears to be the 9 July low 2013 at 1.2754, albeit that it looks somewhat distant for the time being. I notice Citibank are calling for an eventual run towards 1.2200 as a distant target.

A slow squeeze to the topside looks likely to start the week but it will be mid-late week before we see any real action. While the short term bias remains to the upside,  the more medium term outlook is for an eventual return of dollar strength and a lower Euro.

Economic data highlights will include:

M: EU Trade Balance, NAHB US House Market index

T: EU Current Account, US CPI, Housing starts

W: German PPI, FOMC Minutes

T: Flash Markit EU Mfg/Services/Composite PMI’s, Flash Markit US Jobless Claims, US Mfg/Services/Composite PMI, Existing Home sale, Philly Fed Mfg Survey

F:Jackson Hole Symposium

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EUR/USD: 4 Hour

USD/JPY: 102.35

Having squeezed slowly higher to 102.71 on Friday, the dollar turned sharply lower once safe haven demand for the Yen returned, on the news of increased tension again in the Ukraine. A quick spike down to 102.13 was the result, before settling into the middle of the range, finishing the week at 102.35.

A neutral stance on US$Jpy is needed right now, with sentiment mixed between the demand for yield, using the Yen as the low funding currency of choice, and the opposite need of finding a safe haven for assets in case the Russian situation deteriorates, with the Yen and the Chf being the preferred destinations.

Having stayed within 102/103, the technical points remain largely unchanged. 102.70, on the topside will again act as strong resistance and with exporters lined up all the way up to 103.00, further dollar advances will not be easy. The 5 August spike high was at 102.93, which comes ahead of the 30 July high at 103.08 although it looks unlikely that the dollar is likely to bother this area, or even 102.70 today. If and when 103.00/10 is overcome, then we would most likely be in for an acceleration towards the 3 April high at 104.10. This looks some way off at this stage and I doubt that we see it this week given the extreme caution over Russia, but beyond 104.10, the next target coming into view would be the 21 Jan high at 104.74.

The downside will again see decent bids at Friday’s session lows at around 102.15. A downside break would then see the chance of a return to 102.00, where the top of the weekly cloud and the weekly Tenkan provide solid support. Below here seems unlikely, but if wrong, further support sits close by, where the daily cloud lies, albeit that it is very thin, with the top/bottom parameters being at 101.85/90.

In the more medium term, a break below there could see another fall to the 8 Aug 101.50 low, which looks doubtful right now, although a break of which would see a return to the strong support just above 101.00, where semi official bids were previously rumoured to lie. I doubt we are going to pay a visit down here any time soon, but if wrong, further very strong support lies at the horizontal blue support line (chart) at around 100.80.

Use 102.20/60 as a guide today (Russian developments aside) and watch out for the Japanese trade figures due on Wednesday.

EURJPY: 137.15. Having spiked down to 135.72 the previous week, the cross spent last week recovering its lost ground, and in choppy trade reached a peak at the resistance at 137.60 mentioned last week, before retreating to close at 137.10. The mild bullish divergence on the dailies suggests that we could make another run towards 137.60 and if that can be overcome, look for a run up towards 138.00, a break of which would see further advances towards 138.80. I think that in the near term at least, buying dips towards 136.50/75 is probably the plan, and I am doubtful of seeing the cross back below 135.70 for a while – unless things get serious in the Ukraine, in which case all bets are off. But in the meantime, buying dips with a SL placed under 135.70 seems to be the plan. A break of that would suggest a decline towards 135.00 and lower towards 134.00. Not for a while I suspect.

AUDJPY:95.40. The cross did pretty much the right thing last week in  heading up from the 94.50 low and back into the middle of the prevailing 95/96 range, where it looks pretty comfortable. I don’t think we should expect too much different this week  and would once again look to buy the dips but at the same time taking profit if we approach the top end of the range.

Economic data highlights will include:

M:

T:

W: Japan trade Balance

T: Foreign Bond/Stock Investment, Flash Nomura Mfg PMI

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USD/JPY: 4 Hour

GBP/USD: 1.6720

Cable has opened higher, at 1.6720, after comments from BOE Governor in a Sunday Times interview, where he stated that he would not wait for real wages to turn higher before raising interest rates.

Cable headed up to a session high of 1.6701 on Friday after the UK Q2 GDP growth was upwardly revised by 0.1% to a more than 6 yr high of 3.2% but was unable to post any further gains and settled back into its tight 1.6670/1.6700 range.

There is some important midweek UK data out this week but it most likely be the FOMC/Jackson hole that will provide the volatility and in the meantime Cable looks to be somewhat rangebound.

I would not expect too much action today, and Friday’s 1.6675/1.6700 could again cover it. The 4 hour charts are pointing mildly higher though and if Cable can find the legs to take out 1.6700, we could then head on towards 1.6730 and then on towards Tuesday’s 1.6754 low, which will act as decent resistance. Above here, which looks a bit unlikely today, would see a squeeze back to 1.6800(23.6% of 1.7191/1.6688/ /descending trend resistance) and then to last weeks high at around 1.6840.

The dailies though remain negative and if the resistance remains intact, then we could see a resumption of the downtrend, especially if the UK CPI does not meet expectations (Tuesday), where the initial support is seen at the 1.6657 trend low (1.6660; 200 DMA). This is important support as it was also the low on 15 April, from where it bounced strongly, so there will be some short covering down there, should we see it. If/when 1.6650 is broken, Cable would then likely to head to Fibo support at 1.6630 (23.6% of 1.4813/1.7191), below which would have quite bearish implications and could potentially head towards the 4 April low at 1.6551.

For Monday, look for more consolidation near current levels and look to take  direction from tomorrows CPI/PPI/RPI. Wednesday sees the BOE Minutes and then Thursday the Retail Sales so it should warm up as the weak wears on.

Economic data highlights will include:

M:

T: UK CPI, PPI, RPI

W: BOE Minutes

T: UK Retail Sales

F:

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GBP/USD: 4 Hour

GBPUSD Daily

USD/CHF: 0.9020

The dollar headed lower on Friday, breaking important 0.9035 support after the reports of a Russian incursion into Ukraine territory, which saw a quick rush for the exit by the dollar bulls, and a need for the safe haven of the Swissy.

With the short term indicators pointing lower it could be that the dollar will remain under pressure for the next session or two, and having closed on its lows we could  be in for another look at 0.9000/10, which had proved rather sticky resistance on the way up and where rising trend support should see decent bids. Further bids should be seen at 0.8985/90, although I am not sure that we see it down here today. If wrong, below there would test the larger rising trend support, currently at 0.8965 and then the 200 DMA at 0.8945 and 100 DMA at 0.8930.

The topside is looking a little less certain over the next few days and the immediate need would be for a return above 0.9035. I am not sure that this will be seen today, but if wrong look for a squeeze back to 0.9050. Beyond here, 0.9075 would again come into view, with further minor resistance seen at 0.9085 protecting any move towards 0.9100.

Further out, if/when we can overcome 0.9100 and then last week’s 0.9114 high, then we could then head on towards 0.9130 (23.2% of 0.9838/0.8698), beyond which would see a run up towards the 100/200 WMA’s, which both currently lie at around 0.9160. This should be strong resistance but a break of which would suggest a run up towards 0.9190 (20 Nov ’13 high) and then to 0.9249 (7 Nov 13 high).

Use 0.9000/0.9040 as a guide today. If the Russia/Ukraine issue deteriorates, the demands for Chf will increase, sending the dollar lower.

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USD/CHF: 4 Hour

AUD/USD: 0.9318

The Aud had a choppy session on Friday, and after having topped out at 0.9333 it eventually dived to a low of 0.9297 as risk positions were lifted once the Ukraine headlines hit the wires. As US equity markets later recovered their poise and rebounded from their lows, so did the Aud, to close roughly where it had begun the day at around 0.9315.

More of the same choppy conditions look likely over the next couple of days and a reasonably neutral stance is required. Geo-politics are going to dominate direction by the look of it and if things turn sour, then further upside for the Aud will be limited. The dailies though are picking up some positive momentum, and if risk appetite recovers, the Aud could see a squeeze back towards Friday’s high where the 100/DMA (0.9336) will provide decent resistance. A break of this, and then 0.9350 would then most likely see a squeeze back towards 0.9373(6 Aug high) and 0.9382 (61.8% of 0.9472/0.9239). Above this would open the way up for a run to 0.9400 and possibly to 0.9416 (76.4%) but I don’t see this being the case – at least for a while.

On the downside,  it looks as though 0.9300 will continue to hold the Aud up for the time being, but back below here would then suggest a return towards 0.9285 and then to the strong 0.9260 area. A break below 0.9250 would find further support at Friday’s 0.9239 low, beneath which, would most likely see some acceleration towards 0.9200. Under here, the next target would be the 200 DMA/38.2% Fibo support of the rally from 0.8660/0.9505 at 0.9175. A break of this could see a much deeper move towards minor support at around 0.9135 and then to 0.9100 and maybe to 0.9050 (50% pivot of 0.8660/0.9505)

In the bigger picture I still prefer to trade from the short side and will use a rally to sell into, looking for an eventual break below the 0.9250 support for a run towards 0.9175. Don’t get too excited, this could take a while.

EURAUD: 1.4380. The cross remains rather choppy, but overall remained weak in falling from a high of 1.4462, where it opened the week to a low of 1.4320 before bouncing to close at 1.4380. I remain reasonably neutral, although the longer term charts vaguely suggest that buying dips may be a plan. Overall it looks as though the coming week may be pretty much covered by 1.4320/1.4480 with a break of either side heading towards 1.4260/1.4520 respectively. There are easier things to look at right now.

GBPAUD: 1.7893. The cross had a tough week and after squeezing up to 1.8146, it reversed sharply lower to finish at 1.7895 having bounced from a low of 1.7876, meaning  that our  longer term target that we mentioned last week, – at 1.7730 -, is now not so long term!! Ahead of that 1.7820 will provide interim support, but the dailies are still negative and this seems to be the overall direction to concentrate on. The shorter term charts though need some time to recover and we could yet see a squeeze back towards 1.7980, which would be a sell opportunity with SL placed above 1.8020.

Economic data highlights will include:

M: New Vehicle Sales

T: RBA Minutes, China House Price Index.

W: RBA Leading Index

T: Flash HSBC Mfg PMI

F:

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AUD/USD: 4 Hour

NZDUSD: 0.8485

As with the Aud, the Kiwi was choppy on Friday and dominated by risk on/off sentiment, but after a range of 0.8467/0.8502 it finished up roughly where it started and looks as though it may be in for more of the same early in the coming week.

The dailies though are beginning to point a bit higher and if 0.8500/10 can be overcome we could be in for a run up towards 0.8535 (1 Aug high), above which the Kiwi could make a run towards 0.8586 (25 July high). Further out, it could be that the Kiwi wants to make a run back to 0.8615, where strong resistance lies in the shape of the daily cloud base/daily Kijun/100 DMA.

On the downside, we could head back towards support at the daily Tenkan/200 DMA at 0.8460/65 which has so far done a decent job of propping it up over the last couple of sessions. I don’t think we are heading under here today, but if wrong, 0.8430 will find bids ahead of the recent 0.8408 low (38.2% of 0.7718/0.8835) today. Further support would be seen at the 4 June low at 0.8401. If/when 0.8400 eventually gives way, a deeper correction would most likely head rather quickly to 0.8275/0.8300, with little support to be seen in between there and 0.8400. Unlikely for now and I suspect that we are more likely in for another run back towards 0.8500 and possibly higher.

For today look for 0.8460/0.8510 to provide a guide as to the range.

Economic data highlights will include:

M:

T: PPI, RBNZ Inflation Outlook

W:

T:

F:

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NZD/USD: 4 Hour

EURGBP: 0.8030

EURGBP:  0.8030. The cross did as we had hoped last week, breaking above 0.8000 to finish just below the week’s highs although it has yet to come close to the targets mentioned last week at 0.8070 and possibly 0.8080 (100 DMA) and even possibly to the top of the channel at around 0.8150. We have not lost the chance of this happening though and buying dips towards 0.7990, with a tight SL under 0.7960 looks an attractive plan, although back below there would mean more choppy trade in the 0.7900/0.8000 region. We get the UK CPI (Tueday) and then the BOE minutes on Wednesday which will be watched for any sign of a potential shift in UK rates , but if they replicate the dovish tone of last week’s QIR, then Cable will remain under pressure.

Meta Trader –                                                                                                               EURGBP: Daily

GBPJPY: 170.80

GBPJPY: 170.80.The cross headed lower, as we thought it might last week, peaking at 172.60 but unable to overcome the weekly Tenkan at 172.75 and headed down to finish right on the support at 170.80. The dailies are still negative and a break of 170.80 would suggest a run back down towards the 200 DMA at 170.50 which held it up on Friday. A break of this would have the potential for a deeper decline towards the 29 May low at 169.53.  The 4 hour charts are showing some mild bullish divergence  and we could see an interim bounce towards 171.40  and possibly back to the 200 DMA resistance at 172.25 although this looks doubtful, but which, if seen, looks to be a sell opportunity with a SL placed above 172.50. Much will depend on risk sentiment and the UK data, so it is going to be choppy but the overall trend seems to point lower.

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USD/DXY: 81.42

 The DXY chopped around last week, consolidating in a 0.8139/65 range and looking as though we could be in for some more of the same ahead, although the daily MACD’s have now crossed lower to suggest that the immediate pressure may be to the downside for the dollar. That being the case, we could see a drift back towards 81.10/00, which I think should provide an opportunity to once again buy the dollar/index. Below the rising trend support at 80.95 would be a bit of a concern and suggest deeper losses towards the 200 DMA at around 80.40, but while the weeklies point higher – as they do – I don’t think this is on the cards for now.

On the topside, the previous week’s high at 81.71 is the immediate target, although I doubt we are going to see it reach up here, for the next few days at least. It would probably take a more hawkish than expected tone from the Fed Minutes/Janet Yellen to do so, and that seems highly unlikely. If/when 81.70 can eventually be overcome, then look for a run up towards the 50% pivot of the move from 84.76 / 78.89 at 81.82, beyond which could well see an acceleration towards the 61.8% Fibo level at 82.51, albeit that this is well over the horizon right now.

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USD/DXY: Daily

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