Aud, Kiwi steady ahead of RBA Minutes, RBNZ Inflation outlook.
An apparent easing in the Russian tensions and some positive US housing data combined to underpin the dollar today in generally quiet trade. More of the same could be in store ahead of the FOMC Minutes (Wed), and possibly until Jackson Hole (Friday), although today will see the RBNZ Inflation outlook and the RBA Minutes, and then later on, the UK and the US CPI data, which could create some volatility. Overall another range bound session looks to be the most likely outcome, while waiting for Yellen and Draghi later in the week. WTI (Oil) has collapsed at the NY close, from 96.50 to 93.85. Not sure why. Easing tensions in Iraq and/or Russia? Large Apache oil discovery off WA? No idea yet!
EUR/USD: 1.3362
The Euro had a quiet session, capped by offers at 1.3400 and eventually drifting a bit lower to sit at around 1.3360. The US$ is a bit firmer today, helped by mildly higher bond yields, after the NAHB Housing Index came in a little stronger than expected and by an apparent easing in the Russian/Ukraine tensions.
Today’s focus will be on the US CPI, but traders generally look like sitting on their hands, waiting for the FOMC Minutes late in tomorrow’s session and then the Jackson Hole Symposium on Friday, where Yellen is likely to reflect her usual cautious stance. More interest is building as to what Mario Draghi may say, with the possibility of further easing,and potentially QE, in the EU and which will probably keep the Euro in a fairly tight range until then. The EU Manufacturing PMI’s on Thursday might provide further guidance on that happening but no-one expects any positive news to come from them.
Technically the recent 1.3335/1.3415 range looks pretty safe for the coming session, although the short term indicators now tend to suggest that we could see a mild drift lower form the current 1.3360 pivot.
I would be very surprised though to see the Euro break the strong support in the 1.3335/40 area today though, unless the US CPI is much stronger than expected (exp 2.0% yy July), or probably ahead of Friday’s Jackson Hole summit.
If/when the Euro does head lower, large stops are said to lie below 1.3330, which if triggered, would drive it towards 1.3294 (7 Nov ’13 low) below which, more distant targets are to be seen at 1.3228 (61.8% of 1.2754/1.3993) and then eventually at 1.3104 (6 Sept ’13 low).
On the topside, minor resistance now lies at 100/200 HMA’s at 1.3370/75 which may well cap it today. A break above here would suggest a return to 1.3400, and if this were to get taken out there is further strong resistance at 1.3415 and then again at the 8 Aug high at 1.3433. 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.
As long as Russia/Ukraine tensions do not escalate, which would send investors back into safe-haven US bonds and probably push the dollar lower, look for a fairly tight session today, and use 1.3345/1.3385 as a guide, at least until the US data.
Selling Euro rallies remains the longer term preference, looking for a break towards 1.3300 and lower.
Economic data highlights will include:
EU Current Account, US CPI, Housing starts
Meta Trader – AxiTraderEUR/USD: 4 Hour
USD/JPY: 102.53
$/Jpy traded another relatively tight range today although the Yen is a little weaker as tensions in Russia/Ukraine appears to ease a little after the weekend talks between them, also involving France and Germany.
I don’t think we should expect too much change today and the technical points remain largely unchanged. Above today’s 102.59 high, further resistance lies close by at, 102.70 and will again act as strong resistance, ahead of exporters lined up all the way up to 103.00, so 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 today’s 102.25 low and then at Friday’s low at 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.
Look for a 102.30/70 session.
Economic data highlights will include:
Leading Economic Index, Machine Tool Orders
Meta Trader – AxiTraderUSD/JPY: 4 Hour
GBP/USD: 1.6727
Having opened higher yesterday after Mark Carney’s weekend hawkish comments, Cable has sat in a tight range, but now has a small gap that needs filling down to around 1.6690.
Today sees the UK CPI (exp 1.8% YY July) which will give further guidance as to what the BOE may be thinking with respect to any impending rate rise from the BOE. This is followed by tomorrow’s BOE Minutes, which may have a slightly more hawkish stance, but would need to be backed up by a today’s CPI coming in at least at par to make any real difference and it could be that the market will prefer to wait for the Jackson Hole meeting to see any real volatility.
Having squeezed up to 1.6736 today, this will act as minor resistance ahead of Tuesday’s 1.6754 low, which would see good sellers. Above here, which looks a bit unlikely in the coming session, would see a squeeze back to 1.6800(23.6% of 1.7191/1.6688/ /descending trend resistance) and then to last week’s high at around 1.6840.
On the downside, if/when the gap to 1.6690 has been filled, further losses would find support at the 1.6657 trend low (1.6660; 200 DMA). This is important 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.
Wait for the CPI, for direction. The short term charts are mixed and we could be in for some more choppy sideway trade but the dailies still point lower and I suspect that selling rallies is probably still the way to go.
Meta Trader – AxiTraderGBP/USD: 4 Hour
USD/CHF: 0.9065
The dollar is a bit higher, with the Chf less in demand after the apparent easing in the Russian tensions, but overall the consolidation looks set to continue through the coming session, and 0.9035/85 should again cover it.
Short term support again lies at 0.9050 and 0.9035. If we go below Friday,s 0.9015 low (unlikely), we would then 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.
On the topside, 0.9075/85 will again act as a hurdle, protecting any move towards 0.9100, which I doubt we see today.
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 0.9040/85 as a guide.
Meta Trader – AxiTraderUSD/CHF: 4 Hour
AUD/USD: 0.9325
The Aud had a tight session (0.9308/33), and little looks like changing until a speech from Glen Stevens tomorrow, or even ahead of Yellen on Friday, although today’s RBA Minutes may cause a few ripples. A generally dovish tone is expected, which may cause the Aud to head a little lower but there are still plenty who are happy to buy dips and to earn the carry, so much below 0.9300 on the day would be a bit of a surprise.
On the topside, the Aud continues to be capped by the 100/DMA (0.9336) although the dailies are now pointing very mildly higher. A break of this, and then 0.9355 (daily cloud base/Kijun) 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 once again looks as though 0.9300 will continue to hold the Aud up today, 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 an 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).
Look for 0.9300/40 to cover it today, with any further direction to be provided by the RBA Minutes.
Meta Trader – AxiTraderAUD/USD: 4 Hour
NZDUSD: 0.8475
The Kiwi was unable to overcome the offers at 0.8500 and has drifted a little lower in a fairly nondescript session. That may change in the next 24 hours, with the NZ PPI, and the RBNZ 2-yr inflation forecast due today and the Fonterra milk auction, tomorrow.
The initial support lies at around the session low (0.8467), where the 200 HMA sits, at 0.8475, below which, the daily Tenkan/200 DMA is at 0.8460/65 and which has done a decent job of propping it up over the last couple of sessions. A break of that would head towards 0.8430 will find bids ahead of the recent 0.8408 low (38.2% of 0.7718/0.8835). 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.
If so, and if/when 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.
The short term indicators are a little mixed and not offering much help. The dailies are pointing higher, but we need to overcome 0.8500/10 fairly quickly, or the Kiwi is going to run out of steam and would then give the lower support another run for its money.
For today, use 0.8450/0.8500 as a guide, with the data to provide the direction.
Economic data highlights will include:
PPI, RBNZ Inflation Outlook
Meta Trader – AxiTraderNZD/USD: 4 Hour
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