US$ back in favour ahead of today's FOMC Minutes.

Kiwi soft after yesterdays data. Aud steady, waiting on the RBA’s Glen Stevens to testify to the senate.

Strong  US housing starts underpinned the dollar today, with more gains looking possible in the days to come, at least from a technical perspective. A dovish outlook from the FOMC minutes, later today, backed up by an equally cautious Janet Yellen at Jackson Hole,on Friday, may change that view, but Mario Draghi will also be speaking and he could well signal a further easing in the EU- as well as potentially outlining a case for QE, which could send the Euro lower. The FOMC aside, today also sees the Japanese Trade Balance for July,the German PPI and from the UK, the BOE Minutes. The RBA’s Glen Stevens will be testifying to the Australian senate, so it should turn into a busy session. Let’s hope so!

EUR/USD: 1.3320

Despite the focus being on the US CPI, which came in slightly softer than expectations, it was the strong housing starts report that underpinned the dollar today, sending the Euro down through the strong support level at 1.3335  to a session low of 1.3313, before a dead cat bounce late in the day back to just above 1.3320.

The way now looks open to test the 1.3294 (7 Nov ’13 low) although there are option related buyers protecting 1.3300, and ahead of the FOMC Minutes later today, and possibly ahead of the Jackson Hole summit on Friday, when both Janet Yellen and Mario Draghi will be speaking, I am not sure that the dollar will have the legs to make too much progress.

If wrong, below 1.3294, 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).

It should also be noted that the Euro is now sitting on the base of the weekly cloud. It has not traded below this since breaking up into the bottom of the cloud in November 2012, so a weekly close below 1.3315 would have quite bearish implications and will be worth watching.

On the topside, the immediate resistance is now seen at the previous support at 1.3335/40. Above here, further offers will arrive at 1.3360 and then again at 1.3400. I don’t really see it above here today, although if the FOMC minutes are particularly dovish, the dollar is going to find it rather difficult to make any further progress ahead of the Jackson Hole summit. If it does weaken, then above 1.3400, 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.

Look for a tight range above 1.3300 today but it is beginning to look as though the Euro could eventually come under more extreme pressure and a break of 1.3294 will eventually see an acceleration to the downside.

Economic data highlights will include:

German PPI, FOMC Minutes

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EUR/USD: 4 Hour

USD/JPY: 102.90

The dollar has headed slowly higher today, taking out the offers at 102.70 but running into Japanese exporter sellers above here which has slowed the rise and has so far been capped at the resistance at the 5 August spike high was at 102.93.

The apparent easing of tensions in Russia has diminished the need for the safe haven Yen which has helped to put the dollar under some pressure over the last couple of days. While the tensions in Ukraine are under some sort of control, the Yen should stay under pressure given its status as the funding currency of choice and a move towards 103 and higher does not seem too far away.

The immediate 102.93 resistance lies right ahead, and once it has been taken out the dollar would then look to test the 30 July high at 103.08. If and when 103.00/10 is overcome, there is not too much to stop the dollar from accelerating towards the 3 April high at 104.10, although this looks some way off at this stage, but beyond 104.10, the next target coming into view would be the 21 Jan high at 104.74.

The positive daily momentum looks as though it is picking up, so trading from the long side is the preferred strategy. The immediate support is at 102.70 below which could see a return towards the 100 HMA at 102.50. The 200 DMA is as 102.40, and as long as we stay above here, then I think that we should make further upside progress. A break of 102.40 would be a bit of a worry and would signal a return towards Friday’s low at 102.15 and perhaps a return to 102.00, where the top of the weekly cloud and the weekly Tenkan provide solid support. Below here now 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. Stops on long positions should be left below 101.80.

Further out, if the dollar were to a break below 101.80, it could see another fall to the 8 Aug 101.50 low, below which 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

Economic data highlights will include:

Japan Trade Balance

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USD/JPY: 4 Hour

GBP/USD: 1.6620

Cable reversed its short term rally and headed sharply lower after the UK CPI failed to meet expectations, making a new trend low at 1.6610 although even this looks under pressure as there has been no bounce at all.

As we said yesterday, once the important support at 1.6650 was broken, Cable could potentially head towards the 4 April low at 1.6551, and this is now beginning to look quite possible. Further losses would then hint at a run towards the 24 march low at 1.6462.

On the topside, the initial resistance will now be at 1.6650 and then at the 200 DMA, now at 1.6675. I can’t really see it above this today, although the hourly charts are oversold and need time to recover so we could see a bit of a squeeze higher. Above 1.6675 would see a move back towards the 100 HMA at 1.6690.

We do get the BOE minutes today, which could see a split in the MPC vote over the timing of a rate hike, but yesterday CPI reading will dampen the reaction to any hawkish thoughts and any rally should be limited below 1.6700.

Selling into strength remains the plan, looking for an eventual break of 1.6600 and a move towards 1.6550.

Economic data highlights will include:

BOE Minutes

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GBP/USD: 4 Hour

USD/CHF: 0.9092

The dollar is higher again today, but it should be noted that, unlike the Euro or Cable, which both made new trend lows, it is yet to reach 0.9100 or the recent 0.9114 high against the Chf, and should hint at some caution with regard to the strength of the dollar.

We could do with taking out 0.9115, to add confidence to the overall dollar rally, and if /when we do so, we could then see further strength 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).

The downside will now find minor support at 0.9075 and then at 0.9050. I doubt we see it under here today but further bids would be seen at 0.9035 and then at Friday’s 0.9015 low, below which, 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 would see decent bids. Further bids should be seen at the rising trend support at 0.8990 a break of which would hint at a retest of the 200 DMA at 0.8945 and 100 DMA at 0.8930, but which are looking increasingly distant

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USD/CHF: 4 Hour

AUD/USD: 0.9300

Having tested the resistance at 0.9340 (high 0.9343) the Aud has given up some ground but still holds onto 0.9300 in rather choppy trade.

This may continue to be the case, although it could well come under some pressure given that RBA governor Glen Stevens is giving his semiannual testimony to the House of Representatives’ Standing Committee on Economics today and will probably take yet another opportunity to tell us that the Aud is too high.

Should that be the case, the immediate support is close by at 0.9295 (200 HMA). A break would most likely see a return towards 0.9280 and then possibly to the 0.9260 pivot which should again see good buying interest. Below here would hint at a return to last week’s low at 0.9239. I don’t think this is going to be bothered today, unless Mr Stevens comes up with a surprise to push the Aud lower, but a break of 0.9240 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).

On the topside, 0.9325 and then 0.9240 (100 DMA: 0.9336) will once more find decent sellers. I can’t see it above here today, but if wrong, we could be in for a run towards 0.9355 (daily cloud base/Kijun) and possibly 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%).

 

For today, use 0.9280/0.9325 as a guide, with a bias towards trading form the short side over the next couple of days.

 

Economic data highlights will include:

RBA Governor Glen Stevens Testimony, RBA Leading Index

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AUD/USD: 4 Hour

NZDUSD: 0.8422

The Kiwi did not like yesterdays weaker PPI and growth outlook and despite a bit of a recovery when the mildly soft US CPI was released, taking the Kiwi back to the 200 HMA at 0.8465, it has since been one way traffic to the downside, basing so far at 0.8413 in early NZ trade.

The 4 hour charts remain negative, although support should lie nearby at the recent 0.8408 low (38.2% of 0.7718/0.8835) and then 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. On the topside, sellers will be seen at 0.8450 and again at the session high at 0.8465. Above here looks unlikely, but if wrong we could see a squeeze above the 100 HMA at 0.8470 and back towards 0.8485.

Although now looking rather distant and improbable, 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, although now rather doubtful – but the dailies do  hint at the potential for another topside squeeze – the Kiwi could potentially make a run back to 0.8615, where strong resistance lies in the shape of the daily cloud base/daily Kijun/100 DMA.

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NZD/USD: 4 Hour