Kiwi heavy ahead of NZ trade data today. Aud holding up well in choppy trade.
After the opening gap lower for most of the majors against the dollar – particularly the Euro and the Yen, following on from Jackson Hole, the currency markets have had a reasonably steady session with the dollar hanging on to most of its gains. There is little data out in the first half of today so we could be in for more of the same, and it will be the US Durable Goods and Consumer Confidence that will be the market’s focus. Overall the medium term positive trend for the dollar looks set to continue but in the short term it is becoming overbought and a bit of a correction, allowing the shorter term charts to unwind, would do no harm.
EUR/USD: 1.3190
The German IFO came in a little lower than expectations on Monday, but given that the Euro had already opened with a 50 point gap below Friday’s close it had little immediate effect on the price action, with the Euro hanging around the session lows at around 1.3190. The IFO economist added that while German domestic consumption remains solid, he expects Q3 German GDP to be close to zero, which is likely to reduce 2014 German GDP forecast toward 1.5% from 2.0%. Not a positive for the Euro.
Since then, the EurUsd has done very little and still trades close by as we now await today’s release of the US Durable Goods Orders and the Consumer Confidence. The DG’s do have a wide variance of expectations (exp +8%) so beware, it could produce some short term volatility.
Technically, the dailies still point lower, although the 4 hour charts are at oversold extremes and some sort of correction would be healthy before the medium term trend towards 1.3000 can continue. The gap to Friday’s closing price still needs to be filled, so a squeeze back to the 1.3240 level would not really surprise although beyond there could be tricky, with further resistance seen at around 1.3260 (100 HMA) and at the descending trend resistance currently at 1.3280. I cannot see it really getting close to these levels today unless the DG’s are well under expectations and push the dollar lower, but if wrong, we could see a squeeze back towards 1.3300/15 where strong resistance is seen, this being the base of both the monthly (1.3300) and weekly cloud (1.3315).
Below the session low of 1.3183, support for the Euro is seen close by at the base of the descending channel, now at 1.3175. US bond yields have recovered from their lows helping to keep the bid tone under the dollar today, and should this continue, on the back of strong US data later on, the dollar will break through the base of the channel putting the Euro under further pressure. There is some support for the Euro at the 9 Sept 2013 low at 1.3164, below which there is not much to hold it from heading quickly towards 1.3104 (6 Sept ’13 low). Below that, the next target is found at the Fibo support (76.4% of 1.2754/ 1.3993) at 1.3045, which when seen should prove strong.
For the coming session it should be fairly tight until the US get going, but given the oversold nature of the 4 hour charts a bit of a bounce would not surprise, which would then provide another sell opportunity. Patience is required but look for 1.3175/1.4240 to cover it, bearing in mind that the chart gap does still need to be filled.
Economic data highlights will include:
US Durable Goods orders, Case Schiller Housing Index, Consumer Confidence
Meta Trader – AxiTrader EUR/USD: 4 Hour
USD/JPY: 104.00
The early interbank gap up to 104.49 (before retail platforms had opened) was as good as it got today, and by the time the retail market did get going the high seen was 102.26, since when the dollar has drifted back to trade near 104.00, dipping at one stage to 103.85.
The 4 hour indicators are beginning to look as though a short term top may be in place and having become overbought, they have now rolled over and appear to have some room to move lower.
It maybe that the dollar unwinds for the coming session by chopping around near current levels at 104.00, as medium term demand will remain intact following on from Kuroda’s speech at Jackson Hole last week, where he pledged to forge ahead with QQE for as long as it takes in order to get wage-driven inflation established. However if the dollar does see further profit taking, then below today’s 103.85 low would see further support at 103.70 (100 HMA), 103.60 (23.6% of 101.50/104.26) and then at 103.23 (38.2%).
If the dollar does head higher, which in the short term looks a bit doubtful, then above the 104.26 high would head up towards 104.50, which is protected by good barrier related dollar sellers. A break of this though would head on towards 105.00 and as I said before, I suspect that we are eventually headed back up towards the 200 month MA at 106.50. That is some way off.
Look for 103.70/104.20 today with a mild bias to the downside.
Economic data highlights will include:
M: Corporate Service Price Index.
T:
W:
T:
F:
Meta Trader – AxiTrader USD/JPY: 4 Hour
GBP/USD: 1.6580
Despite the UK holiday today, Cable did manage something of a recovery from its gap lower at the NZ open, where it traded down to 1.6534, before squeezing up to 1.6597 and then closing the NY session at 1.6580. The demand for Sterling came about mainly from flows in Eur/Gbp, where the cross was heavy following Mario Draghi’s speech on Friday, which added to the likelihood of further divergence between the policies of the ECB and BOE, and is likely to keep the cross under downside pressure over the medium term
Cable, for its part is currently trying to break above the descending trend resistance, which, if it does, could see a topside acceleration to above 1.6600 and on towards the 200 HMA at 1.6640. Beyond that would find resistance at the top of the descending channel at 1.6690 and which, if seen, should prove quite strong.
On the downside, 1.6560 will provide minor support ahead of the 1.6534 session low. I am doubtful of seeing it down here again today, although the longer term trend does remain lower, and a break of the current low would suggest a run towards 1.6500 and then towards the 24 March low at 1.6462.
The UK will be back from holiday today so Cable is likely to be busy, but I think in the short term that momentum remains a bit higher so prefer the idea of buying dips towards 1.6550 with a SL below 1.6530, but looking for a squeeze back towards 1.6650/1.6700, which if seen may be a sell once again.
Meta Trader – AxiTrader GBP/USD: 4 Hour
USD/CHF: 0.9152
Having reached 0.9178 in early trade, US$Chf has consolidated its gains, close to the previous 0.9160 resistance and has filled the weeks opening gap.
The 4 hour charts are overbought and I suspect that we are in for more of the same today, with a mild bias to the downside as profit taking caps further gains for the dollar.
0.9160 (100/200WMA) is not going to be easily overcome for a sustained move higher and will, I think, again prove tricky today. If wrong, then we are likely to revisit the 0.9178 high, beyond which, would open up the chance for a run up towards 0.9200 and to the November 2013 high at 0.9249.
The downside today will see bids at Friday’s close at around 0.9140, fairly close by. Below here would see a return towards 0.9115 and 0.9100 although I don’t see the dollar below here today or probably even close. If wrong, further losses could take it back to the daily Tenkan at 0.9085. A break of this would see a return to 0.9060 (daily Kijun) but currently looks unlikely.
Further upside progress may take a while and I think the initial progress will be slow, but buying a dip back towards/below 0.9100, should we see it, does appear to be the medium term strategy.
Meta Trader – AxiTrader USD/CHF: 4 Hour
AUD/USD: 0.9296
Having looked bid for much of the session, when it traded up to 0.9322, the Aud finally headed lower once the US got going, with the US$ assisted by a recovery in bond yields, pushing the Aud down to a session low of 0.9289.
Technically the choppy trade either side of 0.9300 looks set to continue, although it could be that a short term bear flag is developing. If so, a break of the session low could head towards 0.9275 and then back to the important 0.9260 level. Below here would retest last week’s 0.9236 low although I think that this is over the horizon today.
Further out, a sustained break of 0.9235/40 would most likely see an acceleration towards 0.9200, below which, 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 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, today’s top is going to be tricky to overcome, and in the absence of any data today I suspect rather unlikely. If wrong, the descending trend resistance will be taken out, allowing for another run towards 0.9340 beyond which would head to 0.9355 (daily cloud base/Kijun) and then possibly back towards 0.9373(6 Aug high) and 0.9380 (61.8% of 0.9472/0.9236), where I think it would be approaching sell territory. If wrong, and the Aud is able to make further gains, then the way would open up for a run to 0.9400 and possibly to 0.9416 (76.4%).
In the absence of any data today look for a range of 0.9270/0.9315, but probably ending up somewhere close to current levels, at least until the NY release of the Durable Goods orders.
Economic data highlights will include:
China Leading Economic Index
Meta Trader – AxiTrader AUD/USD: 4 Hour
NZDUSD: 0.8343
After a nasty sell off in the Kiwi in early Asia, where it hit a low of 0.8335, Europe tried a bit of a recovery in taking it back to 0.8370, where it ran out of steam and headed back towards 0.8340 and now looks heavy again.
The NZ July trade balance is coming up shortly and a weak reading will add to the downside pressure where, below the current session low, further support is to be seen at the base of the wedge at 0.8325. Below here, the next meaningful support levels at 0.8300 and then at 0.8275(50% Fib of 0.7670-0.8839) come into view ahead of 0.8240 (February 20 low,).
On the topside, 0.8370 will see sellers, a break of which will head back up towards 0.8385 (100 HMA) and 0.8400. I don’t see it above here today unless the trade balance is strong enough to bring about a short squeeze, but if wrong; look for a run back to the 200 HMA at 0.8420.
There is some short term bullish divergence which could induce a bit of a squeeze, but the overall trend remains lower and selling rallies towards 0.8370/0.8400 seems to be the overall plan looking for an eventual break of 0.8300 as we head towards 0.8275.
Economic data highlights will include:
NZ Trade Balance
Meta Trader – AxiTrader NZD/USD: 4 Hour
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