The coming week is going to be a busy one with plenty of event risk, – with the main focus being on the FOMC meeting but with the Scottish Referendum Vote not too far behind and which will have very severe implications should the “Yes”vote win the day – which it won’t, I don’t think. Other highlights will be the inflation data from the EU, US & UK, the latest Minutes from the RBA & BOE, an Interest rate decision from the SNB and the NZ GDP, which comes ahead of Saturday’s NZ General Election. There are plenty of other bits and pieces too, with the dollar looking likely to consolidate in the near term, prior to resuming its gains.
EUR/USD: 1.2962
The dollar remained generally firm after the US retail sales came in as expected (+0.6%mm) on Friday, indicating that the US economy continues to improve, although the Euro did manage to finish the week by squeezing a bit higher as pre-weekend position squaring dominated the action.
The coming week will be busy, with the highlight being the FOMC meeting on Wednesday so the market may remain reasonably steady until then, although today does see the US industrial production/capacity utilisation figures which may provide some volatility. On Wednesday, before the FOMC, the EU CPI (exp +0.4%yy, -0.7%mm. Core: exp +0.8%yy) and then the US CPI (exp 0.1%mm / 2.00%yy ) will be released so it will be a hectic session. The market will be closely watching for any change in the language of the statement that could cause the dollar’s rally to accelerate, should it hint at the onset of rate hikes, which is what the market is expecting to hear..
Technically, the Euro made it up to the 200 HMA at 1.2978 on Friday before easing back to finish near 1.2950. With the daily indicators appearing to turn higher and the 4 hour charts also looking positive we could be in for a further squeeze to the topside, and above Friday’s high would see a run towards 1.3000 and above here to the descending trend resistance at 1.3025 – and potentially to the inverse head/shoulder target at 1.3070. Beyond there, decent resistance lies within the 1.3225/50 band although I don’t think we are heading up there for a while, if at all.
On the downside, minor support is seen at the head/shoulder neckline at around 1.2940, below which, could see a quick run back to the 100 HMA and rising trend support at 1.2915 and then to 1.2900.
Further out, although the downtrend appears to be on hold, at least while the Euro attempts to stabilise nothing has really changed and once the Euro breaks down below the trend low at 1.2858 there really is not a lot to stop it heading to 1.2800 and then to the target area of 1.2780 (major rising trend support; from July 2001), which comes just ahead of the 9 July 2013 low at 1.2754.
With Mario Draghi again saying on Friday that the ECB stands ready to take further action to maintain price stability, while the Fed looks to be about to head in the other direction by ending QE altogether in October, the upside for the Euro seems fairly limited, with any rally looking rather temporary before the downtrend reasserts itself.
Selling rallies remains the theme.
Economic data highlights will include:
M: EU Trade balance, US Capacity Utilisation, Industrial Production, NY State Empire Mfg Index
T: EU Q2 Labor Costs, German/EU ZEW Survey Economic Sentiment, US PPI
W: EU, US CPI, FOMC/ Statement/Press Conference, G20 Meeting
T: US Building Permits, Housing Starts, Jobless Claims, Philly Fed Mfg Survey, G20 Meeting
F: German PPI, EU C/Acc, CB Leading Indicator.
Meta Trader – AxiTraderEUR/USD: 4 Hour
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USD/JPY: 107.35
US$Jpy had a big week, and after rallying over 2%, it finished Friday at the trend highs, pinned up against the descending trend resistance at 107.40 ahead of interested sellers at 107.50.
Good offers are said to lie here and given the overbought nature of the shorter term charts, I suspect that it could again prove difficult to overcome early in the week.
Note that 10 year US yields headed sharply last week, closing at 2.61% and taking out near term descending channel resistance, suggesting that they may have recently bottomed out at 2.305%, which has assisted in underpinning the recent run up in US$Jpy.
Technically, it appears that there may be further upside in yields, potentially for a test of the 200 DMA at 2.65% and then the 3 July high at 2.69%, a break of which could open the path for a run back to 2.8% and then the 31 Dec 2013 high at 3.03%. Such a development would add further fuel to the fire, as far as both US$/Jpy and the commodity bloc are concerned, so will be worth monitoring.
If/when 107.50 is taken out though, it could be that we are in for a quick run to 108.01 (Sept 19, 2008), beyond which, there is not much resistance to be seen until the descending trend resistance, joining the Feb 2002/June 2007 highs, at 109.20 (see monthly chart below), and then at the August 2008 high at 110.65, and again at the 76.4% Fibo level at 112.50 (124.13/75.56).
On the downside, bids will arrive at 107.00 (Friday low:106.96) and below this at Thursdays spike low/100 HMA at 106.65. It does not look as though we are going to see it below here again for a while, but if wrong, further bids should eventuate at 106.50 and at 106.00, which if seen would be a good buy opportunity with a SL placed below 105.70.
The hourly charts are showing a degree of bearish divergence and with the 4 hour charts being at overbought extremes so it could be that we do see the dollar back near 106.00, although until the FOMC it would not really surprise to see the dollar consolidate near current levels, below 108.00.
Economic data highlights will include:
M:
T: BOJ Kuroda Speech
W:
T: Japan Trade Balance
F:
Meta Trader – AxiTraderUSD/JPY:4 Hour
USDJPY: Monthly
GBP/USD: 1.6265
Cable continued to recover its recent lost ground, reaching 1.6277 on Friday, ahead of the upcoming Scottish Independence poll due this coming Thursday.
Expect plenty of volatility before then. Aside from more poll predictions, the UK CPI (exp 0.4%mm, 1.6%yy) is due tomorrow and then the BOE Minutes will be released on Wednesday, which will be closely monitored to see if the MPC are edging closer towards hiking rates in Q1 2015.
Technically it looks as though Cable could continue to recover and if Friday’s high at 1.6277 can be overcome (200 HMA:1.6270), then it should be able to make a run towards 1.6300, above which it would look to close the opening gap of last Monday at 1.6320 (1.6318: 23.6% of 1.7191/1.6051). If Thursday’s vote decides to remain within the UK, then cable could see quite a strong bounce and back above 1.6320 could see a decent squeeze up towards 1.6480 (38.2%).
In the short term, 1.6230/40 provides minor support ahead of 1.6200. Below there would see a return to 1.6170 (100 HMA) and then 1.6150 but I don’t think we are likely to see it below 1.6200 ahead of the CPI, tomorrow.
If the Scotland vote goes the other way, then don’t stand in the way of Cable as it will collapse though 1.6000 and head quite a lot lower. I don’t think this is likely, but if it were to happen, then there is not a whole lot to hold it up and it could target 1.5725 (61.8% of 1.4813/1.7191) and then 1.5380 (76.4%). Below there, would see a return to 1.4813, the July 2013 and potentially even to 1.4230, the May 2010 low – Don’t get too excited yet, but if Scotland go for it, we could get there in a hurry.
The vote count will commence at 7 am Australian ET on Friday and will progress over the next 9 hours with 32 sets of results to be released, one for each Scottish Council. It could be quite a day in Asia on Friday!!!
EURGBP: 0.7970. The cross remains highly volatile but is effectively unchanged on the close from the previous week, having spiked up to 0.8065 at one stage after the Scottish poll showing the “Yes’ vote for independence in a winning position with 51% of the tally. Later polls, suggesting the “No” being in the lead, have bought the cross sharply lower, and at least until Thursday I would stay away from it as trade will depend on polls/politics and it will remain choppy, potentially with plenty of price gapping and slippage. The dailies are giving little hint either way, although the weeklies suggest we may be forming a basing pattern above 0.7970. If the Yes vote were to win, Cable will collapse, sending the cross sharply higher. I can’t see it, but it is to close to call, so best avoided for now.
Economic data highlights will include:
M: BOE Quarterly Bulletin
T: UK CPI, PPI, RPI
W: BOE Minutes, UK Unemployment, Average Earnings
T: Scottish Referendum Vote, UK Retail Sales
F:.
Meta Trader – AxiTraderGBP/USD: 4 Hour
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EURGBP: Daily
USD/CHF: 0.9325
US$Chf looks as though it is topping out for the time being and may consolidate or head a little lower ahead of the FOMC on Wednesday.
The week finished at the session lows at 0.9320, and with the indicators pointing lower we could be in for an early test of 0.9300 (200 HMA), below which would see a run towards 0.9285 and possibly 0.9270 (50% pivot of 0.9838/ 0.8698), which if seen would be where I would be looking to buy for the next leg higher.
On the topside, 0.9350 (100HMA) will provide minor resistance ahead of 0.9385 and 0.9400 (61.8% Fibo level of 0.9838/0.8698), which will not give way easily, but beyond 0.9400, the next target would be the 6 Sept 2013 high at 0.9455. Above here there is little to stop the dollar heading to 0.9570 (76.4% Fibo level of 0.9838/0.8698).
While looking to stay structurally long, I think we need to allow for dips towards 0.9285 so we need to leave room to buy it down there with a SL place sub 0.9240
The SNB meeting is on Thursday. EUR/CHF rebounded quite impressively last week on talk that SNB could adopt negative rates so we could see some decent moves, although it is not a cross I choose to get involved with.
Economic data highlights will include:
M: Proucer/Import Prices
T:
W:
T: Trade Balance, SNB I/R Decision
F:.
Meta Trader – AxiTraderUSD/CHF:4 Hour
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AUD/USD: 0.9038
The Aud has opened lower, Monday, perched precariously above 0.9000 following the release of the weekend China data and it looks as though there are more losses ahead.
The Aud is in full reverse gear after falling to a new trend low at 0.9030 on Friday, with plenty of hedge funds and real money managers falling over each other in their rush for the exit, and lower levels looking likely this week.
Note that Chinese industrial output for August was released over the weekend and was the lowest outcome in over 5 years : yy +6.9% vs +8.8% exp, which won’t help the Aud or the Kiwi a lot first thing on Monday.
With a dovish tone from the RBA Minutes, tomorrow, and the chances of a more hawkish tone from the Fed on Wednesday, the way would appear to be open for further losses and a test of 0.9000 would appear imminent. Further pressure could come later in the week from the RBA Bulletin/Annual report which are again likely to lament the high level of the Aud.
Having closed the week below 0.9050 (Weekly Cloud Base, 50% pivot of 0.8660/0.9505, Monthly Tenkan) it now looks as though further declines could now take the Aud, below 0.9000 and on towards 0.8975(61.8% of 0.8660/0.9505), below which would reach the head/shoulder target that we mentioned last week at 0.8960, where the Aud should find some buyers at last. If wrong and the Aud keeps falling as the longs continue to scramble, then we could be in for a bit of a freefall towards 0.8923 (12 March low), 0.8890 (3 March low) and possibly to 0.8860 (76.4% of 0.8860/0.9505).
While the dailies are pointing sharply lower, the 4 hour charts are at oversold extremes, so we could see a short term consolidation or perhaps a rally that could take the Aud back to 0.9050, where the weekly cloud base would provide the initial resistance. Above there, 0.9070 (Hourly Kijun) will see minor sellers ahead of the 100 Month MA and the monthly Tenkan which both sit at 0.9100. I cannot really see the Aud back above here in the next session or two, but if wrong, look for a squeeze towards the 100/HMA/descending trend resistance, currently at around 0.9150.
Stay short, looking to add to positions with a SL placed above 0.9150.
Economic data highlights will include:
M: New Car Sales
T: RBA Minutes, China FDI
W: WBC Leading Index
T: China House Price Index, RBA Bulletin/Annual report
F:.
Meta Trader – AxiTraderAUD/USD: Daily
AUDUSD:Weekly Ichimoku.
NZD/USD: 0.8145
The Kiwi had another tough session on Friday, heading to new trend lows at 0.8140, where it came to rest right between the important supports at the Fibo level (61.8% Fibo 0.7670-0.8839) at 0.8145 and the 200 WMA at 0.8135. This may well hold it early in the week but the overall trend remains lower and below here the Kiwi is likely to head quickly to 0.8100, below which there is very little to hold it until the 2014 low at 0.8051 on Feb 4, from where it bounced sharply. Below that would probably head quickly to 0.8000 and below, to Fibo support at 0.7985 (76.4% of 0.7670-0.8839).
A steep fall is unlikely ahead of the FOMC on Wednesday, although the weak Fonterra Milk auctions have recently been a key driver of the Kiwi and there is another one on Tuesday which could add further downside pressure. A hawkish Fed would quickly see US yields head higher, causing the Kiwi and the commodity bloc to head sharply lower.
As with the Aud, the Kiwi is currently rather oversold on the short term time-frames, so a short squeeze is possible and could take it quickly back to the base of the weekly cloud – which gave way on Friday and now provides resistance at 0.8175. We would need a close back above here at the end of the coming week in order to provide some stability. Right now this looks doubtful, but if wrong, look for a further run towards 0.8200 and possibly on to the Fibo level at 0.8225 (23.6% of 0.8514/0.8140) ,
As with the Aud, stay with shorts positions and look for further declines over the week, with the chance of a short term squeeze to 0.8200/25. If seen, use it as a sell opportunity with SL placed above the descending trend resistance, currently at 0.8275.
The general election is on Saturday. John Key looks set to be returned to power so there should not be too many waves, although a hung parliament is possible due to the mixed member proportional (MMP) representation system used in NZ, which would also send the Kiwi lower. Wait and see on that one – next week.
Economic data highlights will include:
M:
T: Fonterra Milk Auction.
W: NZ C/A,
T: NZ GDP,
F: Visitor Arrivals.
S: General Election
Meta Trader – AxiTraderNZD/USD:4 Hour
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EURJPY:139.15
A huge week on all the crosses, with EurJpy being no exception rising more or less in a straight line, from sub 136.00 to finish on its highs at 139.15. More gains look possible, although strong resistance lies ahead between 139.60 (descending trend) and 139.80 (200 DMA) but if these can me overcome the cross now looks headed to 140+. A break of 140.00 would probably lead quickly back to 141.00 (13 May high 140.94), beyond which there is not too much to stop it heading up to 142.36 (8 May high).
The downside will now find buyers at the rising trend support at around 138.70, and below that, at the first Fibo level of 138.40. If we go below there it Is really back into the consolidation area for more chopping around, with further support seen at 137.90.
Prefer to play it from the long side, as with all the Yen crosses. ie. Yen to show further weakness.
Meta Trader – AxiTraderEurJpy: Daily
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GBPAUD: 1.8000
No lack of volatility here either! Having looked down and out at 1.7214 on Monday, the cross staged a huge weekly key reversal (see below) to finish at 1.8000.
More upside looks likely, although a “yes” vote over Scotland would quickly change that theory, with the initial resistance to be found right here at 1.8000. Above there could head towards 1.8100 but I suspect that after such a rise, we are unlikely to go too far anywhere directionally and may need to consolidate a little, at least until the Scotland vote on Thursday. Nearer resistance lies at the 100 DMA at 1.8025 and at the descending trend line at 1.8085.
The downside should see bids at 1.7900 and then again at 1.7850 and 1.7800. I don’t think we are heading below here, but prefer to play the cross from the long side and dips would appear to be buying opportunities..
Meta Trader – AxiTraderGBPAUD: Daily
GBPAUD: Weekly.
EURAUD: 1.4340
The cross powered north from opening the week at 1.3800 to finish at its highs, with the potential of more to come this week although the momentum should slow somewhat from here. Descending trend resistance lies immediately ahead at 1.4365, beyond which, the daily cloud base is at 1.4375. Above 1.4400, the 100 DMA is at 1.4460 and then strong Fibo resistance sits art 1.4570.
On the downside, support will be seen at around 1.4260 and then below here at 1.4200 and at 1.4140 (daily Kijun), which if seen would, I suspect, be a decent buy opportunity. Playing it from the long side, buying dips appears to be the preferred strategy..
Meta Trader – AxiTraderEurAud: Daily
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EURNZD: 1.5885
I like the look of EurNzd, given the weekly finish at 1.5885, having above both the descending trend resistance and the initial Fibo level at 1.5845. Further progress looks possible, although the weekly Kijun, which lies right here at 1.5885 may provide some early resistance. If/when overcome, the next resistance would lie at the 200 DMA (1.5948), a break of which could see a concerted test of 1.60/1.61.Dips look like buying opportunities, although I would not now want to see it back below 1.5700, which would indicate a false break to the top side. Buying dips towards 1.5800, with a SL place tight below 1.5700 appears to be the strategy.Meta Trader – AxiTraderEurNzd: Daily
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DXY: 84.17
There was no holding back the DXY last week and it reached 84.51 before pulling up just short of the major target at the July 2013 high at 84.75. This should prove stubborn resistance and with the dailies being overbought and looking as though they could roll over, I suspect that progress may slow up, at least ahead of Wednesday’s FOMC. If wrong, and the index continues its march north I cannot see too much to stop it heading on towards 76.4% Fibo resistance/descending monthly trend line at around 85.50 (see below) and then on to the 29 June 2010 high at 86.30 (weekly chart below). Beyond there would eventually head to the 7 June 2010 high at 88.70, from where it collapsed, eventually to 80.08 by August 2010.
The downside now should find minor support at around 84.00 and then at last week’s close at around 83.75. Stronger support would be seen at the break-up level of the long term downtrend resistance-now-turned- support, at 83.35 and then below there at 83.17 (23.6% of 78.86/84.51). I don’t think we are going there, but – as before -, dips are buying opportunities, given that the weekly charts look to have plenty of upside potential. In the short term some consolidation may be necessary.
Meta Trader – AxiTraderDXY: Daily
…
DXY: Weekly.
Meta Trader – AxiTraderDXY: Weekly
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