The dollar has retreated a little after yesterdays strong rally but reached a 6 year high against the Yen. While the overall trend has further to go, today could be one of consolidation in the absence of any major data, which would allow the short term indicators to unwind their overbought condition. The commodity bloc look a little healthier too and could see a bit more of a short squeeze. Have a good w/e.
EUR/USD: 1.2920
The dollar gave up some of its ground today, with the Euro managing to squeeze back above 1.2900 in choppy trade and after some mixed data from the US. Jobless Claims were better than expected (280K) while housing starts dropped to 0.96 mio in August (exp 1.04 mio) and building permits dropped to 1 mio (exp 1.045 mio).
There is not a lot of economic data out today so it may be a choppy session, with the market largely likely to be watching the outcome of the Scottish vote.
Technically the short term momentum indicators point higher but are running into resistance from the 100/200 HMA’s currently at 1.2925/30, beyond which would find further sellers at the descending trend resistance at 1.2950. A break of this level would see a run towards 1.3000 again, but which might be a hard nut to crack today. If wrong look for a run towards the Fibo level at 1.3038 (23.6% of 1.3700/1.2834).
On the downside, 1.2900 will provide the initial support, ahead of minor buyers at 1.2880 and 1.2850 which I doubt that we revisit today. If wrong, below the trend low of 1.2835 would take a look at 1.2800 and then head towards 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.
Look for a choppy but directionless session, with the Euro likely to be dragged around by Cable as the outcome of the referendum becomes clear.
Economic data highlights will include:
German PPI, EU C/Acc, CB Leading Indicator.
Meta Trader – AxiTraderEUR/USD: 4 Hour
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USD/JPY: 108.67
The dollar reached 108.95 today, falling just short of 109.00, which was protected by option related sellers. The dips have been shallow though and once 109.00 is taken out, the next resistance will be seen at the descending trend line joining the Feb 2002/June 2007 highs, at 109.20 (see monthly chart below) and should be strong resistance, but beyond which the dollar could soar to the August 2008 high at 110.65. Above there would head on to the 76.4% Fibo level at 112.50 (124.13/75.56), albeit not for a while.
The daily charts are becoming extremely overbought so we should expect a correction, which could possibly be quite sharp although right now it looks a little unlikely. The downside will now find buyers at 108.50 and again at 108.00. I don’t really see it back below here today but if wrong, look for a run back to the previous strong resistance at 107.35…
Meta Trader – AxiTraderUSD/JPY:4 Hour
USDJPY: Monthly
GBP/USD: 1.6385
Cable has rallied strongly on the assumption that the “No”. vote will win the day in the referendum.
Further strength looks possible with the next resistance being seen at 1.6480 (38.2% of 1.7191/1.6051) beyond which would see it head on towards 1.6500 and the previous trend low at around 1.6535.
The downside will now find buyer at 1.6400 below which could head back to 1.6320, albeit probably not today.
In the longer term, Sterling will again come under pressure from the stronger dollar and could eventually retest the minor rising trend support at 1.6240, a break of which would hint at a return to 1.6150 and possibly to the trend low at 1.6051.
Selling into strength above 1.6500, should we see it appears to be the medium term strategy
Meta Trader – AxiTraderGBP/USD: 4 Hour
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USD/CHF: 0.9338
The dollar has given up all the gains from yesterday after having reached a high of 0.9432, and in the short term the indicators suggest that we may run down towards 0.9300 (23.6% of 0.8855/0.9432) and possibly to 0.9260 (23.6% of 0.8698/0.9432).
The topside today looks somewhat limited and I would be surprised to see 0.9400. If wrong, look for a run back to the session high, above which could see a run up towards the 6 Sept 2013 high at 0.9455, above which there is little to stop the dollar heading to 0.9570 (76.4% Fibo level of 0.9838/0.8698)..
Use 0.9300/70 as a guide today.
Meta Trader – AxiTraderUSD/CHF:4 Hour
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AUD/USD: 0.8985
The Aud is at 0.8985, having recovered from a dive to the session and trend low of 0.8926 when the US dollar and bond yields rallied on the release of the better than expected jobless claims.
Those losses were quickly reversed and the Aud steadily ground higher to reach 0.0.9000 before some late US dollar buying took it back to current levels at the end of the NY session.
The short term charts suggest the chance of another squeeze to the topside and above 0.9000 would run into decent resistance at around 0.9020 (100 HMA/descending trend resistance). A break of this would meet further sellers at 0.9038 (23.6% of 0.9400/0.8926) and then at 0.9055 (23.6% of 0.9473/0.8926). I don’t think we see it above here today but if wrong look for further gains towards 0.9100 where the 200 HMA/38.2% (of 0.9400/0.8926) Fibo resistance lies.
Today’s low virtually met the support at 0.8923 (12 March low) and while I doubt that we see this again today the next points to watch will be at 0.8890 (3 March low) and 0.8860 (76.4% of 0.8860/0.9505).
Look for a day of 0.8950/0.9020 with a preference – on the day- of buying dips. In the more medium term, look to be selling into strength should we see the Aud back near 0.9100.
Meta Trader – AxiTraderAUD/USD:4 Hour
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NZD/USD: 0.8156
The Kiwi has recovered from the session and trend low at 0.8076, assisted by yesterday’s better than expected GDP. After a bit of a dip, on the better than expected US jobs data, the Kiwi then headed higher once more to a peak in NY of 0.8157, roughly where it finished the session.
Further short covering looks possible ahead of tomorrow’s election, albeit that PM, John Key should be returned and will have little impact. A hung parliament would see the Kiwi head lower but looks unlikely.
The indicators hint at a run towards 0.8185 (200 HMA) and 0.8200 and possibly to the descending trend resistance at 0.8225. While I doubt that we see it above here today, further strength would take the Kiwi to 0.8250 (23.6% of 0.8838/0.8076).
The downside will find buyers at 0.8125 (minor) and 0.8100. I don’t think we head under here today, but if incorrect the trend low at 0.8076 will see buyers, below which we would head towards the 2014 low at 0.8051 on Feb 4, from where it previously bounced sharply. Below that would probably head quickly to 0.8000 and lower, to Fibo support at 0.7985 (76.4% of 0.7670-0.8839) but not today.
The longer term trend remains down, so selling into strength remains the preferred plan.
Economic data highlights will include:
Visitor Arrivals.
Meta Trader – AxiTraderNZD/USD:4 Hour
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