No stopping the US$ run. ECB & NFP to be this weeks highlights.

The dollar continued its march higher on Friday making trend highs against most of the other majors, assisted by the firm, upwardly revised US Q2 GDP reading. It does not look like much will change this week, and the Euro should remain under pressure ahead of the German and EZ CPI’s due for release on Tuesday/Wednesday which come ahead of Thursday’s ECB meeting, at which Mario Draghi is again likely to be extremely dovish in his outlook and may announce further stimulatory measures for the EU. Plenty of other secondary data ahead of Friday’s US Jobs/NFP numbers should ensure a busy week.

EUR/USD: 1.2682

The dollar finished higher for the 11th straight week against most other currencies on Friday, the longest winning streak since its 1971 float under President Richard Nixon. The Euro headed down to a new trend low of 1.2676, with the dollar underpinned by the firm Q2 GDP, and with precious little bounce it looks to be headed a fair bit lower in the weeks ahead.

The focus this week will initially be on the German/EU CPI readings, and these will weigh on the Euro should they come in beneath expectations, ahead of the ECB  meeting on Thursday. Given Mario Draghi’s statements that the ECB stand ready to act to add further liquidity to the system, the upside for the Euro seems rather limited over the next few days, although after last months surprise cut maybe we should not expect too much from him on Thursday..

Both EU and US Consumer Confidence figures are due early in the week and on Wednesday we get the global manufacturing data before the focus turn to the ECB (Thursday) and then to Friday, when we will see the September US Jobs/NFP (exp 6.1%, 203K) which should bounce back from last months underwhelming number, and could once again help to propel the dollar to higher ground.

Technically the Euro now sits above the Nov 2001 low at 1.2660, below which there is  minor support at 1.2625 and at 1.2585, but otherwise there is little to hold it until 1.2505 (76.4%of 1.2041/1.3995) a break of which would then open up the path for an even steeper decline towards the 22 July 2012 low at 1.2041.

Traders look likely to sell rallies, although if seen, they would appear to be reasonably shallow and may not even reach 1.2800 again (100 HMA:1.2795). The initial resistance will be at 1.2700, above which will see sellers at the 1.2745/55 area that acted as support on the way down where the major rising trend line sits from July 2001.

The DXY is up against strong resistance (see report) and if that does see any sort of correction, taking the Euro higher, then above 1.2800 would see sellers at the descending trend resistance and 200 HMA at around 1.2845.

Stay short and look to sell rallies but keep an eye on how the DXY reacts over the next day or so.

Economic data highlights will include:

M: EU Consumer Confidence, German CPI, US Personal Income/Consumption Expenditure, Pending Home Sales, Dallas Fed Mfg Survey

T: German Retail Sales, Unemployment, EU CPI, Unemployment, US Consumer Confidence, Case Schiller Home price Index

W: German /EU Mfg PMI, EU GDP, US ADP Employment, ISM Mfg PMI

T: EU PPI, ECB I/R Decision/Press Conference, US Jobless Claims, Factory orders

F: EU Services/Composite PMI, Retail Sales, US Jobs/NFP, Non Mfg PMI.

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EUR/USD: Daily

USD/JPY: 109.28

Having seen an early dip into the support area at 108.45/50 on Friday, the dollar rallied strongly and eventually managed to overcome the 109.45 trend high, taking out the 109.50 barrier, but was unable to carry on and having seen 109.53 it turned back to finish the week at 109.28.

Having looked reasonably firm, the Yen then gave up its gains on the news that the government will push ahead with pension fund reforms, – removing the concerns that the GPIF (Government Pension Investment Fund) could be rolled back,-  which in turn would pave the way for the GPIF to purchase up to $1.2T of overseas assets.

Technically the outlook remains unchanged, in that I think the dollar will take out the 109.50/55 area, possibly sooner than later, and head a fair bit higher, with the next realistic target to be seen at 110.65 (August 2008 high), above which the dollar would head on to 112.50 (76.4% Fibo level of 124.13/75.56). A break of this would suggest that the dollar is on its way to the July 2007 high at 123.65 although we have a lot of work to do before then

On the downside, 109.00 will now act as the initial support ahead of the 100/200 HMA’s at 108.85 and 108.60.  Below there 108.45/50 remains solid support, ahead of the daily Tenkan at 108.15 although it looks doubtful that we head back here any time soon.

Economic data highlights will include:

M:

T: Unemployment, Industrial Production, Retail trade

W: Tankan, Nomura Mfg PMI

T:

F:.

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USD/JPY:Daily

GBP/USD: 1.6250

The 200 HMA resistance at 1.6330 proved too much for Cable on Friday and after making a couple of attempts to overcome it Sterling  turned around and headed lower in one way traffic, not stopping until it reached its lows at 1.6237.

The week ahead will provide room for further volatility, with the Consumer Confidence and GDP both due on Wednesday likely to be the highlights, but with traders also keeping an eye out for any anti-EU comments from the UKIP Part Conference which takes place this week and which could put a dent into Cable.

Technically, in finishing above the support at 1.6230 (61.8% 1.6051/1.6523), Cable has so far avoided taking out the stops that sit below, although that seems unlikely to last long, and we could be in for an early look at what sort of support lies at 1.6200. A break of this would head back towards the 16 Sept low at 1.6162, below which would hint at a run down towards the recent 1.6050 low, seen just before the Scotland independence poll, albeit that this is some way off at this stage.

On the topside, 1.6275 will provide minor resistance ahead of 1.6300 and I am not sure that we head above here today. If wrong, further resistance will be seen at 1.6330/40 and then at 1.6400. If seen, which I doubt, it would be another opportunity to sell Cable.

A break of this would head back to 1.6160 but looks unlikely at present.

Economic data highlights will include:

M: UK Consumer credit

T: Gfk Consumer Confidence, GDP, Current Acc

W:

T: UK Construction PMI

F:.UK Services PMI

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GBP/USD: Daily

USD/CHF: 0.9513

US$/Chf recovered from Thursday’s dip to 0.9450 to finish the week just below the new trend high at 0.9520.

There is no change in view, and we are now within touching distance of the 0.9535 target (July 2013 high), above which will head on to 0.9565 (76.4% Fibo level of 0.9838/0.8698) and then on to 0.9600. Above here though will prove tricky to negotiate as there is plenty of congestion, and having already come so far, the dollar may get a bit choppy above 0.9600, should we see it.

The downside will now see buyers at 0.9500 and then again at Friday’s session low at 0.9460. I doubt we see it down here today, but below this, 0.9430/50 will see bids ahead of 0.9400 (200 HMA).

Economic data highlights will include:

M:

T:

W: SVME PMI

T:

F:.

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USD/CHF:Daily

AUD/USD: 0.8765

The Aud continued its slide on Friday, reaching a low of 0.8747, before a minor bounce into the close to finish at 0.8765.

Even lower levels look likely in the day’s ahead, although the Aud may see some support early in the week, having closed right on the major rising trend support off the July 2007 low at 0.7721, (weekly chart below – purple line).

A break down through 0.8745/50 would see a run to minor supports at the 4 Feb 2014 low at 0.8730 and then at the 31 Jan low at 0.8694. Below here will then want to take a look at the 24 January low at 0.8660, which should act as strong support but below which would then head to the July 2013 at 0.8632. Below here there is little to suggest that the Aud will pull up ahead of the 50% pivot of the long term rally from 0.6006/1.1082, at 0.8538.

The topside looks a little limited as long as this US$ strength continues, but if we do see a squeeze higher we could get back to the descending trend resistance at 0.8800. Above here would trigger stops and could see a run up to the 100 HMA at 0.8840 and then to the Fibo (23.6% of 0.9473/0.8747) resistance at 0.8900, where the 200 HMA lies and I think that any rally towards 0.8850 should be treated as a sell opportunity for an eventual look at the base of the major channel at  0.8500 (see weekly chart below) and possibly a fair bit lower. A sustained move back above 0.8850 though, would tend to turn the bias back to neutral for some consolidation before heading lower once again.

I have included a monthly chart, below. I don’t know if anyone else is considering this, but it looks to me like a huge head and shoulders and we are currently sitting right on the neckline. A break opens up the potential for a run to the target – this being an equal distance from the top of the head to the neckline – which would mean that the Aud is headed for 0.5950!  If nothing else, it would put a smile on Glen Stevens face!

Economic data highlights will include:

M:

T: ANZ Business Confidence, Private Sector Credit, RBA Annual Report, HSBC Mfg China PMI

W: NBS Mfg PMI, Aust Retail Sales, China National Day

T:,Aust TD Inflation, HIA New Home sales, Building Permits, Trade Balance, China National Day

F: AIG Services PMI, China National Day.

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AUD/USD:Daily

AUDUSD:  Weekly

AUDUSD: Monthly

NZD/USD: 0.7865

The Kiwi must be making the RBNZ very happy, in falling like a rock, on Friday reaching 0.7858, closing on its lows and taking out some important support in the process and with the chances of a long way to go yet.

By closing below the major Fibo support (23.6% of 0.4892/0.8835 – weekly chart) support at 0.7913, and breaking back underneath the top of the monthly cloud at 0.7900 there is not a lot to now hold it from heading towards the 24 June 2013 low at 0.7682.

Before then minor support should be seen at the early Sept 2013 lows lined up at 0.7792, 0.7775, 0.7735 and 0.7718.

On the topside, 0.7900/15 will now act as resistance and the Kiwi may have trouble in getting up this far. A break higher  would suggest a squeeze back towards 0.8000 and 0.8040, although this is beginning to look a long way off.

As with last week’s view, stay short and sell rallies.

Economic data highlights will include:

M: NZ Building Permits

T:

W:

T:

F:.

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NZD/USD: Daily

NZDUSD Weekly

EURGBP: 0.7803

The cross continued to trend in Sterling’s favour last week, and with the Scottish vote now well behind us I cannot see an awful lot to change matters in the week ahead. Interest rate differentials will again be the focus and thus it looks as though the cross will head lower as Cable outperforms given the diverging outlooks from the BOE and ECB. We shall find out more after the ECB meeting on Thursday..While we may consolidate for a session or two ahead of the ECB, a break of the trend low at 0.7785 would then head on to the long term target of 0.7753 (July 2012 low), which ties in nicely with the base of the channel, seen in the chart below. If we head below there, then there is little to stop the cross from heading to there Oct 2010 low at 0.7693 but that is still some way off I suspect.Rallies will see offers at 0.7875/85, although I cannot see what is going to drive it up there, and then at 0.7900 and at 0.7927 (23.6% of 0.8399/0.7810), which if seen – doubtful – will again be a sell opportunity..Sell rallies remains the theme..Meta Trader – AxiTraderEURGBP: Daily

GBPAUD: 1.8530

The cross has maintained its strong upside momentum and looks to have further gains ahead, and if last week’s high at 1.8620 can be taken out we could be in for a run towards 1.8720 (76.4% of 1.9185/1.7213). The downside looks to have support at the former Fibo resistance at 1.8425, a break of which would then head back to test the the July double top at 1.8375, a break of which would revisit the 200 DMA at 1.8200 although I cannot see it happening..Look to buy dips with an overall bias to the topside, however, note the bearish divergence on the 4 hour charts which suggests that it maybe possible to buy Sterling at cheaper than current levels over the next couple of days.Meta Trader – AxiTrader

GBPAUD: Daily

NZDJPY: 85.95 

NzdJpy failed badly last week, falling sharply from 88.90 to finish at 85.90. If we take out the support at 85.60, then I suspect we could be in for some substantial falls in a move that could eventually take the cross down towards 84.00 and potentially to around 82.50 (23.6% of 57.93/88.91)..The topside looks a bit limited with the 100 DMA at 86.40 providing the first resistance, a break of which would take us back to the rising trend support – now turned resistance – at 87.15, but which would provide a sell opportunity..Selling rallies seems to be the way to go. The 4 hour charts are at overbought extremes so it may be worth  leaving an order higher up and then waiting a couple of days, hoping to get set on a short squeeze, before the down trend continues.Meta Trader – AxiTrader

NZDJPY: Daily

EURNZD: 1.6115

Although the shorter term charts are overbought and may need some time to unwind, the cross looks to have plenty of medium term upside momentum, and once the Fibo resistance at 1.6115 can be overcome, the cross should be able to proceed towards the 4 June high at 1.6200 and to the 29 April top at 1.6285. Beyond there would suggest a run to the 50% pivot of the decline from 1.7274/1.5410/descending trend line at 1.6340. If the cross fails here at around 1.6100, then we could see a run down to the 200 DMA at 1.5940, where I think it would also be a buy, with a SL placed under the 100 DMA, currently at 1.5825.Meta Trader – AxiTrader

EURNZD: Daily

EURAUD: 1.4470

The cross continued its strong run higher last week and would appear to have further to go in the coming days. Resistance sits immediately ahead at the Fibo level at 1.4572 but once that is overcome there would seem little to stop it heading on towards where the 200 DMA and 50% pivot of 1.5831/1.3800 are crossing, close to 1.3800. Above there would retest the neckline from where the cross broke lower in April, at 1.4900.While the dailies point to higher ground, the shorter term charts may want to consolidate the recent gains and we could see a dip back towards the 100 DMA at 1.4410, below which could see losses towards 1.4375/1.4400 and possibly to 1.4320. If so, these should afford a buying opportunity with a SL placed below 1.4280.Meta Trader – AxiTrader

EURAUD:Daily

DXY: 85.64

The DXY, closed the week at 85.64, right up against the Fibo strong resistance (76.4% of 89.59/72.70) which is also strong trend line resistance, joining the tops from March 2009/May 2010, so while the longer term dollar uptrend looks set to continue, some near term caution may be warranted, as this level will not easily give up its ground.

The weekly MACD’s remain positive, and if we do head higher, the next meaningful resistance is not seen until we reach the 29 June 2010 high at 86.30 (weekly chart below), which is also the 61.8% extension of 72.69/84.75  from the low of 78.90 and therefore should be very strong resistance, but a break of which could head towards the April 2009 high at 86.87. Above here would head up to the major descending trend resistance reaching all the way back to February 1985 at 164.72 and joining the Feb 2002 top at 120.51, now at around 87.85, which again should be very strong, but beyond which could see a quick run to the 7 June 2010 high at 88.70, from where it collapsed, eventually to 80.08 by August 2010. If we get above 88.70 then we are headed all the way back up to 89.62, the high seen in March 2009. Don’t get too excited yet!

The dailies though, are now becoming overbought, as are the weekly stochastics, so while the uptrend remains firmly intact, we could see an easing up in the momentum and possibly a bit of a dip back towards 85.00 and possibly to the previous long term top at 84.75. Below this would head back towards the first meaningful Fibo support but which is not seen until 84.24 (23.6% of 79.74/85.68), although I don’t really see it, particularly ahead of the ECB meeting on Thursday, and if it does get there it would present another opportunity to sell the Euro at higher levels..

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DXY: Weekly

DXY:  Monthly.

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DXY: Weekly