General dollar strength has again been the theme of the day, with both the Yen and the Euro under pressure ahead of respective central bank meetings (BOJ today / ECB tomorrow). Aud and Kiwi are both also lower despite yesterday’s solid China data, with today’s direction to come via Consumer Confidence (Aud) and CPI (Nzd) data. Gold was again a winner, so far falling just shy of 1300oz, while WTI fell sharply. Elsewhere today, the BOE Minutes and US housing data will be the main focus.
EUR/USD: 1.1550
The dollar has retained a generally bid tone today with the Euro remaining heavy despite the firmer ZEW survey, which rose to 48.4, way above expectations of 40 and the prior reading of 34.9.
Having traded close to 1.1600 for the first half of the day, the Euro is currently hugging the lows, just above 1.1540, with activity likely to diminish ahead of tomorrow’s ECB Meeting. Today’s action will be supplied by the US housing data, and also through the crosses, following important data from both Japan (BOJ IR decision) and the UK (BOE Minutes).
Technically there is not too much change and while the hourlies do point a little lower, the downside today looks a bit limited, with the 4 hour charts still attempting to recover from their current oversold condition. 1.1500 will find bids today, and I would be a bit surprised to see it much below there, but if wrong we would head back towards last week’s low at 1.1460. Beyond there, the next realistic support is at 1.1370 (Nov 2003 low) and then at the major Fibo support at 1.1227 (61.8% of 0.8225/1.6037), with precious little elsewhere to hold it up.
On the topside, 1.1600 will be the first hurdle, above which the session high and 100 HMA, in the 1.1615/25 area, will prove tricky to overcome. If this were to happen, further resistance is seen at 1.1645 (2005 low), the descending trend resistance at 1.1675 and then at the (200 HMA/ 23.6% of 1.2570/1.1460 & daily Tenkan), currently at 1.1720. A break of this would trigger stops and would potentially head towards 1.1880 (38.2% of 1.2570/1.1460) although it is unlikely to get anywhere close today.
Look for another session gyrating within 1.1500/1.1600
Economic data highlights will include:
US Building permits, Housing Starts, World Economic Forum, Davos.
Meta Trader – AxiTrader EUR/USD: 4 Hour
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USD/JPY: 118.75
US$Jpy has had a positive session, assisted initially in Asia, by a 2% rise in the Nikkei yesterday and underpinned today by the general round of US$ strength, trading towards the NY close, at the session highs of 118.86.
Today sees the BOJ meeting and IR decision, policy statement and press conference. No major changes are expected but the tone of the BOJ outlook will dictate the direction. The lower oil prices are helping the Japanese economy as they rely solely on imported energy and will be doing some of the work for the BOJ, s any major changes would be a surprise.
The move higher from the session lows of 117.55 has seen the dollar come to rest up against decent resistance, this being the top of the daily cloud. A close above 118.65, which it looks as though we are going to get, would allow further progress towards 119.00 and above, towards recent highs at 119.30 and then at 119.95 (8 Jan).
Further out, if/when 120.00 can be overcome then look for further gains towards the minor triple top at around 120.75. At this stage I doubt we are heading towards 121.00, but if/when we do, further advances towards the trend high at 121.85, a break of which would see a run towards the 15 July 2007 high at 122.42. In the longer term, the target of 124.13 (17 June 2007 high) would appear on the horizon but will take time given the resistance levels sitting in between.
If the daily cloud top proves too much to overcome, then we are heading back towards the minor rising trend support, currently at around 118.40 and then to the daily Kijun (118.15) and the 200 HMA/daily Tenkan at 117.90. Given the positive look of the short term charts, I would doubt heading below here today, but further support would arrive at the 100 HMA at 117.35.
Wait for the BOJ, but overall a day of choppy trade above 118.00 would not surprise. The dailies still do not give any hint of a strong move higher, but buying dips may be the plan.
Economic data highlights will include:
BOJ Monetary Policy Statement/Press Conference.
Meta Trader – AxiTrader USD/JPY: 4 Hour
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GBP/USD: 1.5156
Cable had a very active session by comparison with the other major pairs, in initially heading lower, where Asia triggered the stops under 1.5075 support, taking it down to a low of 1.5056 before Europe turned it around and drove Sterling all the way to 1.5198. Since those highs, Cable has been choppy but has settled a little lower, near the 100/200 HMA confluence at around 1.5150.
I suspect that we are in for more of the same choppy trade above 1.5000 over the next couple of days, while capped by the strong resistance at around 1.5250. Today’s BOE Minutes and the UK Unemployment data will be the drivers, but the points to watch are pretty much unchanged from the previous few sessions.
On the topside, above 1.5200 will see further upside progress towards the major rising trend-support-now-turned-resistance at 1.5255. This should prove strong resistance, but above here would suggest a false downside break, and that being the case, Cable could head back towards the channel top at around 1.5475.
On the downside, back below 1.5100, there should be bids at 1.5075 and again at the session lows at 1.5056. Below here, then look for a run back towards the trend 1.5033 lows and a test of the important 1.5000 level, below which would see stops push Cable towards 1.4915 (61.8% of 1.3502/1.7191) and the July 2013 low at 1.4813. In the short term this appears unlikely, but given the overall longer term view with regards to the dollar up trend I think we are eventually heading in this direction and selling Cable into strength still appears to be the plan. Having said that, there is more mileage to be made out of selling the Euro than selling Cable I suspect.
For today, with the charts looking relatively positive, trading Cable from the long side, looking to buy dips, hoping for a break of 1.5200 seems to be the plan. Stops should be left under today’s session low.
Meta Trader – AxiTrader GBP/USD: 4 Hour
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USD/CHF: 0.8760
No change. Avoid.
As before, for those wanting to be involved, the wide range of 0.8400/0.8900 currently looks to have it covered, albeit that liquidity is still thin and I think it probably sensible to give it a wide berth.
In the bigger picture, while I still like the US$, buying dips towards 0.8300/0.8200, should we see it would seem to be a plan. If/when the Euro (EurUsd) heads lower, towards 1.10, and possibly to parity, then even US$Chf may find the legs to head back towards 0.9000/0.9500. Keep positions very small, or avoid it altogether.
Economic data highlights will include:
ZEW.
Meta Trader – AxiTrader USD/CHF: 4 Hour
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AUD/USD: 0.8175
The Aud chopped around close to 0.8200 at the time of the China data yesterday but the mildly better than expected 7.3% yy reading of the GDP failed to ignite any fresh buying and saw the it drift away to 0.8160, which proved to be the session low. Since then, the price action has chopped around the 0.8160/0.8210 area, but is finishing the US session nearer the lows and with the 4 hour charts looking heavy, a more sustained test of 0.8150 may be on the cards.
Back below 0.8150, and the 15 Jan low at 0.8132, further bids will arrive at 0.8100, where it appears that the Aud is trading in a short term rising channel, with 0.8100 currently being the base. A break of 0.8100 would head to the previous lows at 0.8067 and then to the recent trend low of 0.8032 (7 Jan). Below here, albeit probably not today, the downside momentum would look to carry the Aud beneath 0.8000 and on towards the important Fibo level at 0.7944 (61.8% of 0.6006/1.1080), below which we then are headed to the July 2009 low at 0.7700 and beyond, possibly to the RBA’s stated target at 0.7500, albeit not for a while.
On the topside, 0.8200/15 has proved tricky over the last session or two and may well prove to be so again today. A break higher though would target Friday’s high of 0.8255 ahead of the recent minor highs at 0.8273 and 0.8298, with the next Fibo resistance not seen until 0.8321 (38.2% of 0.8795/0.8033). Beyond this, the breakout level from below the base of the long term channel is seen at 0.8350 and should be strong resistance – and a decent sell opportunity – if seen.
For today, use 0.8130/0.8210 as a guide. The WBC Consumer Confidence will be the only local data and it looks as though the Aud is going to have a session driven mostly by the crosses, given the relative lack of data today to give the US $ any direction either. Keep an eye on Aud/Jpy in case of a surprise from the BOJ.
Economic data highlights will include:
WBC Consumer Confidence.
Meta Trader – AxiTrader AUD/USD: 4 Hour
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NZD/USD: 0.7682
The Kiwi had a rather tough session, trading with a heavy tone even before yesterday’s Chinese data. No bounce ensued and amidst general US$ strength both Europe and NY were looking for excuses to sell it. A test of 0.7700 was seen before the Fonterra milk results came out, and while the GDT PI and WMP prices increased for the third consecutive auction, total volumes sold were lower again and little bounce has been seen since the 0.7658 low.
The Q4 CPI (exp 0.9%yy, 0.0%qq) is expected shortly. If below expectations, the pressure could well resume on the downside as the RBNZ are likely to curtail any thoughts of a 2015 rate rise and will need to reappraise monetary policy.
Below today’s low would target 0.7618 (5 Jan low) and 0.7600. Below this would hint at a run towards 0.7550, the base of the descending trend support, although I don’t see this being touched over the next session or two.
If the CPI comes out above par, then look for a bounce back to 0.7700, and possibly higher, towards the daily Kijun at 0.7750.
Overall, the Kiwi has been very choppy recently and more of the same sort of trade with a downside bias looks most likely, and I would use 0.7615/0.7700 as a guide. Sidelined, but looking to sell a decent rally towards 0.7900, if we see one.
Economic data highlights will include:
CPI.
Meta Trader – AxiTrader NZD/USD: 4 Hour
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