Soft US data placing the US$ under pressure ahead of today's FOMC. Australian CPI coming up.

The US$ and stocks both came under pressure following today’s weak US Durable Goods Orders, as traders turn their attention to today’s FOMC meeting, with growing speculation that the Fed might hold off on raising interest rates for longer than has been expected. Today’s other big event will be the Australian CPI, at which a soft reading – on the back of lower petrol prices – is expected. If that turns out to be the case, it would put another dent in the Aud, pushing it towards the RBA’s stated objective of around 0.7500.

EUR/USD: 1.1369

The Euro finally made up a bit of lost ground today, in reaching 1.1420 when  the dollar came under some pressure of its own after the US Durable Goods orders tumbled by -3.4% in December, as opposed to the expected + 0.5%. The dollar has since recovered some of its earlier losses after the improved Consumer Confidence, although the steam does appear to be running out of the recent rally and it may be that for the time being the Euro can hang on above Monday’s 1.1097 low – and could possibly even head a bit higher.

Today’s focus is going to be on the FOMC decision, but at which no change is expected in the official statement. There is no press conference from Janet Yellen or any forecast updates, so while rates are expected to rise later in the year, the status quo should prevail today. More interesting, are likely to be the minutes, to be released in 3 weeks, which should convey how the Fed go about outlining when a rate rise will occur and how they will communicate their intentions through the guidance language.

Technically, on the topside the Euro is going to find sellers at 1.1400 and at 1.1420, today’s peak. Beyond there will run into various points of resistance which will make for some headwinds to further Euro progress –1.1440 (23.6% of 1.2570/1.1097), 1.1455 (61.8% of 1.1680/1.1097), 1.1470(200 HMA) and then above 1.1500 at the descending trend resistance currently at 1.1520 will all present hurdles. Nevertheless, the 1 and 4 hour charts remain positive, so further gains are possible but will depend largely on the Fed’s statement later today.

If the outlook from the Fed is hawkish, then the Euro will again come under pressure and will test 1.1300, below which would head back towards 1.1260 (minor) and 1.1220. Below 1.1200 would see a return towards the recent lows, although this looks a little unlikely to be seen today.

As we keep reiterating, below the rend low at 1.1097, the next obvious target is at 1.1000, where many analysts had previously been looking for a 2015 low, although the next realistic technical level is not seen until the September 2003 low at 1.0759, beyond which we are going to zero-in, eventually, on parity.

While the short term still seems to have some legs, looking for levels to sell medium term rallies remains the theme

Economic data highlights will include:

German Consumer Confidence, FOMC Decision/MP Statement..

Meta Trader – AxiTrader   EUR/USD: 1 Hour

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USD/JPY: 117.82

US$Jpy remains choppy in the extreme, and having again failed on the topside, peaking at 118.65, the dollar has fallen back towards the recent lows, today reaching 117.33 after the release of the US D/G data, before a bounce to 118.00, and then settling around 117.80.

There are easier things to trade right now than the Yen and the choppy conditions could well continue today. Sooner or later though, we are going to get a break out, either below the quadruple bottom at around 117.30 or above the resistance top at around 118.80. In between I would not be too involved.

Below 117.30 would find further support at the rising trend line at around 117.00 (61.8% of 115.85/118.86) although below this would see the chance of a deeper decline towards 116.56 (76.4%) and possibly back to 115.85 (16 Jan low).

On the topside above 118.00 (100 HMA) will find selling interest at 118.25 and then at 118.50 and the session high at 118.65, where the daily cloud is proving a major hurdle. If broken, then the dollar would head to 119.00, a break of which would then signal further gains towards the 12 Jan high at 119.30, beyond which 119.95 (8 Jan high) will come into view.

Further out look for a run towards 120.00 above which will suggest further gains towards the minor triple top at around 120.75. Eventually I suspect that we are heading towards 121.00, but not yet. If/when we do, do so, further advances towards the trend high at 121.85, above 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.

For today, look for more of the same choppy trade and then go with the flow following the FOMC announcement.

Meta Trader – AxiTrader   USD/JPY: 4 Hour

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GBP/USD: 1.5199

Cable was able to squeeze higher today, reaching a peak of 1.5225 as the dollar weakened after the soft DG data, and came about despite Cable seeing some soft data of its own, after the UK GDP came out marginally lower than expected.

Having held the support at the 100 HMA, Cable headed to the resistance at 1.5200 (38.2% of 1.5620/1.4950), where it currently sits, and looks as though it has the legs to head on above the session high, towards 1.5260 and then to 1.5285 (50% pivot of 1.5620/1.4950). A break of this, although a bit doubtful, would potentially see a sharper topside squeeze towards the 61.8% Fibo level at 1.5360.

Keep an eye out for the bullish divergence in the charts below. They may be giving an early warning of a stronger rally, although I suspect it would take a surprisingly dovish outlook from the Fed later today, putting the dollar under further pressure, to bring this about. More likely I think, is some choppy consolidation below 1.5300, possibly 1.5350, while at the same time holding on above 1.5100.

On the downside, minor support will arrive today at 1.5160 and then at the 200 HMA at 1.5110, below which the 100 HMA (1.5070) will again come into view.

Further out, we could eventually see another test of 1.5000, below which, 1.4985 and then Friday’s spike low at 1.4950 will see buyers, although I don’t see this area being bothered today unless the FOMC are hawkish in the extreme. If wrong, below 1.4950 would head to 1.4915 (61.8% of 1.3502/1.7191) and then, some way off, towards the July 2013 low at 1.4813. Below this could get ugly as there is not too much to hold Cable up ahead of the 76.4% Fibo level (1.3502/1.7191) at 1.4375.

Meta Trader – AxiTrader   GBP/USD: 4 Hour

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USD/CHF: 0.9009

It was pretty hectic in the Chf today following some comments from the SNB’s Danthine, who indicated that the Bank are prepared to intervene, given that they feel the current levels of the Chf are unjustified. EurChf headed up to 1.0380 before returning to sit at around 1.0250, while the dollar spiked up to 0.9165 before falling equally sharply to a session low of 0.8935 and then regaining 0.9000, roughly where it is finishing the session.

While it remains pretty wild, as I have said before, I would leave it alone, although personally I am long a small amount of US$Chf as I still like the US$ over the longer term, and I suspect that buying dips towards 0.8800/0.8700 is probably the plan, with a SL below 0.8675.

If/when the Euro (EurUsd) heads lower, towards 1.10, and possibly in the longer term towards parity, then US$Chf may find the legs to head back towards 0.9500 and higher. Keep positions very small, or avoid it altogether. Patience will be required.

Meta Trader – AxiTrader    USD/CHF: 4 Hour

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AUD/USD: 0.7946

The Aud held its own in Asia yesterday despite some soft data from both Australia (NAB Business Confidence – Dec) and China (Industrial Profits – Dec), and squeezed steadily higher through the session reaching a peak of 0.7974 as the US$ came under pressure following the soft US data, before turning a bit lower late in the session as traders look towards today’s local data.

The Q4 CPI  (exp 0.3%qq, 1.8%yy) is the local highlight of the week and will be closely watched for any possible hint of action from the RBA at next Tuesday’s meeting. Anything below the estimate will cause the market to feel that an RBA rate cut is a real possibility and will put a dent into the chances of  any potential recovery before then.

Points to watch, on the downside are at 0.7900, 0.7880 and at the trend low at 0.7857, where the base of the descending channel is providing some support. Under 0.7850, would head towards 0.7800 and then to 0.7765 (200 Month MA), 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 above 0.7975 will find decent sellers at 0.8000 (38.2% of 0.8230/0.7857), although if the CPI surprises to the topside (unlikely given the recent fall in petrol prices) it will get a real workout. Above here (doubtful) would see a run towards 0.8050 (50% pivot of 0.8230/0.7857) and then to 0.8085 (61.8%), although I don’t see it happening today.

Trading from the short side is preferred and if we see a rally to/above 0.8000, looking to sell into it.

Economic data highlights will include:

CPI.

Meta Trader – AxiTrader    AUD/USD: 4 Hour

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NZD/USD: 0.7467

After an early low of 0.7407, the Kiwi squeezed steadily higher, reaching a peak in NY of 0.7478 after the below forecast US durable goods data. Since then the Kiwi has consolidated at slightly lower levels and will take its direction today from the Australian CPI, but really waiting for tomorrow’s Fed decision, which will be very closely followed by the equally important RBNZ policy announcement.

Following the recent, surprise BOC rate cut, many analysts now expect the RBNZ to temper their rate stance on Thursday morning, which comes an hour after the FOMC meeting. If they do strike a more dovish tone, then we are likely to see the Kiwi head back towards 0.7400 and possibly lower, towards the Nov 2011 low, at 0.7370, beyond which there is only minor support (20 Mar 2011 low: 0.7290) to hold the Kiwi up ahead of the 76.4% Fibo support and 17 Mar 2011 low seen at 0.7115.

On the topside, above today’s high of 0.7475 (100 HMA) the Kiwi would head towards 0.7500 where the descending trend resistance, currently at 0.7510 would probably cap it. If wrong, look for a stop loss run that could take the Kiwi on towards 0.7585 (38.2% of 0.7890/0.7397) and even to the 200 HMA currently at 0.7610. If seen I would be looking to sell into it,

Meta Trader – AxiTrader   NZD/USD: 4 Hour