US$ firm after US data. Focus today on Australian CPI, BOE Minutes.

Aud remains firm, Kiwi soft, ahead of todays Australian CPI.

The dollar remains bid against the majors today after breaking through an important technical level against the Euro, and looks as though it is building the momentum for a bigger move over the coming weeks. Stronger housing data helped bond yields to head higher and underpinned the view that the US economy is expanding enough for the Fed to raise interest rates next year. Elsewhere, easing tensions with Russia allowed stocks to rebound. Today’s focus will be on the Australian CPI and then later on the BOE Minutes. That aside it will be pretty thin on the data front and focus will remain on Russia etc.

EUR/USD: 1.3465

Early Europe triggered stops to take the Euro below 1.3500, for it to sit just above 1.3480 by the time the US data revealed that inflation came in pretty much to expectations,- although the core figure slightly missed expectations, – while June U.S. home sales hit an eight month-high, suggesting the housing market is gradually regaining momentum, underpinning bond yields, and kept the bid tone in the dollar, which finished the US session just above its high against the Euro,  of 1.3459.

Having now taken out the major support in the 1.3475/1.3500 area, the Euro looks as though it may see further declines, although it should be noted that the short term charts are oversold and may need some time to unwind. With the speculative market already running very short of the Euro, some sort of corrective short squeeze cannot be ruled out, with sellers likely to be seen at 1.3480 and again at 1.3500. Stops are building above 1.3510, which could once again take us back towards Mondays 1.3548 peak. Beyond there looks doubtful now, but above 1.3550, would head to sellers at 1.3570 and 1.3585, ahead of 1.3600. Given the ongoing negative look of the daily indicators, I don’t really see it back above 1.3600 for quite a while now, but if wrong, and the Euro does head higher over the next couple of days, offers in the 1.3640/50 area remain solid, where the minor Fibo resistance at 1.3646 (61.8% of 1.3700/1.3562) would provide strong resistance.

On the downside, 1.3450 is apparently being protected by option barrier buyers, but below here, there is then not too much support to be seen ahead of 1.3415 (200 WMA). Below 1.3400,  would head to 1.3370 (50% pivot % of 1.2754/1.3995) and eventually to 1.3300 (100 WMA) and 1.3294 (7 Nov ’13 low).

In the bigger picture, with the wedge formation that we have been discussing over the last few months, now broken, we could be at the start of a larger move down, potentially targeting the 9 July low 2013 at 1.2754. Don’t get too excited yet, if it turns out to be correct, I think it will be a choppy and relatively orderly progression and there should be plenty of opportunity to get on board into the odd, intermittent short squeeze.

With not much data due out today, traders will focus on geopolitical events, with the meeting in Brussels to discuss Russian sanctions being of immediate interest.

The BOE Minutes might see some action in Eur/Gbp, which might see the Euro jump about a bit.

Use 1.3450/1.3500 as a guide today, looking for an eventual move to/below 1.3400.

Economic data highlights will include:

Consumer Confidence (provisional

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EUR/USD: 4 Hour

USD/JPY: 101.45

It has been another tight 27 point range for US$/Jpy today, and despite looking bid for much of the day – reaching 101.59 at one stage – the dollar is now back pretty much where it started the session, having taken a nasty spike lower after the release of the US data, where it briefly reached 101.32, before an equally sharp bounce back to around 101.50 as US bond yields held firm.

There is little to add from a technical point of view, although the offers in 101.50/60 have now been largely filled, and with the 1 and 4 hour charts looking mixed, another choppy day looks to be  the most likely outcome.

If the dollar can make headway above 101.60, further sellers will be seen at around last Thursday’s peak at 101.68, with more at 101.75 (daily Kijun), and the 200 DMA /daily cloud base at 101.95. Beyond 102.00, which looks a little unlikely for a while, 102.10 (100 DMA) will provide some resistance, above which could see a run up to the recent high at 102.35.

On the downside, the session low of 101.32 will see buyers, ahead of the strong support at 101.00/10.  I would be surprised to see it down here today, but if we do head lower we would see a return to further support at the 9 May low at 100.80. If this were to give way, then look for a run towards 100.60 (50% pivot of 95.78/105.43), below which we could be in for a sharp run towards 100.00 and 99.47 (61.8%). Large stops are supposed to lie below 100.70, which if taken out could accelerate the run towards 100.00 and possibly lower.

Use 101.25/65 as a guide today.

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USD/JPY: 4 Hour

GBP/USD: 1.7065

Cable had a choppy session, looking heavy early on, in sympathy with the Euro, hitting a low in early NY at 1.7042 before recovering to close the NY session around 1.7065. The focus will now turn towards the BOE minutes which should shed some light on the outlook for the UK economy and the possibility of a coming UK rate hike.

Technically, the short term charts still looks a bit messy, but the dailies still suggest that we may be in for lower levels ahead, and below today’s 1.7042 base, we may see a run back to Friday’s low at 1.7034. Below this, look for a fall, back towards 1.7000 (38.2% of 1.6992/1.7192) and then to the rising trend support, now at around 1.6980, a break of which would trigger plenty of stops and would look for a run down, potentially towards the 100 DMA, currently at 1.6840.

On the topside, sellers will arrive at around today’s high at 1.7082, above which, 1.7100 will now act as strong resistance. Beyond here, 1.7143 was last Thursday’s high and will provide some resistance, although a break of 1.7150 would most likely head back to the 1.7190/1.7200 area, but which will not be easily overcome. If /when it is taken out, then look for an accelerated move towards the next major resistance level, which is not to be seen until 1.7331 (50% pivot of the long term move from 2.1160/1.3547). Beyond that, there is not a great deal to stop Cable heading to the August 2008 high, which is not to be seen until 1.7516. Not today.

A minor short squeeze back towards 1.7100 would not surprise, but overall, the view remains unchanged that eventually we are headed back to 1.7000 and possibly lower. Wait for the Minutes to find out.

Economic data highlights will include:

BOE Minutes

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GBP/USD: 4 Hour

USD/CHF: 0.9022

US$/Chf has finally taken out the resistance at 0.9000 and has headed on to a session high of 0.9026 where, as with the Euro, it stopped in its tracks after the dollar became overbought on the short term charts.

Positive momentum is building on the dailies though and dips look increasingly like buying opportunities, where support is now seen at 0.9000 and below, at 0.8985, and then at yesterday’s 0.8970 low and at 0.8945 (200 DMA/weekly Tenkan). Below this would head back towards 0.8925 (weekly Kijun) and then to the recent base at around 0.8900. This looks unlikely to be seen for a while, but if wrong, look for a potential test of 0.8885, with stronger support at the 100 DMA at 0.8870. While I don’t think we are likely to see it down here, a break of 0.8870 would see the chance of a run back to last week’s low at 0.8855, below which, look for further support at 0.8830/40.

On the topside, we are heading towards the 5 June high of 0.9036, a break of which would see a run towards the descending channel top at around 0.9050, which is also the weekly cloud base and will act as strong resistance if/when seen. Above this though would suggest an acceleration up towards 0.9100 and then 0.9130 (23.2% of 0.9838/0.8698) but could take a while.

Buying dips seems to be the plan, with a range likely to be in the 0.8990/0.9040 range today.

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USD/CHF: 4 Hour

AUD/USD: 0.9393

Neither of the RBA speakers (Debelle/Stevens) talked the Aud lower yesterday, which gave the bulls a helping hand, and this, along with the slight miss in the US Core Inflation figure saw the Aud make a quick spike up to a session high of 0.9421, from where it promptly returned back below 0.9400 as US yields held their ground, and currently sits pretty much unchanged from where it was trading in Asia yesterday afternoon.

Focus will now turn to the upcoming  Q2 CPI, which is expected to tick a bit higher and may provide some volatility if the result is well away from forecast of 0.6%qq/ 3.1%yy.

On the topside, after triggering the stops at 0.9410 but then failing at 0.9421, the offers at 0.9425 remain intact. If the CPI is a strong reading, look for a run up above here, to the 10 July high at 0.9455 and the 10 April high at 0.9460. Beyond this would then head on towards 0.9495(76.4% of 0.9757/0.8660) and to the recent top at 0.9505, a break of which, there would be little to stop the Aud heading towards the 6 June high at 0.9543. Above here, the long term objective from the major head/shoulder reversal is now at 0.9665.

On the downside, a soft CPI outcome would see the Aud head back towards the 0.9360 session low and then to 0.9350, below which would potentially drop back to Fridays 0.9335 low.  Under here, look for a run towards 0.9320 (61.8% of 0.9220/0.9505/18 June low) and then 0.9300. Below 0.9300 would see a run towards 0.9275 (76.4%) and as we said before, if the Aud breaks under 0.9250, then the downside could really accelerate, but at this stage is considered unlikely.

Overall the indicators are all pretty flat, so I would not expect too much in either direction as we hang close to 0.9400, but prefer to buy dips, unless the CPI puts in a particularly weak reading.

Economic data highlights will include:

CPI

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AUD/USD: 4 Hour

NZDUSD: 0.8865

The Kiwi was largely sidelined today, although we did see a squeeze to 0.8697 after the slight miss in the core US CPI, which was quickly rebuffed as US Yields rebounded, underpinning the US$ and sending the Kiwi to a session low of 0.8652.

Short term resistance is now seen at 0.8685 (100 HMA) above which 0.8700 will provide strong resistance. I would doubt that we are heading above here today, but if wrong look for a run up towards 0.8720. Above this, further gains would head to minor Fibo resistance at 0.8740 and 0.8760, but for the time being 0.8800 looks rather distant.

Below the 0.8652 session low, the Kiwi will find bids at Friday’s low at 0.8648 and the June 17 low at 0.8642. Below this would head to 0.8618 (50% pivot of 0.8401/0.8835) and eventually to 0.8568 (76.4% of 0.8401/0.8835).

Keep an eye out for the Australian CPI. A strong reading would see good demand in Aud/Nzd and could push the Kiwi towards 0.8640.

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NZD/USD: 4 Hour