Te foreign currencies futures rallied across the board on Thursday, squashing expectations for a medium-term top. However, the US stock indexes spiked down after St. Louis Fed President Bullard said he thinks that the Fed may have to take the more severe measure of buying government debt if the current economic weakness becomes a more serious, prolonged problem. Bullard’s comments added to Fed’s Beige book’s findings of a faltering US economic recovery. The foreign currencies futures closed off their highs, the US stocks ended with small losses and the gold/oil spread fell. I don’t like this (probably short-lived) breakdown in correlations, and if the Asia/Pacific stock markets and the European bourses follow the US markets down, the European and commodity currencies will turn down as well.
On this fragmented inter-market background, the short-term outlook is bullish for about half a day for the foreign currencies futures. The medium-term outlook is sideways for most of the foreign currencies futures. My model is long all the European and commodity currencies and short the yen.
This analysis is based on my books, as follows:
“Trading in the Global Currency Markets” - Prentice Hall Press, 3rd edition 2007
“Technical Analysis Applications” - McGraw-Hill, 2004
Overnight:
- US: Jobless claims fell to 457,000 from the previous week's revised figure of 468,000 (from the 464,000 originally reported).
- Canada: The Industrial Product Price Index fell 0.9% in June, following a revised 0.4% gain in May. The Raw Materials Price Index declined 0.3% after a revised decrease of 7.3% in May.
Today’s economic calendar:
• Japan: Jobless rate for June
• Japan: National CPI for June
• Japan: Tokyo CPI for July
• Japan: Industrial production for June
• Japan: Housing starts for June
• Australia: Private sector credit for June
EUR- March
Luca Model: Long since July 22
The September euro surged to an over 2 1/2-month high, so the medium-term top scenario is out of the picture. The short-term outlook is bullish for about half a day. The medium-term outlook is sideways and my model is long.
Initial resistance is at 1.3138. The next caps are 1.3156 and 1.3195. Distant resistance is perched at 1.3275.
Immediate support is 1.3046. Below 1.2994, the 100-day moving average supports at a distant 1.2913.
INDICATORS
Fast stochastics: Bullish
MACD: Bullish
Ichimoku: Bearish
OUTLOOK
NEAR-TERM: Bullish for about half a day
MEDIUM-TERM: Sideways
LONG-TERM: Bearish
JPY - March
Luca Model: Short since July 20
The September Japanese yen rallied for a second day and the short-term outlook is slightly bullish. The medium-term outlook is sideways and my model is (still) short.
Immediate resistance is at 115.46. The high of the uptrend is 116.00.
Initial support is 114.60. The 21-day moving average supports at 113.97. Distant support is at 113.11.
INDICATORS
Fast stochastics: Slightly bullish
MACD: Bearish (Bearish divergence)
Ichimoku: Sideways
OUTLOOK
NEAR-TERM: Slightly bullish for about half a day
MEDIUM-TERM: Sideways
LONG-TERM: Sideways
GBP - March
Luca Model: Long since July 23
The September pound surged to a new high for the uptrend in Europe but closed well off this peak. The short-term is slightly bullish for about half a day. The medium-term outlook is bullish and my model is long.
The uptrend high is 1.5660. Further resistance follows at 1.5723 and 1.5766.
Immediate support is at 1.5580. Below 1.5520, the next floors are 1.5445 and 1.5396.
INDICATORS
Fast stochastics: Bullish (overbought)
MACD: Bullish
Ichimoku: Sideways
OUTLOOK
NEAR-TERM: Slightly bullish for about half a day
MEDIUM-TERM: Bullish
LONG-TERM: Bearish
CHF - March
Luca Model: Long since July 29 (reversing short since July 23)
The September Swiss franc exploded higher in Europe and remained strong in the US to mark a new high for the uptrend. Thus, expectations for a medium-term peak ended. The short-term outlook is slightly bullish for about half a day, but the Swissy is overbought. The medium-term outlook is bullish and my model went promptly long.
The new high of the uptrend is .9645. The next resistance level is .9721.
Immediate support is at .9532. The next floors are .9478 and .9437 from the 21-day moving average.
INDICATORS
Fast stochastics: Bullish (overbought)
MACD: Slightly bearish
Ichimoku: Bearish
OUTLOOK
NEAR-TERM: Slightly bullish for about half a day
MEDIUM-TERM: Bullish
LONG-TERM: Sideways
CAD – March
Luca Model: Long since July 22
The September Canadian dollar rallied briefly in an inside range but surrendered most of its gains on news that the local industrial product price index fell the most since May 2009. The loonie remains in a symmetrical triangle. The short-term outlook is slightly bullish for about half a day. The medium-term outlook is sideways and my model is long.
Initial resistance is at .9667. Above .9724, further resistance is at .9784. A pivot high is at .9857.
The 55-day moving average supports at .9617 and the 21-day moving average at .9602. Distant support is at .9550.
INDICATORS
Fast stochastics: Slightly bullish
MACD: Slightly bullish
Ichimoku: Sideways
OUTLOOK
NEAR-TERM: Slightly bullish for about half a day
MEDIUM-TERM: Sideways
LONG-TERM: Bullish
AUD – March
Luca Model: Long since July 20
The overbought September Australian dollar reversed Wednesday’s losses and is still challenging the top of the uptrend. The short-term outlook is slightly bullish for about half a day. The medium-term outlook is sideways and my model is long.
Initial resistance is at .9019. Above the key resistance at .9045, further resistance lies at .9132.
Below .8907, the next floors are .8851 and .8797.
INDICATORS
Fast stochastics: Slightly bullish
MACD: Bullish
Ichimoku: Bearish
OUTLOOK
NEAR-TERM: Slightly bullish for about half a day
MEDIUM-TERM: Sideways
LONG-TERM: Bullish
