The December foreign currency futures open little changed in the Far East after closing mostly down on Friday. But strong economic reports from China (which is hoped are accurate) suggest at least some temporary rise in the appetite for risk in the commodity currencies (particularly the Aussie) and weakness in the Japanese yen and the Swiss franc. What’s the bigger picture? Despite recent weakness, both the yen and the Swiss franc remain overbought while officials at BoJ and the SNN ponder the odds of success of a series of interventions. The euro and pound are stuck in a range, while the commodity currencies should remain firm in general.
The short-term outlook is sideways to slightly bearish for most of the European currencies and the yen and sideways to slightly bullish for commodity currencies. The medium-term outlook is sideways for the euro, pound and Canadian dollar and bullish for the yen, Swiss franc and Australian dollar. My model is long on the Dow Jones CME FX$INDEX and all of the foreign currency futures except for the euro and pound.
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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: No data
• Canada: The unemployment rate rose to 8.1% in August from 8.0% in July
Today’s economic calendar:
• China: Industrial production rose 13.9% year-over-year in August from 13.4% rate in July.
• China: CPI came in at +0.6% in August and at +3.5% Y-o-Y.
• China: Retail Sales rose 0.5% in August and 18.4% Y-o-Y.
• Australia: No data
• Japan: No data
EUR- December
Luca Model: Short since September 6
Luca Model: Short since September 6The December euro opens flat in a trading range. The short-term outlook is sideways to slightly bearish. The medium-term outlook is sideways and my model is short. My model is also short euro/yen and euro/pound. The long-term outlook remains bearish.
The CME Cot report: The short EUR position decreased by 1,870 contracts to -23,699 contracts.
Friday’s low is 1.2643. A pivot low is at 1.2587. The bottom of the Ichimoku cloud is 1.2540.
The 21-day moving average resists at 1.2764. Distant resistance is at 1.2876 and 1.2913.
INDICATORS
Fast stochastics: Sideways
MACD: Sideways
Ichimoku: Bullish
OUTLOOK
NEAR-TERM: Sideways to slightly bearish
MEDIUM-TERM: Sideways
LONG-TERM: Bearish
JPY - December
Luca Model: Long since August 31
The December Japanese yen opens flat on Monday after marking a new high for the uptrend on Wednesday and falling on Friday. Again, be careful here, it’s not that impossible that we’ve already seen a hangman on Wednesday. The short-term outlook is slightly bearish. The medium-term outlook is bullish and my model is (still) long.
The CME Cot report: The long JPY position increased by 2,279 contracts to 52,183 contracts.
Below 118.37, the 21-day moving average supports at 118.17. The next floors are 117.10 and 116.80.
Initial resistance is at 119.41. The high of the uptrend is 120.01. Distant resistance is at 120.57.
INDICATORS
Fast stochastics: Slightly bearish
MACD: Slightly bearish
Ichimoku: Bullish
OUTLOOK
NEAR-TERM: Slightly bearish
MEDIUM-TERM: Bullish
LONG-TERM: Sideways
GBP - December
Luca Model: Short since August 10
The December pound broke its alternating up and down days pattern, as it closed down for two consecutive days late last week. It opens soft in Asia. The short-term outlook is sideways to slightly bearish. The medium-term outlook is sideways and my model is short.
The CME Cot report: The short GBP position increased by –802 contracts to -16,068 contracts.
Initial support is at 1.5284 from a pivot low. Further support is at 1.5225.
Initial resistance is at 1.5390 from the 55-day moving average. Key resistance is 1.5451 from the key 21-day moving average. Above 1.5550 there is additional resistance at a distant 1.5598.
INDICATORS
Fast stochastics: Slightly bearish
MACD: Bearish
Ichimoku: Bullish
OUTLOOK
NEAR-TERM: Sideways to slightly bearish
MEDIUM-TERM: Sideways
LONG-TERM: Bearish
CHF - December
Luca Model: Long since August 16
The overbought December Swiss franc opens lower after recouping most of its losses on Friday with help from the 21-day moving average. It had peaked on Wednesday. The short-term outlook is slightly bearish. The medium-term outlook is bullish and my model is long.
The CME Cot report: The long CHF position increased by 2,346 contracts to 16,627 contracts.
Initial support is at .9775. The 21-day moving average supports at .9761. The next floor is .9695.
Friday’s high is .9855 and Thursday’s high is .9901. The high of the uptrend is .9941.
INDICATORS
Fast stochastics: Bearish
MACD: Slightly bullish
Ichimoku: Bullish
OUTLOOK
NEAR-TERM: Slightly bearish
MEDIUM-TERM: Bullish
LONG-TERM: Sideways
CAD – September
Luca Model: Long since December 1
The December Canadian dollar opens little changed after falling on Friday from a new high for the upmove. The loonie remains on track to reach the target of a double bottom. The short-term outlook is sideways to slightly bullish. The medium-term outlook is sideways and my model is long.
The CME Cot report: The CAD position turned long by 5,216 contracts to 452 contracts.
A pivot high is at .9700. Above .9754, further resistance is at .9832.
The 100-day moving average offers initial support at .9597. The next floors are .9564 and .9514.
INDICATORS
Fast stochastics: Sideways
MACD: Bullish
Ichimoku: Bullish
OUTLOOK
NEAR-TERM: Sideways to slightly bullish
MEDIUM-TERM: Sideways
LONG-TERM: Sideways
AUD – December
Luca Model: Long since August 27
The overbought December Australian dollar opens firmly on Monday and already marked a new high for the uptrend (see Chinese data). The short-term outlook is slightly bullish. The medium-term outlook is bullish and my model is long.
The CME Cot report: The long AUD position increased by 13,158 contracts to 56,966 contracts.
Initial resistance is at .9250. Further resistance is at .9315. Distant resistance is at .9465.
Immediate support is at .9166. The next floors are .9119 and .9093.
INDICATORS
Fast stochastics: Slightly bullish
MACD: Bullish
Ichimoku: Bullish
OUTLOOK
NEAR-TERM: Slightly bullish
MEDIUM-TERM: Bullish
LONG-TERM: Sideways
