The appetite for risk was divergent on Wednesday

The appetite for risk was divergent on Wednesday. While foreign currencies made little progress, the US stocks surged in very thin volume and the gold/oil ratio fell. The market is still digesting comments by German Chancellor Angela Merkel that not all is well in the Eurozone debt crisis; whereas this is obvious, the market was unnerved by the mere fact that she approached the issue. In the US, the Beige Book stated the obvious: low growth and even lower job creation.

The short-term outlook for the European and commodity currencies is sideways. The medium-term outlook for most of the foreign currencies is bearish. The LGR short-term model is short on the European currencies and yen.

Good luck!

Overnight

• US: Housing starts expanded 6.9% to a seasonally adjusted annual rate of 760,000 in June compared to May’s upwardly revised to 711,000 from the 708,000 initially reported. Building permits fell 3.7% to a seasonally adjusted annual rate of 755,000 in June from May’s upwardly revised figure of 784,000 from 780,000.
• US: In its latest "Beige Book", the Federal Reserve said that economic activity continued to expand at a modest to moderate pace in June and early July, while job growth grew at a slow pace across most of the twelve Federal Reserve districts.

Today's economic calendar

• Japan: All Industry Activity Index for May 
• Japan: Leading economic index for May 

EUR – September

Luca Model: Short since May 7        
 
The oversold September edged marginally lower on Wednesday on Merkel’s overstated doubts about the Eurozone, but this was only a pretext to take profit after recovering for three days. It had hit a two-year low on Thursday. The euro should remain under overall pressure.
The short-term outlook is sideways. The medium-term outlook is bearish and my model is short.
Friday’s low is 1.2171. Further support is at 1.2150.
Initial resistance is at 1.2327. The 21-day exponentially smoothed moving average resists at 1.2396.   

INDICATORS

Fast stochastics: Sideways
MACD: Bearish
Ichimoku: Bearish

OUTLOOK

NEAR-TERM: Sideways    
MEDIUM-TERM: Bearish
LONG-TERM: Bearish

JPY – September

Luca Model: Short since June 21             
 
The September Japanese yen advanced on Wednesday after slipping on Tuesday and remains within Monday’s range, when it marked a four-week high. It is trading in a rising channel.
The short-term outlook is sideways. The medium-term outlook is slightly bullish but my model is short.
Initial resistance is at 1.2735. Further resistance is at 1.2895.
The 21-day exponentially smoothed moving average supports at 1.2609. Further support is at 1.2490.   

INDICATORS

Fast stochastics: Bullish
MACD: Slightly bullish  
Ichimoku: Slightly bullish  

OUTLOOK

NEAR-TERM: Sideways   
MEDIUM-TERM: Slightly bullish  
LONG-TERM: Sideways  

GBP – September

Luca Model: Short May 15                  

The September pound made little progress on Wednesday after advancing for three days and hitting an 11-day high on Tuesday. Its 21-day exponentially smoothed moving average provided support. The pound had formed a medium-term peak at an eight-month high on April 30 and bottomed at a 4 1/2-month low on June 1 and is currently approaching the tip of a symmetrical triangle. 
The short-term outlook is sideways. The medium-term outlook is slightly bearish and my model is short.
The 21-day exponentially smoothed moving average supports at 1.5581. Further support is at 1.5510 and 1.5450.
The 100-day exponentially smoothed moving average caps at 1.5709. Further resistance is at 1.5775.

INDICATORS

Fast stochastics: Bullish
MACD: Sideways
Ichimoku: Sideways

OUTLOOK

NEAR-TERM: Sideways       
MEDIUM-TERM: Bearish  
LONG-TERM: Sideways

CHF – September

Luca Model: Short since May 2  

The oversold September Swiss franc slipped on Wednesday after rising for three days and reaching a one-week high. It has apparently bottomed at a 1 1/2-year low on Friday. It trades in an inside range well below the 21-day exponentially smoothed moving average. 
The short-term outlook is sideways. The medium-term outlook is bearish and my model is short.
A pivot low is at 1.0142. Further support is at 1.0090.
Immediate resistance is at 1.0300. The 21-day exponentially smoothed moving average resists at 1.0330. 

INDICATORS

Fast stochastics: Sideways 
MACD: Slightly bearish
Ichimoku: Bearish

OUTLOOK

NEAR-TERM: Sideways       
MEDIUM-TERM: Bearish 
LONG-TERM: Bearish

CAD – September

Luca Model: Long since June 29

The September Canadian dollar ended off a two-month high and above the 100-day exponentially smoothed moving average. It is trading in a wide channel rising since June 4. The loonie had peaked on April 27 and bottomed at a 5 1/2-month low on June 1.
The short-term outlook is sideways. The medium-term outlook is sideways and my model is long.
Immediate resistance is at .9940. The next cap is 1.0015.   
The 21-day exponentially smoothed moving average supports at .9800. The next floors are .9720 and .9632.   

INDICATORS

Fast stochastics: Bullish
MACD: Bullish
Ichimoku: Slightly bullish

OUTLOOK

NEAR-TERM: Sideways     
MEDIUM-TERM: Sideways  
LONG-TERM: Sideways

AUD – September

Luca Model: Long since June 29

The September Australian dollar advanced for a fourth day and closed at a near three-month high. It is holding well above the 21-day exponentially smoothed moving average. The Aussie peaked at a two-month high last Thursday. It has been advancing overall since June 4.
The short-term outlook is sideways. The medium-term outlook is sideways and my model is long.
A pivot high is at 1.0375. Further resistance is at 1.0410.
Initial support is 1.0230. The 21-day exponentially smoothed moving average supports at 1.0111. 

INDICATORS

Fast stochastics: Bullish 
MACD: Sideways
Ichimoku: Sideways

OUTLOOK

NEAR-TERM: Sideways     
MEDIUM-TERM: Sideways 
LONG-TERM: Sideways