Ivan Delgado
Independent Analyst
Aud looking good for further gains ahead of Thursdays Jobs data. Kiwi recovering from the recent sell-off.
It was a mixed session Friday, with a slight miss in the NFP, but followed up by an upward revision in February’s reading as well as an improved participation rate. The dollar looks as though it is trying to build a head of steam although yet more patience will be required but if Wednesday’s FOMC minutes are suggestive of an H1 2015 rate hike, while the ECB appear to be about to start easing, this could be the catalyst for further dollar gains. German Industrial Production, Sentix investor Confidence today.
EUR/USD: 1.3700
The dollar finished the week generally slightly lower after the lukewarm NFP (192K) came in below the expected 200K, while the jobless rate deteriorated to 6.7% from 6.6%. On the bright side, February’s figure was revised upwards and the participation rate also increased. The mixed picture had the market wondering what the outcome might mean for the tapering programme (and looking for clues as to any possible timing for a hike in interest rates), but result meant that the dollar gained some strength on the news of the previous month’s upward revision, with the Euro having a brief blip down to 1.3675, before finishing back at 1.3700, pretty close to where it spent much of Friday’s session.
The market will now be looking to this week’s FOMC minutes (Wednesday) for inspiration and hoping for a hint of what the Fed are thinking with regards to tapering. I suspect there will be little change and that we should expect them to continue on a straight course, with the minutes reiterating the policy of “steady as she goes” until the end of the year. Any mention of a rate hike in H1 2015 would give the dollar a further boost, particularly against the Euro, where it looks increasingly as though the ECB are heading in the opposite direction.
Before then the main data focus will be from the EU, beginning today with the Sentix Investor Confidence Survey and the German Industrial Production numbers.
Technically, the Euro is holding on above the strong support at around 1.3680. This is not going to give up its ground easily, being where several indicators converge, including the top of the daily cloud, the 100 DMA, the 23.6% retracement of 1.2753/1.3966 and the rising trend support from the 1.2753 low. A break of this though, would head back towards the Fibo support at 1.3660 (61.8% of 1.3475/1.3966) below which, the 27 Feb low at 1.3643 will come into view ahead of the 76.4% Fibo support at 1.3595. Below there would head towards the 200 DMA at 1.3525 and while this is a long way off, I suspect that eventually it is going to be tested.
On the topside, minor resistance will arrive at 1.3730 and then 1.3750/60, where the 100/200 HMA’s now lie. It looks unlikely that we will head much above here today, and I don’t think we are going to see 1.3800 again for a while. The resistance above 1.3800 remains strong, with 1.3808 (1.3803: Daily Kijun, 38.2% of 1.3966/1.3704) and 1.3820 (Daily Tenkan) providing the initial hurdles ahead of 1.3833 (50% pivot of 1.3966/1.3704). A break of this would see a move on towards 1.3865 (61.8%) and the recent spike high at 1.3875. I cannot really see this being tested again in the near term, but if wrong, beyond there would head towards the minor trend resistance at 1.3900, above which would suggest a retest of 1.3966 and eventually 1.4000
Looking to sell rallies appears to be the game plan, although today I don’t think there will be an awful lot in it either way, nor possibly for the next couple of sessions as the calendar is light, and would therefore tend to use 1.3675/1.3725 as a range guide, preferring to trade it from the short side.
Economic data highlights will include:
M: German Industrial Production, Sentix investor Confidence
T:
W: German Current Account, US Wholesale Inventories, FOMC Minutes
T: ECB Monthly Report, US Jobless Claims
F: IMF Meeting, German CPI, US PPI, Provisional Rts/Michigan Consumer Sentiment
USD/JPY: 103.25
US$/Yen reversed some of its recent gains after the below par NFP, and despite February’s upward revision and improved participation rate, it failed to hold on above 104.00, sinking back to finish at the session lows on Friday around 103.25.
Having made a new trend high (by one pip) at 104.12, we now have a short term double top in place, and by the negative look of the 4 hour charts it is not going to be worried again, at least for the coming session. The 100/200 HMA’s are at 103.60/103.00 (Daily Cloud top 103.10) respectively, and I suspect that for today’s session, these will provide the parameters.
With the market generally running short of Yen, hoping for a hand from the BOJ at the upcoming meeting on Tuesday, these shorts may well be squeezed a little further, perhaps towards the 100 MA currently at 102.85, although I would be surprised to see it much below there today, and would tend to think of it as a potential buying opportunity.
More likely, the BOJ is generally expected to maintain its current policy at tomorrow’s meeting and if Koruda maintains an upbeat tone for the economic outlook, the BOJ are likely continue to maintain a neutral policy stance. With a number of officials suggesting some scope to achieve the 2% inflation target by the end of FY 2014, the Yen may benefit from some scaling back of short Yen positions as hopes for further stimulus are postponed. We shall see…
On the topside, above 103.60 would see further sellers at minor resistance at 103.80. Above there, although it currently looks unlikely in the short term, if we can overcome the double top at 104.11/12, then we might head on towards the major Fibo resistance at 104.31(76.4% of 105.42/100.75). Beyond there lies the descending trend resistance at around 104.50, which, in turn, lies ahead of further minor resistance at around 104.80/90 ahead of 105.00.
While the short term charts do look a bit heavy, - and I suspect the dollar longs are in for some more pain -, I still think that buying dips at around 102.85 (100 DMA / DailyTenkan) may be the way to go and that by the end of the week we could be back having another look at 104.00. If wrong, back below 102.80 would suggest a test of the daily cloud base at 102.45, ahead of the 61.8% Fibo support of the climb from 101.20/104.12 at 102.32 and then the 76.4% support at 101.90.
Keep an eye on the Nikkei. Futures finished the US session down 1.35% at 14,865. Further losses could see renewed demand for the Yen, weighing on the dollar and the crosses. Overall though buying dollars somewhere in the cloud maybe a plan, if we see it down there.
Economic data highlights will include:
M:
T: Japan Current Acc, BOJ I/R Decision, Policy Statement, press Conference
W: BOJ Monthly Economic Survey,
T: Bank Lending, Machinery orders
F: BOJ Minutes
GBP/USD: 1.6571
Cable had another tough session following last week’s soft UK PMI’s, failing at resistance at around 1.6600 (1.6605 high) on Friday, before finishing mid range, above day’s lows of 1.6550 and looking weak ahead of the upcoming BOE meeting on Thursday, at which no changes to policy are expected, with the focus being on when a rate rise may be due, with the market currently pricing in a hike in around March 2015.
Having closed right on the daily Kijun (1.6570), but the indicators looking heavy, the way now appears open for a retest of 1.6550, where rising trend support lies. A break of that could bring about deeper declines, although the daily charts are flat and do not suggest any major move in either direction. Below 1.6535 (daily cloud base) though, could see a run towards 1.6500 and then the 100 DMA (1.6475) and the 24 March low at 1.6462.
On the topside, 1.6600/05 will again be the first hurdle, ahead of 1.6620 (200 HMA). Above here, would suggest a run to 1.6660, although this is looking increasingly distant.
It looks unlikely that we are heading above 1.6600 today, but if we saw 1.6600/20 it would appear to be a sell opportunity for another retest of the downside.
Before the BOE, we get the Industrial/Manufacturing production on Tuesday and the UK Goods Trade Balance on Wednesday, when the real focus will be on the FOMC minutes..
For today use 1.6590/1.6540 as a guide, with a preference to trade from the short side.
Economic data highlights will include:
M:
T: Industrial/Manufacturing production, GDP Estimate
W: UK Goods Trade Balance
T: BOE I/R Decision, APP Facility
F:
USD/CHF: 0.8917
The dollar made a brief spike to 0.8953, briefly breaking down trend resistance, following the US jobs data but returned to finish the week back below it, at 0.8935.
As we said last week, the 0.8935/50 area will be tough to overcome, with 0.8950 being the 100 DMA/daily cloud base and should see good selling interest. If this area can be taken out, the dollar would see further sellers at the Fibo resistance (23.6% of 0.9838/0.8698) at 0.8962, above which could see an acceleration towards 0.8980 (61.8% of 0.9143/0.8698/daily cloud top) and then picking up further speed as it breaks above 0.9000, possibly heading towards 0.9046 (76.4%) and the 200 DMA at 0.9085.
On the downside, 0.8900 remains the initial minor support ahead of 0.8870 and the rising trend support at around 0.8850 (daily tenkan). Back below here would see a deeper decline, perhaps towards 0.8800 (0.8810 – daily Kijun), but this looks unlikely and for the time being I prefer to trade from the long side, looking for an eventual break of 0.8930 for a move towards 0.9000+.
Use 0.8890/0.9035 as a guide but I am looking for a break of 0.9050 to accelerate higher..probably not today though ..patience will be required!
Economic data highlights will include:
M: Swiss CPI
T: retail Sales
W:
T:
F:
AUD/USD: 0.9290
The Aud had a good session on Friday, generally squeezing shorts, briefly touching 0.9301 and closing just below the highs, meaning that the Head/Shoulder objective of 0.9590 still a possibility, albeit some way off.
Given the fairly light data calendar from the US this week, the focus will be on Thursday’s Australian Jobs data (and the FOMC minutes), where the consensus is for a rise of 5k after February’s blow-out 47k, while unemployment is expected to rise to 6.1% fro 6.0%. An above forecast result will put upward pressure on Australian bond yields which will take the Aud along with it.
The technical levels remain pretty much unchanged over the last few days. We need to clear 0.9300/05 which would then allow for a run towards the Fibo levels at 0.9339 (61.8% of 0.9757/0.8660) and possibly to 0.9387 (38.2% of 1.0582/0.8660). Beyond this, there is not a lot ahead of 0.9450 (weekly cloud base) and 0.9494 (76.4% of 0.9757/0.8660). As we have said on previous occasions, while 0.9150 holds then buying dips for an eventual run towards the SHS target at 0.9590 remains the strategy.
On the downside, the initial, minor support is now found at 0.9250 and at 0.9230. Below here, further support lies at 0.9200 and then at 0.9185 (38.2% of 0.8660/0.9303) and 0.9175 (daily tenkan). If we do head below this, keep a close eye on the action at 0.9150. A break of 0.9150, would mean a failure of the head/shoulder neckline that we have been watching for a while, so reasonably tight stops on any longs should be left under 0.9135 (100 DMA). Fresh shorts are also likely to be opened up around here, looking for a quick return to 0.9000 and possibly lower.
For today, we have the construction PMI. This should not to have too much effect, but with the intra-day indicators pointing a bit higher, I suspect we may see another test of 0.9300/05. Beyond there may be a bit of a stretch in the short term, but I still prefer the idea of buying dips, and today would look for something like 0.9270/0.9315 to cover it.
GBPAUD: 1.7835. The crosses are where the main action has recently been taking place, with GBPAUD still leading the charge. The neckline, having been broken at 1.8280, means that as long as we stay below here, then there the measured Head/shoulder target is still at 1.7200. The dailies still point lower, – although they are becoming oversold so some caution is warranted -, as do the weeklies, so, while I am reasonably confident that we will eventually reach the target, we could yet get a short squeeze towards 1.8000 and possibly back to the neckline/ 100 DMA at 1.8200. I would not want to see it much above here, and certainly not above 1.8300 as the resulting rally could be vicious. At this stage I would be a seller into a rally towards 1.8000 with SL, lowered to 1.8080 from last week’s stop at 1.8320, looking for a decline to below 1.7800 and eventually heading towards 1.7615 (61.8% of 1.6655/1.9185). Below there, 1.7580 (200 DMA) will add support which should be strong, but beyond which, 1.7245 (76.4%) comes into view.
EURAUD: 1.4750.The Aud crosses all have much the same look in that they are carving out a head/shoulder formation and EurAud is no different. The dailies and weeklies are pointing towards further declines and the week closed below the 200 DMA (1.4800), currently sitting right above important Fibo support at 1.4735 (61.8% of 1.4050/1.5832) a break of which would suggest a run towards 1.4470 (76.4%). In order for this to occur, the cross must stay under the neckline of the SHS formation, now at 1.4905. Above here would most likely produce a short covering rally that could take us to the descending trends resistance at 1.4975 and if that were to get taken out we could be back at 1.5400 in pretty quick time. This is the less favoured view and selling rallies towards 1.4900/50 remains the plan, with a tight stop above 1.5000, or preferably above 1.5100. Try reselling at 1.5100, but with a tight stop placed above 1.5150. I don’t think we are heading up here though, and more likely, over time, I am looking for the measured SHS objective at 1.4120.
Economic data highlights will include:
M: TD Inflation, ANZ Job Ads, China holiday.
T: WBC Consumer Confidence, NAB Business Conditions/Confidence
W: Australian Home Loans, Investment Lending
T: Employment, China Trade Balance
F: Consumer Inflation Expectation, China CPI, PPI, Leading Economic Index
NZD/USD: 0.8595
The Kiwi had a decent session on Friday, almost regaining 0.8600 following the recent sharp sell-off, and in the short term it looks like it may have weathered the storm on the downside. The dailies, still point lower though, so I would not be getting too carried away on the topside, but the intraday indicators look positive for a potential test of the 200 HMA at 0.8615 and possibly a bit higher. Above here would hint at a test of minor Fibo resistances at 0.8627 and then 0.8655. Beyond this, while the dailies point lower may prove a bit tricky, but if the Aud can keep up its positive momentum, it should eventually drag the Kiwi back towards/above 0.8700.
On the downside, 0.8570/75 is the initial support, below which would suggest a run back towards last weeks low of 0.8513. I don’t think we are headed back here for a while, but if wrong, would suggest a look at 0.8500 (daily Kijun – 0.8490), below which would head towards Fibo support at around 0.8453 (38.2% of 0.8051/0.8700).
Economic data highlights will include:
M:
T: NZ business Confidence
W:
T:
F: NZ Business PMI
USD/DXY: 80.42
The DXY appears to be building the momentum for an upside breakout but has some decent resistance right ahead. We have been here before, when the index looks bid, only to fail and head south, so it does not pay to get too excited yet, but with both the Euro and Cable sitting on decent rising trend support and with US$/Chf looking as though it wants to break important resistance at in the 0.8935/50 area, a run higher for the DXY would seem very possible.
Having taken out the descending trend resistance, currently at 80.30, (which now becomes minor support), the 100 DMA (80.45) lies right ahead of us, followed by the February high at 80.56. This level was actually taken out on Friday, (high, briefly at 80.59) although the gains were not sustained. Above that, we could be in for quite a steep climb towards the 200 DMA at 80.95, beyond which the 100 WMA is currently at 81.15. The dailies are supportive of this and the weeklies are also attempting to push higher, with the MACD’s likely to cross into positive territory in the coming week, suggesting the chance of more sustained gains in the weeks ahead.
On the downside back below 80.30 would suggest a run down to 80.00 and dips to down around here would seem to be buying opportunities in the dollar, although a break of 80.00 could take us back to the 200 WMA now at 79.77. This needs to hold to maintain the bullish outlook.
I cannot see the index getting this low and am beginning to feel that we might actually be at the start of a positive US$ trend (although not necessarily against the commodity bloc). As I said though, we have been here before, so caution is warranted and if the FOMC minutes are overly dovish, then this could prove to be yet another false start.
It was a mixed session Friday, with a slight miss in the NFP, but followed up by an upward revision in February’s reading as well as an improved participation rate. The dollar looks as though it is trying to build a head of steam although yet more patience will be required but if Wednesday’s FOMC minutes are suggestive of an H1 2015 rate hike, while the ECB appear to be about to start easing, this could be the catalyst for further dollar gains. German Industrial Production, Sentix investor Confidence today.
EUR/USD: 1.3700
The dollar finished the week generally slightly lower after the lukewarm NFP (192K) came in below the expected 200K, while the jobless rate deteriorated to 6.7% from 6.6%. On the bright side, February’s figure was revised upwards and the participation rate also increased. The mixed picture had the market wondering what the outcome might mean for the tapering programme (and looking for clues as to any possible timing for a hike in interest rates), but result meant that the dollar gained some strength on the news of the previous month’s upward revision, with the Euro having a brief blip down to 1.3675, before finishing back at 1.3700, pretty close to where it spent much of Friday’s session.
The market will now be looking to this week’s FOMC minutes (Wednesday) for inspiration and hoping for a hint of what the Fed are thinking with regards to tapering. I suspect there will be little change and that we should expect them to continue on a straight course, with the minutes reiterating the policy of “steady as she goes” until the end of the year. Any mention of a rate hike in H1 2015 would give the dollar a further boost, particularly against the Euro, where it looks increasingly as though the ECB are heading in the opposite direction.
Before then the main data focus will be from the EU, beginning today with the Sentix Investor Confidence Survey and the German Industrial Production numbers.
Technically, the Euro is holding on above the strong support at around 1.3680. This is not going to give up its ground easily, being where several indicators converge, including the top of the daily cloud, the 100 DMA, the 23.6% retracement of 1.2753/1.3966 and the rising trend support from the 1.2753 low. A break of this though, would head back towards the Fibo support at 1.3660 (61.8% of 1.3475/1.3966) below which, the 27 Feb low at 1.3643 will come into view ahead of the 76.4% Fibo support at 1.3595. Below there would head towards the 200 DMA at 1.3525 and while this is a long way off, I suspect that eventually it is going to be tested.
On the topside, minor resistance will arrive at 1.3730 and then 1.3750/60, where the 100/200 HMA’s now lie. It looks unlikely that we will head much above here today, and I don’t think we are going to see 1.3800 again for a while. The resistance above 1.3800 remains strong, with 1.3808 (1.3803: Daily Kijun, 38.2% of 1.3966/1.3704) and 1.3820 (Daily Tenkan) providing the initial hurdles ahead of 1.3833 (50% pivot of 1.3966/1.3704). A break of this would see a move on towards 1.3865 (61.8%) and the recent spike high at 1.3875. I cannot really see this being tested again in the near term, but if wrong, beyond there would head towards the minor trend resistance at 1.3900, above which would suggest a retest of 1.3966 and eventually 1.4000
Looking to sell rallies appears to be the game plan, although today I don’t think there will be an awful lot in it either way, nor possibly for the next couple of sessions as the calendar is light, and would therefore tend to use 1.3675/1.3725 as a range guide, preferring to trade it from the short side.
Economic data highlights will include:
M: German Industrial Production, Sentix investor Confidence
T:
W: German Current Account, US Wholesale Inventories, FOMC Minutes
T: ECB Monthly Report, US Jobless Claims
F: IMF Meeting, German CPI, US PPI, Provisional Rts/Michigan Consumer Sentiment
USD/JPY: 103.25
US$/Yen reversed some of its recent gains after the below par NFP, and despite February’s upward revision and improved participation rate, it failed to hold on above 104.00, sinking back to finish at the session lows on Friday around 103.25.
Having made a new trend high (by one pip) at 104.12, we now have a short term double top in place, and by the negative look of the 4 hour charts it is not going to be worried again, at least for the coming session. The 100/200 HMA’s are at 103.60/103.00 (Daily Cloud top 103.10) respectively, and I suspect that for today’s session, these will provide the parameters.
With the market generally running short of Yen, hoping for a hand from the BOJ at the upcoming meeting on Tuesday, these shorts may well be squeezed a little further, perhaps towards the 100 MA currently at 102.85, although I would be surprised to see it much below there today, and would tend to think of it as a potential buying opportunity.
More likely, the BOJ is generally expected to maintain its current policy at tomorrow’s meeting and if Koruda maintains an upbeat tone for the economic outlook, the BOJ are likely continue to maintain a neutral policy stance. With a number of officials suggesting some scope to achieve the 2% inflation target by the end of FY 2014, the Yen may benefit from some scaling back of short Yen positions as hopes for further stimulus are postponed. We shall see…
On the topside, above 103.60 would see further sellers at minor resistance at 103.80. Above there, although it currently looks unlikely in the short term, if we can overcome the double top at 104.11/12, then we might head on towards the major Fibo resistance at 104.31(76.4% of 105.42/100.75). Beyond there lies the descending trend resistance at around 104.50, which, in turn, lies ahead of further minor resistance at around 104.80/90 ahead of 105.00.
While the short term charts do look a bit heavy, - and I suspect the dollar longs are in for some more pain -, I still think that buying dips at around 102.85 (100 DMA / DailyTenkan) may be the way to go and that by the end of the week we could be back having another look at 104.00. If wrong, back below 102.80 would suggest a test of the daily cloud base at 102.45, ahead of the 61.8% Fibo support of the climb from 101.20/104.12 at 102.32 and then the 76.4% support at 101.90.
Keep an eye on the Nikkei. Futures finished the US session down 1.35% at 14,865. Further losses could see renewed demand for the Yen, weighing on the dollar and the crosses. Overall though buying dollars somewhere in the cloud maybe a plan, if we see it down there.
Economic data highlights will include:
M:
T: Japan Current Acc, BOJ I/R Decision, Policy Statement, press Conference
W: BOJ Monthly Economic Survey,
T: Bank Lending, Machinery orders
F: BOJ Minutes
GBP/USD: 1.6571
Cable had another tough session following last week’s soft UK PMI’s, failing at resistance at around 1.6600 (1.6605 high) on Friday, before finishing mid range, above day’s lows of 1.6550 and looking weak ahead of the upcoming BOE meeting on Thursday, at which no changes to policy are expected, with the focus being on when a rate rise may be due, with the market currently pricing in a hike in around March 2015.
Having closed right on the daily Kijun (1.6570), but the indicators looking heavy, the way now appears open for a retest of 1.6550, where rising trend support lies. A break of that could bring about deeper declines, although the daily charts are flat and do not suggest any major move in either direction. Below 1.6535 (daily cloud base) though, could see a run towards 1.6500 and then the 100 DMA (1.6475) and the 24 March low at 1.6462.
On the topside, 1.6600/05 will again be the first hurdle, ahead of 1.6620 (200 HMA). Above here, would suggest a run to 1.6660, although this is looking increasingly distant.
It looks unlikely that we are heading above 1.6600 today, but if we saw 1.6600/20 it would appear to be a sell opportunity for another retest of the downside.
Before the BOE, we get the Industrial/Manufacturing production on Tuesday and the UK Goods Trade Balance on Wednesday, when the real focus will be on the FOMC minutes..
For today use 1.6590/1.6540 as a guide, with a preference to trade from the short side.
Economic data highlights will include:
M:
T: Industrial/Manufacturing production, GDP Estimate
W: UK Goods Trade Balance
T: BOE I/R Decision, APP Facility
F:
USD/CHF: 0.8917
The dollar made a brief spike to 0.8953, briefly breaking down trend resistance, following the US jobs data but returned to finish the week back below it, at 0.8935.
As we said last week, the 0.8935/50 area will be tough to overcome, with 0.8950 being the 100 DMA/daily cloud base and should see good selling interest. If this area can be taken out, the dollar would see further sellers at the Fibo resistance (23.6% of 0.9838/0.8698) at 0.8962, above which could see an acceleration towards 0.8980 (61.8% of 0.9143/0.8698/daily cloud top) and then picking up further speed as it breaks above 0.9000, possibly heading towards 0.9046 (76.4%) and the 200 DMA at 0.9085.
On the downside, 0.8900 remains the initial minor support ahead of 0.8870 and the rising trend support at around 0.8850 (daily tenkan). Back below here would see a deeper decline, perhaps towards 0.8800 (0.8810 – daily Kijun), but this looks unlikely and for the time being I prefer to trade from the long side, looking for an eventual break of 0.8930 for a move towards 0.9000+.
Use 0.8890/0.9035 as a guide but I am looking for a break of 0.9050 to accelerate higher..probably not today though ..patience will be required!
Economic data highlights will include:
M: Swiss CPI
T: retail Sales
W:
T:
F:
AUD/USD: 0.9290
The Aud had a good session on Friday, generally squeezing shorts, briefly touching 0.9301 and closing just below the highs, meaning that the Head/Shoulder objective of 0.9590 still a possibility, albeit some way off.
Given the fairly light data calendar from the US this week, the focus will be on Thursday’s Australian Jobs data (and the FOMC minutes), where the consensus is for a rise of 5k after February’s blow-out 47k, while unemployment is expected to rise to 6.1% fro 6.0%. An above forecast result will put upward pressure on Australian bond yields which will take the Aud along with it.
The technical levels remain pretty much unchanged over the last few days. We need to clear 0.9300/05 which would then allow for a run towards the Fibo levels at 0.9339 (61.8% of 0.9757/0.8660) and possibly to 0.9387 (38.2% of 1.0582/0.8660). Beyond this, there is not a lot ahead of 0.9450 (weekly cloud base) and 0.9494 (76.4% of 0.9757/0.8660). As we have said on previous occasions, while 0.9150 holds then buying dips for an eventual run towards the SHS target at 0.9590 remains the strategy.
On the downside, the initial, minor support is now found at 0.9250 and at 0.9230. Below here, further support lies at 0.9200 and then at 0.9185 (38.2% of 0.8660/0.9303) and 0.9175 (daily tenkan). If we do head below this, keep a close eye on the action at 0.9150. A break of 0.9150, would mean a failure of the head/shoulder neckline that we have been watching for a while, so reasonably tight stops on any longs should be left under 0.9135 (100 DMA). Fresh shorts are also likely to be opened up around here, looking for a quick return to 0.9000 and possibly lower.
For today, we have the construction PMI. This should not to have too much effect, but with the intra-day indicators pointing a bit higher, I suspect we may see another test of 0.9300/05. Beyond there may be a bit of a stretch in the short term, but I still prefer the idea of buying dips, and today would look for something like 0.9270/0.9315 to cover it.
GBPAUD: 1.7835. The crosses are where the main action has recently been taking place, with GBPAUD still leading the charge. The neckline, having been broken at 1.8280, means that as long as we stay below here, then there the measured Head/shoulder target is still at 1.7200. The dailies still point lower, – although they are becoming oversold so some caution is warranted -, as do the weeklies, so, while I am reasonably confident that we will eventually reach the target, we could yet get a short squeeze towards 1.8000 and possibly back to the neckline/ 100 DMA at 1.8200. I would not want to see it much above here, and certainly not above 1.8300 as the resulting rally could be vicious. At this stage I would be a seller into a rally towards 1.8000 with SL, lowered to 1.8080 from last week’s stop at 1.8320, looking for a decline to below 1.7800 and eventually heading towards 1.7615 (61.8% of 1.6655/1.9185). Below there, 1.7580 (200 DMA) will add support which should be strong, but beyond which, 1.7245 (76.4%) comes into view.
EURAUD: 1.4750.The Aud crosses all have much the same look in that they are carving out a head/shoulder formation and EurAud is no different. The dailies and weeklies are pointing towards further declines and the week closed below the 200 DMA (1.4800), currently sitting right above important Fibo support at 1.4735 (61.8% of 1.4050/1.5832) a break of which would suggest a run towards 1.4470 (76.4%). In order for this to occur, the cross must stay under the neckline of the SHS formation, now at 1.4905. Above here would most likely produce a short covering rally that could take us to the descending trends resistance at 1.4975 and if that were to get taken out we could be back at 1.5400 in pretty quick time. This is the less favoured view and selling rallies towards 1.4900/50 remains the plan, with a tight stop above 1.5000, or preferably above 1.5100. Try reselling at 1.5100, but with a tight stop placed above 1.5150. I don’t think we are heading up here though, and more likely, over time, I am looking for the measured SHS objective at 1.4120.
Economic data highlights will include:
M: TD Inflation, ANZ Job Ads, China holiday.
T: WBC Consumer Confidence, NAB Business Conditions/Confidence
W: Australian Home Loans, Investment Lending
T: Employment, China Trade Balance
F: Consumer Inflation Expectation, China CPI, PPI, Leading Economic Index
NZD/USD: 0.8595
The Kiwi had a decent session on Friday, almost regaining 0.8600 following the recent sharp sell-off, and in the short term it looks like it may have weathered the storm on the downside. The dailies, still point lower though, so I would not be getting too carried away on the topside, but the intraday indicators look positive for a potential test of the 200 HMA at 0.8615 and possibly a bit higher. Above here would hint at a test of minor Fibo resistances at 0.8627 and then 0.8655. Beyond this, while the dailies point lower may prove a bit tricky, but if the Aud can keep up its positive momentum, it should eventually drag the Kiwi back towards/above 0.8700.
On the downside, 0.8570/75 is the initial support, below which would suggest a run back towards last weeks low of 0.8513. I don’t think we are headed back here for a while, but if wrong, would suggest a look at 0.8500 (daily Kijun – 0.8490), below which would head towards Fibo support at around 0.8453 (38.2% of 0.8051/0.8700).
Economic data highlights will include:
M:
T: NZ business Confidence
W:
T:
F: NZ Business PMI
USD/DXY: 80.42
The DXY appears to be building the momentum for an upside breakout but has some decent resistance right ahead. We have been here before, when the index looks bid, only to fail and head south, so it does not pay to get too excited yet, but with both the Euro and Cable sitting on decent rising trend support and with US$/Chf looking as though it wants to break important resistance at in the 0.8935/50 area, a run higher for the DXY would seem very possible.
Having taken out the descending trend resistance, currently at 80.30, (which now becomes minor support), the 100 DMA (80.45) lies right ahead of us, followed by the February high at 80.56. This level was actually taken out on Friday, (high, briefly at 80.59) although the gains were not sustained. Above that, we could be in for quite a steep climb towards the 200 DMA at 80.95, beyond which the 100 WMA is currently at 81.15. The dailies are supportive of this and the weeklies are also attempting to push higher, with the MACD’s likely to cross into positive territory in the coming week, suggesting the chance of more sustained gains in the weeks ahead.
On the downside back below 80.30 would suggest a run down to 80.00 and dips to down around here would seem to be buying opportunities in the dollar, although a break of 80.00 could take us back to the 200 WMA now at 79.77. This needs to hold to maintain the bullish outlook.
I cannot see the index getting this low and am beginning to feel that we might actually be at the start of a positive US$ trend (although not necessarily against the commodity bloc). As I said though, we have been here before, so caution is warranted and if the FOMC minutes are overly dovish, then this could prove to be yet another false start.
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