US$ starting to look as if it could be in for a move to higher ground.

RBA Speeches, Flash PMI’s, Australian CPI and RBNZ Meeting – the local highlights this week.

It was a volatile session on Friday with currencies, equities and commodities all seeing decent moves. While the Ukraine plane crash remains in focus the price action will most likely stay choppy with direction coming from political soundbites. The dollar looks as though it may be building for a move higher, but while the holiday season is in full swing we may need to wait a bit longer for any real action. A stronger US CPI (Tues) and/or weaker EU PMI’s (Thur) may be the catalyst to help it on its way. Other highlights will include the Australian CPI (Tues), BOE Minutes (Wed), RBNZ Meeting (Thur), Japan CPI and US Durable Goods (Fri). Have a good week.

EUR/USD: 1.3525

The Euro finished Friday more or less where it started, although it did manage to crack the 1.3500 barrier in heading to a low of 1.3490 before a bounce back to 1.3525. The move lower seems to have been ignited by the Bank of Italy announcement that it had lowered its 2014 GDP estimates to 0.2% from 0.7% “with risks to the downside”.

The coming week is a bit thin on the ground with regard to data, with the EU highlights being the PMI’s and the German IFO survey, while from the US the CPI (exp 2.1%yy, 0.3% mm-June) will be the main focus. If the EU numbers continue to show a soft tone and the  US inflation picks up a little then the dollar may begin to accelerate to higher ground, but for today it looks as though we may be in for a reasonably quiet session. It appears as though it will be political events that shape the outcome over the next couple of sessions and if the Russia/Ukraine situation escalates, then we are likely to see a move to the safe haven of the dollar.

Technically the main feature has been the removal of the 1.3500 barrier and if the dollar can make headway, then beneath Friday’s 1.3490 low, the next bids will arrive at 1.3476 (24 Feb low), but below this there is not too much support, suggesting that we can potentially look for a run down towards 1.3415 (200 WMA). Below this,1.3370 (50% pivot % of 1.2754/1.3995) and eventually 1.3300 (100 WMA) and 1.3294 (7 Nov ’13 low) wood come into view.

On the topside, sellers are lining up above 1.3540, with more to be seen at 1.3560 and 1.3585, ahead of 1.3600. Given the increasingly negative look of the daily indicators, I don’t really see it back above 1.3600 today, 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. A break of this level would see the Euro head on to 1.3665 (76.4%/ daily cloud base/200 DMA) but now looks a long way off. Further out, the Euro would find sellers at 1.3700, a break which would see a run up towards 1.3730(100 DMA), which should be solid resistance although a break of this level would head on towards 1.3803 (61.8%).

In the bigger picture, if the wedge formation that we have been discussing over the last few months turns out to be correct 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.

For today, given that the 4 hour charts look to have some positive momentum behind them, I would not be surprised to see a squeeze up towards 1,3570 area, possibly to 1.3600 (doubtful), but the overall view remains one of looking for rallies to sell into ahead of an eventual move lower.

Economic data highlights will include:

M: German PPI, Chicago Fed Activity Index

T: US CPI, Existing Home sales, House Price Index, Richmond Fed Activity Index

W: Consumer Confidence (provisional)

T: EU Flash Mfg/Composite/Services PMI’s, US Flash Mfg PMI, New Home Sales, Kansas Fed Activity Index

F: German IFO, Consumer Confidence, US Durable Goods Orders

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EUR/USD: Daily

USD/JPY: 101.35

The week finished with UsdJpy once again stuck in a tight range and still unable to test the strong support at 101.00, where semi-official bids are said to lie. With the reversal of the risk-off scenario, seen on Thursday after the plane crash in Ukraine, the Yen saw less safe haven demand on Friday allowing the dollar to make some minor gains on the back of firmer equities and higher US bond yields.

From here, it looks as though the Yen is going to gyrate on political sound bites and thus will not be a particularly easy trade and with today being a Japanese long w/e it should be fairly quiet. From a technical perspective, the charts generally look pretty flat and thus the small ranges to look set to continue.

101.00/10 is going to continue to be strong support and I would be surprised to see it broken 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.

On the topside, sellers will are noted at 101.50 and then at around Thursdays peak at 101.68. As we said before, more offers will arrive at 101.75 and then at 101.80 (daily Kijun), the 200 DMA (101.90) and the daily cloud base (101.95). Beyond 102.00, which looks a little unlikely for a while, 102.15 (100 DMA) will provide some resistance, above which could see a run up to the recent high at 102.35.

EURJPY: 137.05. The cross did much as we expected it might last week, as it continues to ratchet lower towards the target at the 4 Feb low of 136.22 and it made a good attempt to get there on Friday, before bouncing off the 136.70 low to finish back above 137.00. The momentum remains to the downside though and if we can reach the downside target this week, the next support levels to watch would be seen at 136.00 and then at 135.55 (38.2% of 119.10/145.68). The topside will see sellers at 137.75 (daily Tenkan), 138.00 (daily Kijun) and then at 138.40 (weekly cloud top/weekly Tenkan). I don’t see it back above here for a while, but if wrong we could see a chance of heading back to the 100 DMA/daily cloud base at 139.45

GBPJPY: 173.15. As per the trade idea on Friday, the cross appears to have formed a head and shoulder top and has broken down below the neckline and also below the longer term rising trend line from November 2012. Adding to the bearish view, the cross has today broken below the daily Tenkan/Kijun, which are crossing lower at 173.68, closing below them for the first time since 30 May.

Selling into strength towards 173.50 looking for an eventual head/shoulder target of 170.70, with a SL placed just above the 100/200 HMA’s (173.85) at 174.05 seems to be the plan and the more aggressive traders could think about leaving the stop loss above the right hand shoulder at 174.55. The first downside target would be at the 100 DMA at 171.80, which is also 61.8% of the move up from 169.53/175.35.

 AUDJPY: 95.15. The cross has some downside momentum having traded to as low as 94.37 on Friday but it has bounced well off the Fibo support at 94.35 (61.8% of 93.04/96.50) to finish back at 95.15, where it also finished the previous week. It has therefore recovered to trade back above the daily cloud and could see further minor gains ahead, ensuring that we remain within the 95/96 range of recent weeks. If the cross can find some legs, then the topside will look for targets at 95.50 (minor) and then at 96.00 although for the time being 96.50 appears to be some way off. The downside will see bids once again at 94.70 (100 DMA) and then at 93.35, but a break of which would head down towards 94.15 (23.6% of 86.46/96.50). I think that buying dips probably remains the play, even though the yield carry is not all that attractive.

Economic data highlights will include:

M: Holiday

T: Leading/Coincident Index

W:

T: Trade Balance, Nomura Mfg PMI.

F: CPI, Foreign Bond/Stock Investment.

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USD/JPY: Daily

GBP/USD: 1.7085

Cable hurtled down to a low of 1.7035 on Friday, on rumours of a dovish outlook from BOE Governor Mark Carney in an article to be published in the weekend press. This was denied by the BOE and saw a quick bounce back to close the week at 1.7085.

The charts are looking somewhat messy, but the dailies do suggest that we may be in for lower levels ahead, and if that turns out to be the case, then Fridays low will be the initial target, below which, look for a run back towards 1.7000 (38.2% of 1.6992/1.7192) and then to the rising trend support at around 1.6960. A break of this level would trigger plenty of stops and would look for a run down, potentially towards the 100 DMA, currently at 1.6825.

On the topside, 1.7100 is now the first hurdle, above which the 100/200 HMA’s are  at 1.7115. Beyond here, 1.7143 was Thursdays high and will provide some resistance although a break of 1.7150 would most likely head back to the 1.7190/1.7200 area, 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.

Right now, I prefer to look to sell into rallies above 1.7100, in anticipation of a decline eventually to 1.7000 and possibly lower.

 EURGBP: 0.7915 The cross has bounced will off the trend low at 0.7885 to reach 0.7932 on Friday, and the short term charts suggest that we could see a bit more of a squeeze towards 0.7980 and possibly back to 0.8000. The greater trend though remains resolutely lower and eventually the downside should resume for another test of 0.7885 and then to the bottom of the channel, now at 0.7860. Further out, the longer term target would be at 0.7753 (23 July 2012 low) albeit that this is a long way off. The BOE Minutes this week will provide the main focus as far as the cross is concerned and selling rallies toward 0.7980/0.8000 with a SL above 0.8040 still seems a decent theory.

Economic data highlights will include:

M:

T:

W: BOE Minutes

T: UK Retail sales

F: UK Q2 GDP (provisional)

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GBP/USD: Daily

USD/CHF: 0.8985

US$Chf made it back to the sticky area around at  0.9000 (high 0.9003) on Friday but once again was unable to sustain the strength and ended the week at 0.8985.

Although it may not happen today, I do think the dollar is building up for a decent move higher and that eventually 0.9000/10 will be taken out for a run up towards 0.9035. Above here, 0.9050 is the weekly cloud base and will be strong resistance if/when seen. Above this would break out on the topside of the long term descending channel and would suggest an acceleration up towards 0.9100 and then  0.9130 (23.2% of 0.9838/0.8698).

A return to the downside will find bids at 0.8960 and then at 0.8945 (200 DMA/weekly Tenkan), below which would hint at a false upside break out of the minor channel, suggesting a decline back towards 0.8925 (weekly Kijun) and then to the recent base at around 0.8900. Under here looks unlikely, 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 for a while, 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.

 Economic data highlights will include:

M:

T: Trade Balance

W:

T:

F:

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USD/CHF: Daily

AUD/USD: 0.9390

The Aud performed pretty well in the latter half of Friday’s session, and after an early attempt on the support at 0.9330 it bounced strongly as a positive risk appetite returned, spiking up to 0.9410 before finishing the week at around 0.9390. The charts are now looking a little more positive and the Aud could see another run to 0.9400 and above, although this week sees RBA speeches from Stevens & Debelle and also the Q2 CPI which may temper some of the bullish enthusiasm.

Above Fridays 0.9410 high, look for a run up towards 0.9425 and then 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 last week’s 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, 0.9350 will see bids again below which would head 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.

I think the choppy price action looks likely to continue over the next session or two and that 0.9350/0.9420 should largely cover it. Any deterioration in the political situation in Russia though will see a quick move out of risk assets including the Aud, and therefore stops on the downside should be kept fairly tight.

EURAUD: 1.4400. The cross is lower but overall rather choppy as it continues to consolidate above the important support at 1.4360 (11 June low). There is not much downside momentum so we could be in for more of the same this week, but if 1.4360 does give way, then look for a decline towards the 18 Nov low at 1.4318, and then below 1.4300, for a possible acceleration to 1.4200. I doubt we get anything like this in the coming week, and should 1.4360 hold, then we could see a squeeze back towards last week’s high at 1.4545, within minor, interim resistance at 1.4480 and 1.4500.

GBPAUD: 1.8195. As with Eur Aud, the cross had a choppy week and fell quite sharply from 1.8308 to 1.8150 on Friday, losing earlier weeks gains and closing 30 points away from the previous week’s close. More choppy trade seems quite possible, with near-term supports being at 1.8160 (minor Fibo support) and at 1.8120 (100 DMA). Below 1.8100 would hint at a run to the 200 DMA (1.8040) but looks a bit over the horizon right now. On the topside, if 1.8200 can be regained then we may head up towards 1.8300 again, but the negative look of the 4 hour charts suggest that if so, we ought to think about selling into the strength. There are better things to look at right now than the Aud crosses.

Economic data highlights will include:

M:

T: RBA Debelle Speech, RBA Stevens Speech

W: CPI

T: HSBC Flash Mfg PMI

F:

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AUD/USD: Daily

NZDUSD: 0.8685

The Kiwi saw early sellers that pushed it almost to the 0.8642 target, before a bounce from the 0.8648 low allowed it to regain some lost ground, to close the week at 0.8685.

Despite the dailies pointing lower still, short term momentum looks positive and the shorts may get squeezed a bit further given the  upcoming RBNZ meeting (Thur), which may prompt some more covering, in case Wheeler maintains a hawkish stance.

Back above 0.8700 would hint at a return to 0.8720 although above here may be a bit tricky today. If wrong, further gains would head to minor Fibo resistance at 0.8740 and 0.8760, but for the time being 0.8800 looks rather distant.

If the RBNZ sit on their hands, the downside is likely to come under pressure again, and back below Friday’s 0.8648 low would test the June 17 low at 0.8642, below which would head to 0.8618 (50% pivot of 0.8401/0.8835) and eventually to 0.8568 (76.4% of 0.8401/0.8835).

Given that the dailies do still point strongly lower, I think a rally towards 0.8760/80, if we see it up there over the next few days,  may provide a decent sell opportunity for another test of the downside.

 Economic data highlights will include:

M:

T:

W:

T: RBNZ IR Decision, Trade Balance

F: ANZ Activity Outlook

Meta Trader – AxiTrader

NZD/USD: Daily

 

USD/DXY: 80.50

 The DXY did as we hoped last week and with the daily MACD’s having crossed higher, the DXY managed to build some mild further upside momentum in taking out the 200 DMA at 80.25 and headed up to a high of 80.68, before closing the week at 80.50, once again unable to put in a weekly finish above the troublesome 80.60 hurdle.

All is not lost though, and with the dailies now looking quite positive I think the DXY will eventually take this level out and head onto to resistance at the 100 WMA (80.88) and then to the 5 June high at 81.02. If we get there, descending trend resistance at 81.15 will be a tough nut to crack and I don’t think we have yet reached the necessary momentum to overcome it, but if/when we do, the Euro will begin to head sharply lower.

On the downside the 200 DMA at 80.26 is now the initial support ahead of the 100 DMA at 80.04. I don’t think this will come under pressure this week, but if wrong, back below 80.00 would see a run back towards the recent low (79.74) and then possibly towards 200 WMA at 79.56, although I think for now that this is the less likely scenario.

The overall strategy seems to be one of buying near term dips in the dollar, looking for it to eventually make some decent gains to the topside. This looks more likely to be the case against the Euro and Chf and I would tend to concentrate on these and to leave the Yen and Cable alone.

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USD/DXY: Daily