Oil was again in focus on Friday, collapsing once more and taking the equities markets with it. Bond yields headed lower too, undermining the dollar which looks to be under some pressure heading into the FOMC on Wednesday, where a dovish outlook from Janet Yellen would put the cat amongst the pigeons, likely causing a decent cleanout of dollar long positions before Christmas. Other data this week will include the EU & US CPI’s, the ZEW, the IFO and the global flash PMI’s. Today sees the Japanese Tankan, Australian MYEFO and then later, the US CU& IP and the NY Empire State Mfg Index. Liquidity is getting thin so expect some exaggerated moves. The resounding w/e Abe election win in Japan has had little effect so far on US$Jpy.
EUR/USD: 1.2456
The Euro ratcheted higher in thin conditions on Friday, reaching a peak of 1.2484, with the dollar under some pressure against most of the majors as the result of another selloff in US bond yields and also due to some pre- Christmas position squaring heading into the weekend.
The last full week before the Christmas break is going to be fairly action packed, with the highlights coming midweek, with the EU CPI due on Tuesday, to be followed by the US CPI and the FOMC meeting and Press Conference on Wednesday (early Thursday-Asia). It could get pretty hectic at that time as not only will market be looking for clues as to when any impending rate hike might be due, but the Fed are also due to give their projections for GDP, Employment, Inflation and the Fed Funds Rate for the end of 2015, 2016 and beyond. Its going to be a lively session, but I still think we are probably looking at least to Q2 before any chance of a hike.
Technically the dollar appears to be heading towards some headwinds, with the Euro once again attempting to break above the descending trend resistance, currently at 1.2475. A break of this, which the daily charts are suggesting is a growing possibility, would head on towards last week’s peaks in the 1.2485/95 area, with a break of 1.2500 likely to trigger stops and take the Euro on towards the 26 Nov high at 1.2531. The first major Fibo resistance not seen until we reach 1.2590 (23.6% of 1.3699/1.2246), with the greater Fibo level not seen until 1.2656 (23.6% of 1.3993/1.2246).
Back to the downside, the Euro will find bids at the 100 HMA at 1.2400 and then at the 200 HMA at 1.2365. Below this, which looks the less likely outcome in the short term, would head back towards 1.2300, beneath which, will find buyers ahead of the trend low at 1.2246, which in turn lies just ahead of the next major level at 1.2225 (200 Month MA) and will once again act as strong support. Once this is taken out the Euro would then head towards the major rising trend support (joining the 2005, 2010, 2012 lows) at around 1.2140, and then to 1.2100 which is the 50% pivot of the rally from the Euro Oct 2000 low to the July 2008 high and again, should also provide decent support. Under that, which would see the long term head/shoulder neckline being broken, we have the July 2012 low at 1.2041 and the June 2010 low 1.1876, which both come ahead of 1.1743, where the Euro was initially pegged to the dollar in January 1999.
For the time being, further short covering would not surprise, taking us possibly up to around 1.2600, but with the ECB set to ease monetary policy in early 2015, any decent rally would seem a great opportunity to get short for a resumption of the downtrend early in the New year.
Economic data highlights will include:
M: NY Empire State Mfg Index, Capacity Utilisation, Industrial Production, NAHB Housing Index, Long term TIC flows.
T: EZ Flash Mfg/Composite/Services PMI’s, EU Trade Balance, EU/German ZEW Survey, US Building Permits, Mfg Flash PMI.
W: EU CPI, US CPI, Current Account, FOMC Meeting/Press Conference/Statement.
T: German IFO, US Flash Services/Composite PMI’s Philly Fed Mfg Survey.
F: German Consumer Confidence, PPI, EU Current Account, Kansas Fed Mfg Survey..
Meta Trader – AxiTrader EUR/USD: 4 Hour
USD/JPY: 118.77
US$Jpy had a choppy day on Friday, closing roughly in the middle of its 118.05/119.20 range, and with the short term indicators looking mixed it could mean more of the same in the coming week. The election results giving the PM Abe the mandate to continue his current policies could well mean a resumption of Yen weakness though, which I think will eventually drive the dollar a lot higher..
In the meantime, while the dailies still point lower, we could see a further decline back towards 1180 and then to last week’s 117.43 low and to the 27 Nov low at 117.23. For the time being this looks unlikely, but a further downside break would then target the major rising trend support, currently at around 116.90, which if seen would present a decent buying opportunity.
The topside currently looks capped at around 119.10 (100 HMA), above which could squeeze up towards 119.50 (200 HMA). Back beyond there we are looking at a retest of 120.00 and then 120.80 (76.4% of 121.84/117.43).
Further out, I suspect that eventually the dollar will find the legs to head back above 120.00 and the recent trend high at 121.84 and will continue towards the 15 July 2007 high at 122.42. In the longer term, the target of 124.13 (17 June 2007 high) will then appear on the horizon, but will take time, given the resistance levels sitting in between.
Economic data highlights will include:
M: Election Result, Tankan
T:
W: Trade Balance
T:
F: BOJ Monetary Policy Statement, Coincident/Leading Economic Indices, BOJ Press Conference.
Meta Trader – AxiTrader USD/JPY: 4 Hour
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GBP/USD: 1.5715
Cable had another choppy session on Friday, trading within 1.5693/1.5745 but closing in the middle and seemingly happy to use 1.5700 as a pivot for the time being.
There is a bit of UK data due this week which could cause some volatility, headed by the CPI, the Bank Stress Test results, the BOE Minutes and the Retail Sales, and while the 4 hour charts are indecisive, the dailies suggest that we could be in for a run to the topside.
Currently sitting just below the channel top resistance, a sustained break of 1.5745 would suggest a run towards 1.5762 (1 Dec high) and then towards 1.5826 (27 Nov high). Beyond this, which currently looks doubtful, would see a further acceleration towards 1.5927 (23.6% of 1.7191/1.5540).
If Cable fails to break the resistance, then the downside will come back into view, where support would be seen at 1.5685 (100 HMA) and then at 1.5665 (200 HMA). Below there would see a ratchet back towards 1.5600, below which would see a run towards 1.5582 (1 Dec low) and then to the recent trend low at 1.5562 (8 Dec low).
Economic data highlights will include:
M: CBI Industrial Trends Survey
T: UK CPI, PPI, RPI, Bank Stress test results UK Financial Stability Report/Mark Carney Speech
W: BOE Minutes, Unemployment
T: UK Retail Sales
F: PSNBR, CBI Trade Survey.
Meta Trader – AxiTrader GBP/USD: 4 Hour
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USD/CHF: 0.9637
US$Chf pretty much shadowed the Euro on Friday, albeit with a softer bias as EurChf remains on the back foot, posting a 27-month low at 1.2008, which will give something for the SNB to think about as the EurChf hovers precariously above the 1.200 peg.
The dollar closed the week right on the rising trend support and looks as though it is going to come in for a more severe downside test in the sessions ahead. If we do head lower, look for a decline towards the 26 Nov low at 0.9594, and then to the Fibo support seen at 0.9552 (23.6% of 0.8702/0.9817).
The topside will run into some initial resistance at the 100 HMA at 0.9695. Above 0.9700, which looks a little unlikely today, would run into the 200 HMA at 0.9720. For the time being I don’t think that we are heading above here, but further out I think the dollar strength will return and at that time the targets would be at 0.9775 (minor), 0.9800 and then at the recent trend high at 0.9817. Above here would open the way for a run towards 0.9838 (22 May 2013 high), beyond which will see an acceleration towards 0.9971 (22 July 2012 high) and eventually to parity and above. This is going to take a while and I suspect we may be in for better levels to buy dollars in the days ahead.
Economic data highlights will include:
M: PPI
T:
W: SNB Quarterly Bulletin, ZEW
T: Trade Balance
F:..
Meta Trader – AxiTrader USD/CHF: 4 Hour
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AUD/USD: 0.8244
The Aus was contained within the recent 0.8225/0.8300 range on Friday, driven by external factors in the absence of any local data. This could continue to be the case as we head towards Christmas, although today’s MYEFO statement could well keep the pressure on the downside.
The Treasurer is due to announce in increase in the budget deficit to about $40 bio, on the back of the worsening terms of trade, due largely to the collapse in the iron price. The announcement will do the currency no good and the Aud is already opening the week 20 points lower than Friday’s close, currently at around 0.8235 in early interbank trade. See the link to the SMH, below, on exactly what to expect from Joe Hockey today.
The rest of the week provides little to go on, with only the RBA minutes and a speech from the RBA’s Debelle due this week, neither of which are expected to cause any surprises, and the most likely cause of any volatility will be the Feds FOMC meeting (early Thursday).
On the topside, the immediate points to watch today are at 0.8285 (100 HMA) and then at 0.8300. Above there would take another run at the descending trend resistance now at 0.8325 which is backed up by the 200 HMA at 0.8330. If this gets taken out, then look for acceleration higher towards last week’s peak at 0.8375, where the daily Tenkan now lies, but beyond which would take a run towards 0.8400.
Beyond there, which currently looks doubtful, would see a run towards the Fibo resistance at 0.8435(38.2% of 0.8795/0.8214). If so I would be looking to sell into the strength with a SL placed above 0.8510.
On the downside, look for a run towards 0.8200 and below there, a possible acceleration to the downside, with a wave equality target at 0.8145 (AB=CD; from 0.9398 to 0.8642, from 0.8901;see daily chart, below) being the first realistic support, beneath which there is little to hold the Aud up until the May 2010 lows at 0.8066.
Economic data highlights will include:
M: New Vehicle Sales
T: RBA Minutes, HSBC Flash China Mfg PMI
W: China FDI,
T: RBA Quarterly Bulletin, China House Price Index
F:..
Meta Trader – AxiTrader AUD/USD: 4 Hour
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NZD/USD: 0.7776
Having peaked at 0.7870 last Thursday following the RBNZ meeting, the Kiwi has been unable to build on its gains and has chopped steadily lower, breaking back below 0.7800 on Friday to close the week at 0.7765.
More choppy trade looks likely, probably contained within a 0.7700/0.7850 range, at least for the first half of the week. The main events ahead will be the China Flash Dec HSBC Mfg PMI on Tuesday and then the NZ Q3 GDP on Thursday but unless they are a long way from expectations I suspect that the choppy trade could continue into the year-end.
While the 4 hour charts suggest an early dip on Monday, possibly testing the 100/200 HMA at 0.7740, the dailies are looking more positive, and thus a break back above 0.7800 could once again look for a run towards 0.7850 and then to the recent 0.7870 peak. This would see the descending trend resistance taken out and could trigger stops to take the Kiwi on towards 0.7900/10. I don’t think we get there, but if we do it would again present a decent medium term sell opportunity.
On the downside, below 0.7740 would find bids at 0.7700, a break of which would find support at 0.7660 (7 Nov low), with further minor support seen at 0.7635 and then at the trend low at 0.7606, although I don’t think we are heading there yet.
Economic data highlights will include:
M:
T:
W: NZ Current Account, WBC Leading Index
T: NZ Current Account, GDP
F: ANZ Activity Outlook, Business Confidence.
Meta Trader – AxiTrader NZD/USD: 4 Hour
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AUDNZD: 1.0585
The cross looks very heavy and it could be that, given the apparent diverging attitudes of the RBA and the RBNZ that the cross has further room on the downside. We are not far above the all time lows of 1.0428 though and I don’t think that if we see it back there that it will give way all that easily and so would be looking to build into a long Aud/Short Kiwi position at and below those levels. The Kiwis will begin to get all excited about parity parties again, but I don’t think that their luck will be in and that we will eventually see a reversal higher back towards 1.10 and above. If at any time we do go to/below parity, then look to load up on the cross because it wont be there forever and given the weakening demand for NZ dairy products, I don’t think that the Kiwi will maintain its current elevated levels. If the RBNZ are serious about wanting a lower currency, they are not going to be raising rates while the rest of the world are steady at best and most Central Banks are adopting a dovish tone. This is a long term play though and needs to be monitored, so I would not be diving in yet.Meta Trader – AxiTraderAUDNZD:Weekly
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GBPAUD: 1.9060
The cross is back above 1.9000 and looks to be set for a test of the January high at 1.9185. The weeklies appear to be building up for a potentially bigger move to the topside, although the Fibo resistance at 1.9180 will provide a stern test. If that can be overcome, then the way will open up for a move back towards 2.000 and eventually to 2.0481, the major Fibo level of the entire move down from 2001 to 2013 (38.2% of 3.0378/1.4364) . Buying dips still appears to be the plan and dips could take us back to around 1.8700 so I would not be diving in too early, and probably not until the New Year, but trading the cross from the long side still looks to be the medium term plan.wwww.tradingview.com – AxiTrader GBPAUD: Weekly
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Reuters (Thanks KK!) Aud Monthly
DXY: 88.32
Having topped out at 89.55 last week, just shy of the major target at 89.62, the March 2009 peak, the DXY has since retreated, to close Friday back at 88.32, having bounced off a low of 88.06. It looks to me as though we could be in for some more downside action in the next few sessions, with the points to watch being at 88.00/10, below which could see an deeper run towards 87.80 and 87.45 and possibly to 87.20.
A return to the topside looks less likely in the short term, although if wrong, back above 88.70 could see another run back towards 89.00 and eventually to the 89.55 high
While I am doubtful that we are headed back up here before Christmas, in the longer term I suspect that we are headed towards 89.62 and on to 89.83, the 200 Month MA, which should prove to be formidable resistance, but if taken out, beyond 90.00 would then head on towards the November 2005 high at 92.63. Don’t get too excited any time soon about a move of this magnitude although eventually I think we are going to get there and an awful lot higher, over the next couple of years..
www.tradingview.com – AxiTrader DXY: Daily
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