The dollar ended Friday on a firm note, which could well continue in short week ahead, with a fair bit of US data due ahead of Christmas but with little to come from the EZ, aside from the UK Q3 GDP. A generally strong performance from the US will have all the other majors under pressure heading into the holiday period, with the Euro in particular about to break some critical support levels. Watch out for some action in the Yen on Christmas Day, with a lot of data due from Tokyo, when liquidity will be pretty much non-existent.
This will be the last outlook before the New Year, unless there are any major moves, in which case I will provide the major support/resistance levels.
In the meantime have a good break and get ready for 2015, which I think could be a very big one for FX – here’s hoping!!
EUR/USD: 1.2228
The US$ had a brief, mid-session selloff on Friday, allowing the Euro to touch 1.2300 although that was as good as it got and if sank steadily into the weekend where it came to rest right on the 200 Month MA at 1.2225, after seeing a session low of 1.2220.
In the absence of any EZ data in the coming week it will be left to the reasonably heavy US schedule to guide direction and if the recent firm trend in the US data is any guide, we can expect more downside pressure on the Euro going into the Xmas break.
As we have said before, once the 200 MMA is taken out, the Euro will head towards the minor descending wedge support at around 1.2180 and then the major rising trend/neckline 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 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. Once these are taken out, do not stand in the way as I think we are heading towards parity, and which may come quicker than might otherwise be expected, especially if the ECB stop dithering and actually commence their QE programme.
The immediate resistance comes in at around 1.2300 and then again at 1.2350 (minor Fibo), above which would see a return above 1.2400 (200 HMA), although this is now looking increasingly distant. Beyond there the points to watch would be at 1.2435 and then 1.2485.
Selling rallies looks to be the way of it into 2015, although many will now have squared up and liquidity will be thin. I will be keeping a small long dollar position (against Euro, Chf & Aud) and looking to add to it in the NY.
Good luck, and happy Christmas.
Economic data highlights will include:
M: EU provisional December Consumer Confidence, US Existing Home Sales
T: US Durable Goods orders, Q3 GDP, Personal Consumption Indicator, Rts Michigan Consumer Confidence, New Home Sales, Personal Spending.
W: US Jobless Claims
T: Christmas Day
F: Boxing day
Meta Trader – AxiTrader EUR/USD:Daily
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USD/JPY: 119.47
Having reached 119.50 on Friday, after the BOJ left policy unchanged, US$Jpy saw a brief sell-off to 118.85 in NY, before bouncing to record a new session high at 119.61 and finishing close by.
The dollar uptrend looks to be firmly in place again and a test of 120.00 may soon be on the cards. If stronger US data this week does not send it up there, then watch out for a major release of Japanese data on Christmas Day which could well do the trick. It would not surprise me to see the dollar trading a fair bit higher when most markets fully re-open on Jan 2, at which point no one will know what to do with it.
If we are to head north, the points to watch above 120.00 are at 120.33 (76.4% of 121.84/115.55), a break of which would head on to 121.00 and to the 8 Dec, trend high at 121.84. Further out would see the dollar continue towards the 15 July 2007 high at 122.42 and in the longer term, the target of 124.13 (17 June 2007 high) would appear on the horizon but will take time, given the resistance levels sitting in between.
Back below 119.00 would see Fridays low of 118.82 being tested a break of which would run towards the 200 HMA at 118.40 and the 100 HMA at 118.05. Below 118.00 could see a run down to 117.40 but at this stage it looks unlikely.
Buying dips still remains the longer term plan.
Economic data highlights will include:
M: BOJ Monthly Economic Survey
T: Public Holiday
W: BOJ Minutes
T: BOJ Kuroda Speech, CPI, Unemployment, Retail Trade, Industrial Production
F:.
Meta Trader – AxiTrader USD/JPY:Daily
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GBP/USD: 1.5618
Cable continues its choppy sideways action, finishing the week at 1.5630 with little new to add.
The broad range of 1.5550/1.5750 looks set to hold for the time being, so continue to use that as a guide. The dailies still look mildly positive though, and a strong reading from Tuesday’s UK GDP may see a squeeze to the topside, although any Sterling strength could well be nullified if the plethora of US data, due this week, sees a run higher in the dollar.
Economic data highlights will include:
M:
T: UK Q3 GDP
W:
Meta Trader – AxiTrader GBP/USD:Daily
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USD/CHF: 0.9839
Following the introduction of negative rate by the SNB, the dollar made it back to virtually reach the 0.9847 trend high (18 Dec ) on Friday, before closing slightly lower.
There is no change in the longer term outlook and eventually I suspect that we 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.
The downside will mow find support at 0.9800, below which would head back into the recent choppy consolidation area, with the next reasonable support to be seen at 0.9740 and then at 0.9700 (200 HMA)..
Buy dips.
Meta Trader – AxiTrader USD/CHF:Daily
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AUD/USD: 0.8144
The Aud had a choppy session on Friday, capped by the 100 HMA, currently at 0.8180, – which in turn lies ahead of the descending trend resistance at 0.8200, – and supported above the trend lows of 0.8106.
More of the same could be in store this week in the absence of any local market moving data with any direction likely to come via the US$ following the release of the week’s US data. Liquidity will be increasingly thin though, so look for the possibility of some exaggerated moves.
While I doubt that we are headed above 0.8200 this week, a break of the trend resistance would trigger some stops and take the Aud up towards the 200 HMA at 0.8230 and possibly beyond to 0.8270 (23.6% of 0.8795/0.8106). If seen I think it would be a reasonable sell opportunity. Note that the 4 hour charts are showing some minor bullish divergence, so a mild bounce is possible early in the week.
On the downside, a break of 0.8100 would open up the May 2010 lows at 0.8066, below which there is not too much to hold it above 0.8000. Under that would surely bring a Christmas smile to the faces at the RBA who would begin to expect to get their wish for the Aud to head towards 0.7500 in early 2015!
Don’t forget, the long term view is for a run towards 0.6000 (!), as per the head/shoulder objective in the monthly chart below.
Economic data highlights will include:
M:
T: China Leading Economic Index
W: CB Leading Indicator
T:
F:.
Meta Trader – AxiTrader AUD/USD: 4 Hour
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NZD/USD: 0.7742
The Kiwi had a choppy 0.7736/94 session on Friday, with more of the same looking possible and probably contained within a 0.7700/0.0.7800 range, at least for the first half of the week.
Currently sitting right on the 100/200 HMA’s at 0.7740, this could well continue to act as a magnate over the next few days.
A break back above 0.7800 could once again look for a run towards 0.7850 and then to the recent 0.7870 peak, although this seems rather unlikely.
On the downside, below minor 0.7735 support, further bids would appear 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.
The base of the descending wedge is at around 0.7590 and for the time being I think this should hold. If wrong, a break would see an acceleration lower, targeting the 100 Month MA at 0.7535. I think we are heading there, but at this stage it is too early to consider such a move.
Economic data highlights will include:
M:
T: NZ Trade balance
W:
T:
F:.
Meta Trader – AxiTrader NZD/USD: Daily
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