The FX markets have been choppy and mostly rangebound, with little to excite traders on Monday although Sterling remains heavy due to the ongoing Brexit concerns. WTI was in focus, climbing by around 2.7%, underpinning stocks and sending both the S+P and the DJI to yet another daily/all-time high. Note that the Fed will release the minutes of its July meeting on Wednesday which will provide further clues on plans to raise rates, although traders seem to be growing in confidence that there will be no hike any time soon and don’t appear to be concerned at buying stocks at these lofty levels.
Tuesday is likely to be a more volatile session, with the RBA Minutes being the immediate focus in Asia. In European time the UK CPI (exp 0.5%yy, Core; 1.3%yy) and the German/EU ZEW Economic Sentiment Survey are due, and come ahead of the important US CPI reading for July (exp 0.0%mm, 0.9%yy: Ex-Food/Energy; exp 0.0.2%mm, 2.3%yy). Also from the US we get the July Housing Starts /Building Permits, Industrial Production (exp 0.2%) and Capacity Utilisation (exp 75.6%).
EURUSD: 1.1185
24 Hour Bias: Choppy - Neutral
Medium Term Bias: Neutral
EURUSD did little on Monday, and with the charts looking mixed, not hinting at much in either direction, the price action looks set to remain choppy so a cautious stance is required and in the short term I would not be getting too carried away in either direction. As we said before, with the northern hemisphere in full holiday mode, just trading the daily ranges would seem the way to go, without looking for too much more. A break above 1.1250 would trigger stops on the topside, but until then trade the range. Note that there will be a fair bit of data from both the EU and the US today which could provide some volatility. If the US data, particularly the CPI, is soft – enforcing the view of further Fed delays in hiking rates – then the dollar will come under pressure, while stocks will continue their run to the topside.
Economic data highlights will include:
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German/EU ZEW Economic Sentiment Survey, EU Trade Balance, US Housing Starts, Building Permits, CPI (July), Industrial Production, Capacity Utilisation, API Weekly Crude Oil Stock Inventory
USDJPY: 101.22
24 Hour Bias: Neutral
Medium Term Bias: Prefer to Sell Rallies /Mildly Bearish
USDJPY has been choppy, either side of 101.00, on Monday and it could be much the same again today. While the 4 hour charts are still fairly flat, the dailies still point lower, so while it may remain choppy and directionless in the short term, I prefer to use any near term strength to sell into rallies for the eventual, medium term move lower, I suspect towards 100.00 – and then lower again.
Economic data highlights will include:
- n/a
GBPUSD: 1.2878
24 Hour Bias: Mildly Bearish
Medium Term Bias: Neutral
Cable remains under pressure today due to the ongoing Brexit concerns and is now below 1.2900 and will take is direction today from the July inflation figures (exp 0.5%yy, Core; 1.3%yy). Overall, the shorter term momentum indicators look mildly negative, suggesting another test of 1.2900 although the dailies still do not look all that negative so I would not be getting overly bearish down here unless the coming week's data suggest otherwise. Unless the data paints a bleak picture, it may be rangebound and the dailies suggest that that it may remain choppy near 1.3000 over the next few days.
Economic data highlights will include:
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UK CPI, PPI RPI (July)
USDCHF: 0.9725
24 Hour Bias: Neutral
Medium Term Bias: Neutral
As with the Euro, the CHF has been choppy against the dollar and this looks set to continue, requiring a rather cautious stance. 0.9630/40 is good support so buying it there, should we see it, with a tight SL may be a worthwhile short term trade.
Economic data highlights will include:
- n/a
AUDUSD: 0.7674
24 Hour Bias: Prefer to sell rallies
Medium Term Bias: Mildly Bearish
AUD headed down to 0.7635 when Iron Ore futures fell 3% but has since recovered and currently sits mid range following a squeeze up to 0.7690. The RBA Minutes will be released today which may provide some volatility, as could the BHP result, which is predicted to report a huge $6 bio loss for 2015/16.
The dailies may be rolling over and the 4 hour momentum indicators are also still pointing lower so selling into strength is slightly favoured, looking for a test of the initial Fibo support at 0.7610. Further out I do remain mildly bearish although a break above the trend high/ major descending trend resistance at 0.7756/60 would change that theory. Aside from the RBA Minutes, the Q2 WPI and the July Unemployment will be the main features of the week.
Economic data highlights will include:
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New Motor Vehicle Sales, RBA Minutes
NZDUSD: 0.7211
24 Hour Bias: Prefer to sell rallies
Medium Term Bias: Mildly Bearish
With further rate cuts likely, I still prefer the downside although the daily momentum indicators are yet to turn bearish – and actually look mildly supportive so caution is warranted if selling it at current levels. The 4 hour charts do hint at lower levels though, so selling into strength and looking for a move towards 0.7100 is favoured, with a SL on short positions placed above 12 Augusts’ high. Governor Wheeler is speaking today (any minute now) and could again express his unhappiness with the current elevated level of the Kiwi. The GDT is up tonight and the Unemployment data is out tomorrow morning so it could be an active 24 hours.
Economic data highlights will include:
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Global Dairy Trade Index, PPI, Unemployment
Jim Langlands
FX Charts
www.fxchartsdaily.com
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