10 May: Forecast: FX: US$/Majors + trade ideas

By | May 10, 2018


EURUSD: 1.1850
The US$ briefly headed to a new trend high against the Euro on Wednesday, reaching 1.1822 ahead of a bounce that saw a squeeze up to 1.1896 when the US$ came under some pressure following the soft PPI figure. It has since settled back at 1.1850, leaving the medium term outlook unchanged. US CPI today. The Ascension Day holiday will mean thin conditions in Europe.
1 hour/4 hour indicators: Mixed. –Turning higher Daily Indicators: Down Weekly Indicators:  Turning lower.
Preferred Strategy:  We have seen a bounce into the minor resistance at 1.1895/1.1900 but that has so far held, with the Euro now sitting in the middle of the day’s range at 1.1850. The 4 hour charts do seem to be pointing mildly higher though, and if 1.1900 can be taken out look for a run towards 1.1940 and then to 1.1975, although it would take a weak US CPI outcome later today to see it up here again.

The daily charts still point lower though and, as before, I think we are still in for a run towards 1.1600 in the days ahead. Ahead of that, on the downside, support will be seen at 1.1815/25, where the 55 WMA/December 12 low has so far propped the Euro up. A break would find minor bids at 1.1800, below which allows for a run towards 1.1785. below which there is little support to be seen ahead of 1.1700/10

While keeping a core short position, selling into near-term rallies seems to be the plan.

Sell EurUsd @ 1.1900. SL @ 1.1955, TP @ 1.1790 (Cancel if not done ahead of the US CPI).

Resistance Support
1.2010 Minor 1.1837 55 WMA
1.1994 4 May high 1.1822/16 Session low/22 Dec low
1.1975 (23.6% of 1.2475/1.1822) 1.0800 Minor
1.1938 8 May high 1.1787 (76.4% of 1.1553/1.2555)
1.1896 Session high 1.1750 Minor

Economic data highlights will include:

EU Holiday – Ascension Day, US CPI, Monthly Budget Statement

USDJPY: 109.74
US$Jpy has headed higher on Wednesday, reaching 109.82, with higher Treasury yields and oil prices underpinning the dollar. Increasing support now seen at 109.00
1 hour/4 hour indicators: Mixed. – Turning higher? Daily Indicators: Turning lower. Weekly Indicators:  Turning higher
Preferred Strategy:  The momentum indicators are mixed heading into Thursday so a cautious stance is required.

The daily charts are now attempting to point higher again after previously suggesting that a medium term top may be in place. In the absence of any key data until the US CPI later in the session, we may see further sideways trade near current levels, with strong resistance seen at 110.00.  A sustained break of 110.00 would then allow for a move to 110.20/25, which should also be strong, ahead of 110.50 and 110.85 (76.4% of 114.73/104.60).

On the downside, support will be seen at 109.30/40 ahead of the session low of 109.00. Below here looks unlikely today but if wrong, look for a return to 108.75/80 and possibly to 108.55/65.


Resistance Support
110.70 Minor 109.35 200 HMA
110.48 2 Feb High 108.99 Session low
110.20/25 200 DMA /(61.8% of 114.73/104.60) 108.72/75/82 100 DMA /7 May low /8 May low
110.02 2 May high 108.63/54 4 May low /24 Apr low
110.82 Session high 108.10 Neckline

Economic data highlights will include:

Foreign Bond/Stocks Investment, Current Account, Trade Balance – Mar, Eco Watchers Survey

GBPUSD: 1.3546
Cable had a choppy session ahead of today’s BOE meeting, trading a range of 1.3498/1.3606 before closing  once again right on the 200 DMA at 1.35
1 hour/4 hour indicators:  Mixed. –Turning higher Daily Indicators: Turning lower Weekly Indicators:  Turning lower
Preferred Strategy:   The short term momentum indicators look mixed on Thursday ahead of the BOE Meeting so a cautious stance is required. If Cable does manage a squeeze higher, near term resistance will again be seen at 1.3580/90 ahead of 1.3600/10. Beyond there, 1.3640/50 and the 2 May high 1.3665 would see sellers although that seems some way off right now unless the BOE spring a surprise hawkish tone in their outlook.

The longer term charts still look heavy though, and a retest of minor support at 1.3515, the session low at 1.3500, and then the 8 May/trend low of 1.3485 would not surprise in the days ahead. A break of this would open the way to the January low at 1.3457 and the major Fibo level at 1.3400 (38.2% of 1.1821/1.4376)

Neutral. Possible sell rally scenario although the daily charts are becoming oversold.

Resistance Support
1.3680 Minor 1.3550 200 DMA
1.3665 2 May high 1.3498 Session low
1.3629 3 May high 1.3485 4 May low/8 May low
1.3606 Session high 1.3457 11 Jan low
1.3580 Minor 1.3425 Minor

Economic data highlights will include:

Manufacturing/Industrial Production, Goods Trade Balance – Mar, BOE Meeting/Statement/Minutes/Vote Count/APP Facility, BOE Governor, Mark Carney Speech

USDCHF: 1.0053
US$Chf, was rangebound again on Wednesday, trading a similar range to the previous session, today being 1.0003/1.0055.
1 hour/4 hour indicators: Turning Neutral Daily Indicators: Up Weekly Indicators:   Up
Preferred Strategy:  With the medium term indicators still looking positive for further gains in US$Chf there is no change to the view of trading from the long side. The short term charts have been hinting at the chance of a minor dip, but the last couple of days sideways trade have now allowed them to unwind, and the uptrend may now be able to resume but will be dependent on a strong CPI figure later today.

If the dollar can make further gains, a break of the trend high of 1.0055 would open the way to 1.0065/70, which is strong Fibo resistance, and to 1.0100. Further out we are potentially looking at a run up to 1.0170 and even to the December 2016 high of 1.0343 albeit probably not for a while to come.

On the downside, support will again be seen at 1.0000 and at 0.9980. Under here would head to minor levels at 0.9965/35/15 ahead of the 1 May low of 0.9890. This looks unlikely right now but if wrong, on a break of 0.9890, further bids should arrive at 0.9870 and at 0.9845/50.

Buy US$Chf @ 0.9970. SL @ 0.9930, TP @ 1.0100

Resistance Support
1.0170 March 2017 high 1.0002/03 8 May low /Session low
1.0107  Apt 2017 high 0.9985 7 May low
1.0099 May 2017 high 0.9965 4 May low
1.0067 (76.4% of 1.0343/0.9187) 0.9935 2 May low
1.0055 7 May high /Session high 0.9890 1 May  low

AUDUSD: 0.7460
The Aud fell to 0.7411 in Europe on Wednesday, ahead of a bounce which eventually took it back up to 0.7472, underpinned by higher energy/commodity prices, before closing at 0.7460. Watch out for the China CPI today (exp -0.1% mm, +2.4% yy).
1 hour/4 hour indicators: Turning higher Daily Indicators: Turning lower Weekly Indicators:  Turning lower
Preferred Strategy:   The short term momentum indicators are looking a little more positive today although the longer term charts still look heavy, so selling into any near term strength still seems to be the way to go.

If we do see a near term squeeze higher, as the 4 hourly charts hint as being possible, then minor resistance will be seen at 0.7470/75 and then again at 0.7500 ahead of the Tuesday high of 0.7527. This seems unlikely to be visited today but if wrong look for further resistance at 0.7545/50, at 0.7560 and at 0.7575, ahead of the 26 April high at 0.7588.

The longer term charts remains heavy and would seem to have further losses to come in the days ahead. Below minor support at 0.7435/40 would then head towards the session low of 0.7411 and 0.7400. Under here, there really is not too much to hold it up ahead of Fibo support at 0.7385, the 1 June 2017 low at 0.7371 and the May 2017 low of 0.7328.

Sell AudUsd @ 0.7500. SL @ 0.7540, TP @ 0.7385

Resistance Support
0.7559/50 4 May high 0.7440 Minor
0.7542 7 May high 0.7411 Session low
0.7527/22 8 May high /(23.6% of 0.7813/0.7433) 0.7400 Minor
0.7500 Minor 0.7385 (76.4% of 0.7160/0.8135)
0.7472 Session high 0.7371 1 June 2017 low

Economic data highlights will include:                                                                     

China CPI, PPI, Australian Consumer Inflation Expectation

NZDUSD: 0.6936
 The Kiwi traded a 0.6948/97 range through Wednesday but has slumped in early NZ trade this morning after the RBNZ left rates on hold. The Kiwi is currently at new 5 month lows of 0.6935 after the RBNZ sounded less confident about the trajectory of the inflation outlook. They see annual CPI 1.6% by June 2019 (down from 1.8%) and the inflation rate reaching 2.0% target in the 4Q of 2020 vs the 3Q of 2020 in the prior report.
1 hour/4 hour indicators: Mixed- Daily Indicators:   Down Weekly Indicators:  Turning lower
Preferred Strategy:   The Kiwi has traded to the 0.6935 support (76.4% of 0.6780/0.7438) and then 0.6915, long term rising trend support, which is where I think we are eventually heading.  A break of 0.6900 would open up a move to 0.6815 and then to 0.6780, with only minor support to be seen once 0.6900 is broken.

On the topside, sellers will be found again at 0.6980/85, at 0.0.6995/7000. This looks unlikely to be revisited today, although if wrong, look for a squeeze towards the 8 May high of 0.7030. Above here, unlikely, a bounce to 0.7040/50 would see sellers, beyond which allows for 0.7080 and then 0.7095/00, but probably not for quite a while now.

Sell NzdUsd @ 0.6950. SL @ 0.7010, TP @ 0.6800

Resistance Support
0.7080 Minor 0.6935 (76.4% of 0.6780/0.7438) /Session low
0.7051/57 4 May high/ (23.6% of 0.7395/0.6953) 0.6915 Rising trend support
0.7030 8 May high 0.6900 Minor
0.7015/20 100 HMA/200 HMA 0.6870 Minor
0.6997 Session high 0.6850 Minor