After a choppy Friday, the heat map looks rather mixed on Monday although Sterling did fall heavily and it looks set to remain under pressure, both against the US$ and also on the crosses, as we start the new week. Elsewhere, safe haven demand appears to be the medium-term theme, with both the Jpy and the Chf seemingly in demand, while the Aud and the Kiwi still look heavy despite the recent bounce off their respective lows. Note that UsdCny looks increasingly bid and if the trade war continues then we might expect that to head higher over time.
In other markets, the US stock indices look mixed, and it will be the US/China trade negotiations that dominate the medium term direction, while Gold looks bid in the medium- term. WTI headed higher but looks set to remain within its wide 50-55 range.
*Trade of the day: August 12, 2019; 8:24 AM(AET)
*This is a personal opinion only, based on the look of the table below, and carries no guarantee of success.
All trades are good till 5.00pm NY time. All “in the money trades” should have the SL raised to break-even, or managed manually. All “out of the money trades” should keep original SL in place.
Buy EurUsd @ 1.1150. SL @ 1.1115, TP @ 1.1250
Sell EurUsd @ 1.1250. SL @ 1.1285, TP @ 1.1150
Sell AudUsd @ 0.6810. SL @ 0.6835, TP @ 0.6715
Buy AudUsd @ 0.6740. SL @ 0.6710, TP @ 0.6800
Sell NzdUsd @ 0.6500. SL @ 0.6540, TP @ 0.6400
Sell S+P @ 2950. SL @ 2985, TP @ 2880
Other strategies seem to be:
Ongoing Yen and Chf strength on all fronts – another near term bounce in US$Jpy or US$Chf and in X/Jpy, X/Chf is possible but selling rallies is preferred. AudNzd and NzdJpy both look heavy in the medium/long term.
Sterling looks to be in increasing trouble and selling GbpJpy or GbpChf may be the plan. EurGbp also looks increasingly bid
Look to sell rallies in the S+P and the ASX
Gold to remain highly volatile but the charts have an increasingly positive bias so buying dips is preferred
UsdCnh has settled into a wide range of 7.0400/7.1000 and this looks likely to contain it today although the topside is under some pressure. The longer term charts are pointing up though, and as long as the pair remains above 7.0000, I suspect that the dollar will eventually head higher so buying dips is preferred.
EurUsd: The Euro is going to start the week unchanged at 1.1200 after another choppy session on Friday, trading between 1.1177/1.1222, and leaves the technical outlook pretty much intact. As with several sessions last week, the neckline of the HS formation, at 1.1215, was briefly taken out but the 100 DMA (1.1225) once again stood in the way of further progress, and leaves us with a rather neutral stance on Monday. On the topside, resistance will again be seen at 1.1215/1.1250, so any upside progress may be slow, but above 1.1250 would open the way to 1.1264 (61.8% of 1.1411/1.1025), ahead of 1.1300 (200DMA) and 1.1320 (61.8%). On the downside, the initial, minor support will arrive at 1.1180 and again at 1.1165 (38.2% of 1.1025/1.1248/Session low) ahead of 1.1135/40 (/200HMA/50%) and 1.1112 (61.8%). Below 1.1100 would allow for an eventual return to the trend low of 1.1025 ahead of the 1.1000 H/S target. If/when we get below 1.1000, there is good trend support at 1.0965 – at which point I would square up any short Euro positions and take a nimble stance. Right now, given the empty calendar for Monday, it looks set to be another choppy/sideways session and 1.1150/1.1250 may well cover it, but I still prefer to sell Euro rallies as I think that 1.1000 and lower will be seen at some stage down the track.
DXY: (97.03) The DXY headed lower on Friday, breaking below good support at 97.25/30, where the neckline/rising trend support and 100 DMA have converged while, so far, holding on above the 200 DMA at 96.93. The daily momentum indicators are pointing lower though, and below 96.90 would then look towards 96.70, 96.25 and, further out, to the 25 June low at 95.84. If the dollar holds the nearby support, then we may see a return to 97.30, above which opens the way back to 97.50 and to 97.80 (minor) ahead of 98.00, although this looks unlikely for a while. If wrong, above 98.00 would open the way to 98.30/40 ahead of 98.70 and then the trend top at 98.93 and further out, if 98.90/99.00 can be taken out, which looks unlikely for a while, then we could see the measured, reverse H/S target at around 99.25 (EurUsd: 1.1000). Some choppy trade now looks likely with a growing downside bias, although the weeklies remain in neutral mode and as a longer term strategy, I still prefer to buy dips given the relative states of the US/EU economies. The charts though suggest that we may see better levels to do so and right now selling dollar rallies seems to be the plan.
US$Jpy: briefly trade down to a low of 105.25 on Friday on the back of Donald Trump’s Twitter activity but rebounded, to open the week at 105.60. Further safe haven demand will see a return to 105.25/3 and to 105.00, but beneath which there is little support ahead of the January flash-crash low (104.01). The short term momentum indicators are reasonably neutral on Monday but the longer term momentum indicators are heavy, so selling rallies is preferred. Minor resistance will now be seen at 106.00 and at 106.20 (23.6% of 109.30/105.26). Above here would open the way to 106.80 (38.3%) and to 107.00/10, beyond which could then head back to 107.30 (50% pivot of 109.30/105.26) and to 107.75 (61.8%) albeit unlikely in the near term. Volatile conditions are likely to continue but with the daily/weekly charts pointing lower I think a move to 105.00/104.00 is on the cards. Sell rallies.
AudUsd: The Aud$ has backed off from last week’s rally to 0.6821 and the pair currently trades at 0.6785 after some safe haven set in on Friday. The 4 hour momentum indicators are now flat and a choppy but sideways session may lie ahead, and if so, resistance will again be seen at 0.6800 (minor), 0.6821 (08 August high), and then at 0.6830 (38.2% of 0.7081/0.6675). Further resistance would be seen at 0.6877 (50% of 0.7081/0.6675) but that won’t be bothered for a while. On the downside, support will be seen at 0.6865/70 (minor), 0.6750 and to 0.6715/20, ahead of 0.6700 and 0.6675 although we are not going back there today. Below 0.0.6675, there is minor support at 0.6660, but under there would open the way to 0.6500 and, further out, the next major Fibo level is not seen until 0.6250 (76.4% of 0.4773 (April 2001)/1.1082 (July 2011)). That is a long way off yet and in the meantime, as before, selling rallies is preferred given the negative look of the longer term charts.
NzdUsd: having spiked down to 0.6375 following last week’s RBNZ rate cut, the short squeeze since then has seen the Kiwi top out at 0.6495 and currently sees it trade a little lower, at 0.6462. While the short term momentum indicators look rather neutral, the longer term charts still point lower so trading from the short side is still preferred. If so, support would arrive at 0.6450, 0.6425/30 and 0.6600 (minor) ahead of the 0.6376 low. Further out, the January 2016 low is seen at 0.6347 and then at the September 2015 low at 0.6235, below which opens the way to the August 2015 low at 0.6125. On the topside, resistance will be seen at 0.6480/85, at 0.6500 and then at the minor trend high of 0.6495. Above here would open the way to 0.6520 (200 HMA) and to 0.6532 (38.2% of 0.6789/0.6375) although not today. In the meantime, selling rallies remains the plan.