Once again it is a sea of green at the start of the week on the back of the positive sounds coming from the US/China trade talks, on Friday, after Donald Trump agreed to suspend some of the existing trade tariffs. The US$ was generally under pressure, as the Aud$ and Kiwi continued their relief rally, while Cable soared once again, dragging the Euro along for the ride, on the growing hopes of a Brexit deal. Safe haven assets were dumped, meaning that US$Jpy made some decent gains while Gold was under pressure and ended down by around 0.3%. At the start of the week, more of the same looks possible, although Cable has come a long way, but the momentum is definitely higher. A failure to reach a Brexit agreement though will see a very sharp turn lower but right now the charts look constructive for further gains. Note that the Kiwi is building a reverse head/shoulder formation, with a target at around 0.6460.
On the crosses, Sterling is in demand, while the Jpy is again under pressure meaning that GbpJpy looks pretty positive at the start of the week. I also still like GbpAud. It has come a long way but if Boris actually pulls off a deal with the EU, then Sterling is going to fly. Rather than buy it here, I would leave an order well out of the money, 1.84/1.85, to by a possible dip, but leave a wide SL as it is going to be pretty volatile in the days ahead.
Elsewhere, stocks and WTI look increasingly positive for further medium term gains although this will be dependent on how the trade deal turns out.
*Trade of the day: October 12, 2019; 7:10 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.
Sell EurUsd @ 1.1090. SL @ 1.1120, TP @ 1.1000
Buy EurUsd @ 1.1005. SL @ 1.0975, TP @ 1.1100
Sell AudUsd @ 0.6830. SL @ 0.6855, TP @ 0.6765
Buy AudUsd @ 0.6760. SL @ 0.6825, TP @ 0.6735
Buy NzdUsd @ 0.6310. SL @ 0.6285, TP @ 0.6400
Buy GbpAud @ 1.8500. SL @ 1.8200, TP @ 1.9000
EurUsd: The Euro made some decent gains on Friday in reaching a high of 1.1062, where it ran into the base of the daily cloud and the weekly Kijun, before giving up some ground to end the week at 1.1035. The hourlies are showing some bearish divergence and we could see an early dip although the medium term momentum indicators look constructive so we could eventually see a return to the Friday high, where the strong resistance currently remains intact, and beyond, where the September 18/19 highs sit at 1.1072/75 and come ahead of the Fibo level at 1.1080 (38.2% of 1.1411/1.0878) and the 13 September high at 1.1109. A break of this level would add upside momentum and could then see a test of the 100 DMA at 1.1145, and eventually the 61.8% Fibo level at 1.1205 and the 200 DMA at 1.1215.On the downside, support will now be seen at 1.1000, where it looks like a decent buying opportunity if we get there. If wrong, below there would open the way to 1.0965/70 (minor) and then to 1.0940 (8 Oct low). I don’t think we go close to this for a while, but if wrong, below 1.0940 would allow for 1.0900, a break of which would then open the way back to the 1.0879 low. Further out, we could eventually see a run towards the next target at 1.0860(76.4% of 1.0340/1.2555), and then to the 23 April 2015 low at 1.0820. A break of this would find a weekly chart gap that would take us to 1.0775 but don’t get excited about this any time soon. Given the US holiday, a range of 1.1060/1.1000 may be the idea today.
US$Jpy: rallied to a high of 108.62, last seen on August 1 and looks as though it may have the legs to move even high – as long as risk sentiment remain positive – and may even be building a reverse head shoulder base, with a possible target of around 112.50. That remains a long way off, and in the meantime we need to break above 108.60/65, which would then open the way to 109.05 (100 DMA) and to 109.30, which will be strong resistance if/when we get there (1 August high, 61.8% of 11.40/104.45). Further out, we may look towards 109.92 (30 May high) and, above 110.00, to 110.50 (76.4%). On the downside, minor support will be seen at 108.20/25 (minor) and 108.10 (23.6% of 104.45/108.62) ahead of 108.00 (8 Oct low). Below this sees 107.80 (23.6% of 104.45/108.62) come into play, a break of which opens the way to 107.53 (50%) and to 107.30 (61.8%). For the time being, buying dips seems to be the plan, with a SL below 107.80.
AudUsd: The Aud made it up to a high of 0.6810 on Friday before retreating, to close the week at 0.6790. Nevertheless, with the 4 hour and the daily charts both looking constructive, further gains could well lie ahead and above the Friday high/minor Fibo level at 0.6810 (61.8% of 0.6894/0.6770) the targets to watch would be at the larger Fibo level at 0.6828 (38.2% of 0.7081/0.6770), 0.6840 (76.4% of 0.6894/0.6770) and 0.6876 (50% of 0.7081/0.6770), beyond which could then stretch to the 12 September high at 0.6894 and eventually to 0.6925 (61.8% of 0.7081/0.6770). It may be a quiet session given the US holiday, and note that we are now back in the daily cloud, meaning that we may see a few days of messy, choppy trade. On the downside, bids would now arrive nearby at 0.6775/80. Below here would then allow for a move back towards 0.6740/50 (100 HMA/200 HMA) although I don’t think we see it down here today unless all bets are off with regards to the trade war. Further out though, I still think we may eventually see lower levels for the Aud$ and if/when we go back below 0.6700 Fibo extension support would arrive at the 0.6670 low, which will be very strong, but a break of which would then head towards 0.6638 (76.4% of 0.6894/0.6670 from 0.6810) ahead of 0.6600. Under here would allow for a move to 0.6585 (100%) and eventually to 0.6500 although that remains some way off. In the big picture, the next major Fibo support level on the monthly chart is not seen until 0.6250 (76.4% of 0.4773 (April 2001)/1.1082 (July 2011).
NzdUsd: The Kiwi again squeezed higher on Friday, to reach 0.6353 before closing the week at 0.6340. The 4 hour charts suggest that we are breaking above the neckline of a reverse head/shoulder formation, and if that is the case the target is at 0.6470. Ahead of that good offers will arrive at 0.6355 (61.8% of 0.6449/0.6203), at 0.6391 (76.4%) and at the 12 Sept high at 0.6450. On the downside, support will be seen at 0.6315 (100 HMA) and at 0.6300 (200 HMA), and below here seems unlikely today. If wrong, further losses would open the way for a drop back towards 0.6280 and then towards 0.6255/60, 0.6220 and possibly back to the 0.6203, 4 year low. In the distance, on a break of 0.6200, there is little to hold the Kiwi up , but more distant bids would arrive at the August 2015 low at 0.6125, Use 0.6365/0.6310 as a guide today, with the preference to buying dips for the 24 hour trade although being a US holiday it should be rather quiet.