The map looks rather more mixed again today although risk aversion was cast aside on Friday, and the stock markets in particularly look rather more rosy today after the dovish comments from the ECB suggesting easier monetary policy lies ahead. Having said that, I am wary of going long stocks at these levels and think that more likely we are in from some volatile conditions within a wide trading range. The FX markets are mixed, with Sterling currently looking more healthy and which could have further gains ahead of it, especially against the Euro, which I suspect is heading for 1.1000 in the near future, but will run into strong support at 1.0965, if we see it down there.. Otherwise I think the FX markets will probably be choppy/sideways until we hear from Jackson Hole on Thursday/Friday.
*Trade of the day: August 19, 2019; 9:14 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 @ 1.1050. SL @ 1.1020, TP @ 1.1160
Sell EurUsd @ 1.1115. SL @ 1.1155, TP @ 1.1050
Sell AudUsd @ 0.6810. SL @ 0.6845, TP @ 0.6735
Buy AudUsd @ 0.6740. SL @ 0.6710, TP @ 0.6830
Sell NzdUsd @ 0.6460. SL @ 0.6480, TP @ 0.6385
Sell S+P @ 2925. SL @ 2960, TP @ 2825
Buy Gold @ 1495. SL @ 1480, TP @ 1550
Other strategies seem to be: –
The US$ is mixed but selling the Euro is still the main theme for me, while the movements in the Jpy and the Chf were rather more benign on Friday as the stock markets managed to stabilise a little.
The Aud and the Kiwi are consolidating, and may yet squeeze higher but I still prefer to look for levels to sell both currencies against both the US$ and the Jpy. As we said before, keep an eye on AudJpy. All the Jpy/X charts look similar but the monthly chart for AudJpy, below, looks as though a break of 70.00 could see it head an awful lot lower; 66.75 being the next Fibo target (76.4% of 55.06/105.42) . With the Japanese retail market sitting very long, SL selling could escalate if/when we break the neckline.
GbpUsd is chopping around above 1.2000 and it may yet squeeze higher in the near term but it looks to be in increasing trouble in the longer term charts against the US$ and I think is best avoided while the Brexit mess continues. EurGbp was lower on Friday, mainly because the Euro was under pressure, and the dailies do point towards further Sterling strength in the sessions ahead, however, the weeklies still point higher and buying dips may be the plan for those who like to trade the Brexit headlines. Not me!
Gold looks to remain highly volatile and Friday saw a 0.65% reversal to the downside. The longer term charts (weekly/monthly) still have positive bias although the dailies are now looking rather toppish, so, either trading from the short side for the next 24 hours, or waiting to buy the dips for a structural move higher over time, seems to be the current plan.
EurUsd: The Euro fell to a low of 1.1065 on Friday as the prospect of lower EU rates looms on the horizon but it did manage a late bounce to finish at 1.1090 just above the Fibo level seen at 1.1080 (76.4% of 1.1025/1.1248). The 4 hour/daily momentum indicators still look heavy, so a run towards Friday’s low and to 1.1050 and an eventual return to the trend low of 1.1025 ahead of the 1.1000 H/S target would not really surprise. Further out, 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. On the topside, with the hourly charts now turning a little higher we could see a squeeze back above 1.1100 and on to Fibo resistance at 1.1135 (38.2% of 1.1249/1.1065) and again at 1.1157 (50%). I doubt that we head above here today, but if wrong look for further offers to arrive at 1.1175 (200 HMA) ahead of 1.1200. Beyond there, the neckline of the HS formation remains at 1.1215, while the 100 DMA (1.1220) has repeatedly stood in the way of further progress and will remain an obstacle if/when we get back there. The resistance at 1.1215/1.1230 is very strong now, but above which would open the way to 1.1250 ahead of 1.1264 (61.8% of 1.1411/1.1025), 1.1300 (200DMA) and 1.1320 (61.8%). I still prefer to sell Euro rallies as I think that 1.1000 and lower will be seen at some stage down the track, and if you want to get super bearish, check out the monthly chart below! In the meantime, use 1.1135/1.1050 as a guide today.
US$Jpy: managed to hang on above 106.00 on Friday in a choppy but rangebound session, capped at 106.50. The short term momentum indicators are in neutral and the dailies are be trying to turn higher, but the weeklies look heavy and if the stock markets turn lower again, then UsdJpy will follow as safe haven demand reappears. That looks unlikely early on Monday, and 106.00 (200 HMA/100 HMA crossing over) should again provide support, but below which would allow a move back towards 105.65 (14 Aug low) and then to 105.06 (13 Aug low).As we said before, beneath 105.00 there is little support ahead of the January flash-crash low (104.01) although that all looks pretty safe today. On the topside, minor resistance will be seen at 106.50, above which would open the way back to 106.76 (15 Aug high) and to 13 Aug high of 106.97. Above 107.00 would open the way to 107.17 (50% pivot of 109.30/105.05) and to 107.67 (61.8%) ahead of 108.00 and even 108.30 (76.4) albeit unlikely in the near term. A neutral stance is required again today although I still prefer to look for levels to buy the Jpy, both against the US$ and on the crosses.
AudUsd: The Aud$ spent Friday consolidating in a 25 point range below 0.6800, leaving the outlook unchanged. The short term momentum indicators are in neutral and a sideways session may lie ahead in the absence of any Australian data, but the dailies have now become oversold and may be basing out so a squeeze towards 0.6800 should not be ruled out. I doubt we head much above here today but if wrong, further offers would arrive at 0.6820, the minor trend high, above which there is Fibo resistance at 0.6830 (38.2% of 0.7081/0.6675) ahead of 0.6878 (50%), 0.6900 and then at 0.6926 (61.8%). Bids will now arrive nearby at 0.6770 (Friday low) and then again at 0.6750 (minor), 0.6735 (14 Aug low), at 0.6715/20, ahead of 0.6700 and then at 0.6675. Further out, below 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)).
NzdUsd: continues to chop around, going nowhere fast, confined on Friday within minor support/resistance levels at 0.6420/50, although looking a bit heavy into the weekend close. A neutral stance is required early on Monday, although the Q2 PPI is due for release and may provide some directional bias, but the daily/weekly charts remain heavy so I prefer the downside in the medium term. If so, the initial support will arrive right here at 0.6420 and again at 0.6400 ahead of the 0.6375 trend low. If/when we break below 0.6375, the next meaningful support is seen at the January 2016 low 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 0.6445/50, at 0.6468/75 (14 Aug high/23.6% of 0.6789/0.6375), and again at 0.6498/0.6500 (9 Aug high). Above here would open the way to 0.6520 and to 0.6532 (38.2% of 0.6789/0.6375) although not today. In the meantime, selling rallies remains the plan.
DXY: (98.20) The DXY ended the week at 98.20 looks reasonably healthy heading into the new week, with the daily MACDs again crossing higher, albeit without too much momentum behind them. The weeklies are flat though and while I think we may have further mild upside momentum ahead of us, the overall outlook remains for some choppy price action, which may well be the case ahead of Jackson Hole, at the end of the week. Above 98.20 would open the way to 98.40/50 ahead of 98.70 (minor) and then to the trend top at 98.93, and further out, if 98.90/99.00 can be taken out, which looks unlikely for a while, we could see the measured, reverse H/S target at around 99.25 (EurUsd: 1.1000).On the downside, support will now be seen at 98.00, at 97.70 (minor) and then at 97.36 (100 DMA) ahead of a possible return to the 9 August low at 97.03. Below 97.00 would find further support at the 200 DMA at 96.93, albeit not today.
Stocks: The S+P rallied on Friday, ending up by 1.45%, and the short term momentum indicators do suggest further short term gains may lie ahead. On the other side of the coin, the daily/weekly charts look heavy, as the possibility of a recession looms on the horizon, caused largely by the trade standoff between the US/China. All up, I suspect we are in from some highly volatile price action in the coming week but given the look of the longer term momentum indicators I still prefer to look for levels to sell into. If so, the support levels to look out for are at 2865/70, at 2850, and 2820/25 (all minor). Further levels would be seen at 2800 (200 DMA), 2775 (6 August low), and then at 2728/21 (3 June/8 March lows). On the topside, resistance will be seen at 2900 and at 2910 (100 DMA). Beyond there could then see a move back to the top of the recent range at 2945, where I would be looking to re-sell, but with a tight SL placed at 2960. As I said, selling rallies does seem to be the plan but it is going to be a very choppy ride I suspect.