20 Oct: Forecast: FX: US$/Majors + trade ideas

By | October 20, 2017


EURUSD: 1.1849
Preferred Strategy:   EurUsd was choppy on Thursday but after an early Catalonian related selloff, the Euro has ended higher, trading up to a high of 1.1857, underpinned by softer US Treasury yields.  The momentum indicators do look mildly supportive of the Euro and as we said before, if we do see a topside squeeze, the major resistance is at the neckline of the large Head/Shoulders formation which appears to be building, with the neckline at 1.1880.  This level ties in with the major descending trend resistance and should see good selling interest, if we get there. The dailies are pretty flat, possibly mildly bullish, so some caution is warranted on the downside as the whole world is now watching this head/shoulder formation but as long as we stay under 1.1880 I am happy to stay short, with the need to keep a tight SL in place above 1.1900. The H/S objective is at around 1.1250. Sell EurUsd @ 1.1870. SL @ 1.1910, TP @ 1.1700.
24 Hour: Neutral Medium Term: Mildly Bearish
Resistance Support
1.1930 (61.8% of 1.2092/1.1669) 1.1800 200 HMA
1.1895 Minor 1.1767 Session low
1.1879/82 12 Oct high/(50% of 1.2092/1.1669)/Descending trend resistance 1.1729 18 Oct low
1.1874/70 14 Oct high/Neckline resistance 1.1720 (76.4% of 1.1668/1.1880)
1.1857 Session high 1.1700 Minor

Economic data highlights will include:                                                      

German PPI, EU Current Account, US Existing Home Sales, Baker Hughes Oil Rig Count

USDJPY: 112.54
Preferred Strategy: US$Jpy remains will within the 112/113 range that we have spoken bout during the week and I suspect we should expect more of the same today, although there may be some pre-weekend safe haven demand, so some mild Yen strength would not surprise. On the topside, resistance will be seen at 113.00, above which, 113.20 would be decent resistance. Above there, unlikely today, 113.43 (6 Oct high), 114.00 and 114.49 (11 July high) would eventually beckon. The dailies rather uncertain of any potential upside momentum, and on the downside, support today should arrive at the session low at around 112.30, below which, the 18 Oct low was at 112.12. Back below 112.00, good support would be at 111.60/70. Buying dips is still preferred near 112.10/30 although further out, with the dailies looking less positive, further range trade near current levels may be in store. Buy US$Jpy @ 112.20. SL @ 111.60, TP @ 113.20.
24 Hour: Neutral Medium Term: Neutral
                                         Resistance Support
113.43 6 Oct high 112.50 Minor
113.20 Descending trend resistance 112.29 Session low /200 HMA /Rising trend support
113.14 Session high 112.03 17 Oct low
113.00 Minor 118.80 Minor
112.80 Minor 111.64 16 Oct low

GBPUSD: 1.3159
Preferred Strategy:  Sterling was choppy on Thursday, falling hard after the UK retail sales slowed sharply in September, by 0.8% (exp -0.1%), before bouncing into the London fix and then heading lower again into the NY close. Technically, t he momentum indicators are still generally mixed/flat so a neutral stance is required and I prefer to stand aside.
24 Hour: Neutral Medium Term: Neutral
Resistance Support
1.3337 14 Oct high/100 WMA 1.3131 Session low
1.3311 16 Oct high 1.3120 12 Oct low
1.3286 17 Oct high 1.3100 Minor
1.3245 100 HMA 1.3075 Minor
1.3211 18 Oct high /200 HMA 1.3026 6 Oct low

Economic data highlights will include:

UK Public Sector Net Borrowing Requirements, CBI Distributive Trade Survey – Orders

USDCHF: 0.9761
Preferred Strategy:  US$Chf headed lower on Thursday, with renewed safe-haven demand for the Chf being the main focus. The dollar fell hard, to 0.9736 although it has since recovered to currently sit at 0.9765. For the time being the upside momentum has disappeared and the 4 hour charts do now point lower. While I retain my medium term bullish bias I think that right now it could be that we are in for a test of slightly lower levels and a run towards 0.9700 would not really surprise. In the medium term, 0.9815/35 is providing strong resistance, but if we do see a close above 0.9835, then we could progress towards 0.9880 and then to 0.9900+. Buying dips is still preferred but caution is warranted.
24 Hour: Neutral Medium Term: Prefer to buy dips
Resistance Support
0.9880 (50% pivot of 1.0343/0.9420) 0.9760 200 HMA
0.9850 200 WMA 0.9736 Session low
0.9835 200 DMA/(61.8% of 1.0099/0.9420)/6 Oct high/18 Oct high 0.9729 16 Oct low
0.9818 Session high 0.9705 14 Oct low
0.9785 Minor 0.9676 2 Oct low /(38.2% of 0.9420/0.9836)

AUDUSD: 0.7877
Preferred Strategy:  The Aud had a generally solid session, underpinned by yesterday’s solid jobs data, and then for the scramble to buy Aud/Nzd after the announcement of the Labour Coalition Government.  The short term momentum indicators are a little mixed on Friday although the dailies remain positive so a run towards 0.7900 would seem possible at some stage. Given the general lack of data it may be a rangebound session, but further AudNzd demand would not surprise. On the other hand, Iron Ore was down 3.5% today and may dent demand. Overall, I suspect that we could well be confined to another choppy range today, again confined within 0.7800/0.7900. Note the potential reverse head/shoulder formation in the chart. A move above 0.7910 would target 0.8060.
24 Hour: Prefer to sell rallies Medium Term: Neutral
Resistance Support
0.7940 Minor 0.7840 Session low
0.7915 (50% pivot of 0.8102/0.7732) 0.7818/16 18 Oct low-17 Oct low/14 Oct low
0.7897 14 Oct high 0.7795 100 DMA
0.7889 16 Oct high 0.7770 11 Oct low
0.7883 Session high 0.7750 Minor

NZDUSD: 0.7035
Preferred Strategy:   The Kiwi has been hit hard by the election result but is currently holding on above 0.7000. The hourlies are very oversold, so near term downside potential may be limited but the 4 hour/daily momentum indicators are pointing lower, so an eventual test of the 0.6990 Fibo level seems on the cards, below which could see a quick run towards 0.6900 and even to the 0.6817 May 2017 low. On the topside, resistance will be seen at 0.7050/60 and above that at 0.7110.
24 Hour: Prefer to sell rallies Medium Term: Mildly Bearish
Resistance Support
0.7170 (38.2% of 0.7434/0.7009) 0.7009 Session low
0.7130 Minor 0.6990 (76.4% of 0.6817/0.7557)
0.7110 (23.6% of 0.7434/0.7009) 0.6970 Minor
0.7085 Minor 0.6950 Minor
0.7055 Minor 0.6920 Minor

Economic data highlights will include:

NZ Visitor Arrivals