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

By | May 21, 2018



EURUSD: 1.1770
EurUsd set a new trend low on Friday on the back of increasing concerns about the agreement between Italy’s far-right League and 5-Star Movement on a governing accord that would slash taxes and ramp up welfare spending. There are also worries over what will happen to the Italian Government once they have formed a government, with regards to the outstanding government debt owed to the ECB and which sent shudders through the Euro. The pair fell to 1.1750 from an earlier high of 1.1821, and then closed at 1.1770. We may chop around here on Monday given that it is an EU wide holiday (Whitsun) but Italian politics will be the risk again today, with little data to come from the US. Note that, technically, both the US10Y and the 30Y did make a daily key reversal on Friday, suggesting some downside pressure on yields and possibly the dollar at the start of the coming week, although this would provide an opportunity to sell into Euro strength. There are several Fed Speakers: Bostic, Harker, Kashkari  who may provide some volatility
1 hour/4 hour indicators: Turning lower Daily Indicators: Down -Becoming Oversold Weekly Indicators:  Turning lower.
Preferred Strategy:   The Euro remains under ongoing pressure and will continue to do so on the back of general US$ strength and the resurgence of strife in Italian politics.

On the downside, below Friday’s low, 1.1750, there is little support to be seen ahead of December lows at 1.1738/17 and then 1.1700/10 although I don’t think we are going below there today. Once under 1.1700 though, look for an extension to 1.1670, which will be very strong support, and eventually to the November low at 1.1553.

On the topside, minor resistance will be seen today at 1.1785, 1.1800 and at 1.0820 and then again 1.1850 and 1.1865.

Staying short with a core position and trading around it, and looking to sell rallies is still the plan.

Sell EurUsd @ 1.1800. SL @ 1.1830, TP @ 1.1680

Resistance Support
1.1865 (23.6% of 1.2475/1.1762) 1.1749 Friday low
1.1853 16 May high 1.1737 18 Dec low
1.1836 17 May  high 1.1716 12 Dec low
1.1821 Friday high 1.1700 (38.2% of 1.0340/1.2555)
1.1800 Minor 1.1670 Monthly cloud base /Weekly cloud top

Economic data highlights will include:

M: EU Whit Monday Holiday, Chicago Fed National Activity Index, Fed Speakers: Bostic, Harker, Kashkari

T:  Richmond Fed Mfg Index, API Weekly Crude Oil Stock Inventory

W:  German Q1 GDP, EU/US Markit Flash Manufacturing/Services/Composite PMIs , EU Consumer Confidence, US New Home Sales, EIA Crude Oil Stocks Weekly Change, FOMC Minutes

T: Eurogroup Meeting, German Consumer Confidence, EBC Monetary Policy Meeting Minutes, US Existing Home Sales, Kansas Fed Mfg Activity, Jobless Claims

F: German IFO Business Climate/Expectations, US Durable Goods Orders, Michigan Consumer Sentiment Index


USDJPY: 110.74
US$Jpy reached 111.07 on Friday, but  the dollar then came off its highs as US yields went offered and amidst some safe-haven demand, ensuring that the Yen finished the day on a firmer note.
1 hour/4 hour indicators: Turning lower. Daily Indicators: Turning higher Weekly Indicators:  Turning higher
Preferred Strategy:  The short term momentum indicators look rather heavy on Monday and a run back towards 110.00 would not surprise, where the 200 DMA would provide decent support at 110.15, although the longer term charts still point higher and buying dips is preferred.

If so, then above 110.85 (76.4% of 114.73/104.60) would allow a run back to 111.00/10, above which there is not a lot of resistance ahead of 111.45/50.

Sidelined – look to buy dips with a SL under the 100 WMA at 109.50.

Resistance Support
111.86 11 Jan high 110.60 Friday low
111.47 18 Jan high 110.15 200 DMA
111.25 Minor 110.02/06 16 May low / 17 May  low
111.07 Friday high 109.80 Minor
110.90 Minor 109.50 100 WMA

Economic data highlights will include:

M: Japan Trade Balance

T:  All Industry Activity Index

W:  Nikkei Flash Mfg PMI – May


F: Tokyo CPI

GBPUSD: 1.3470
Cable retested the 2018 low again on Friday but held up above 1.3450. This is looking rather precarious at the start of the week and stops will be building below, which inevitably look to be taken out.
1 hour/4 hour indicators:  Turning lower Daily Indicators: Possible basing formation. Weekly Indicators:  Turning lower
Preferred Strategy:   The short term momentum indicators look heavy but the dailies may be forming a base, On the downside, support will be seen at  the trend low at 1.3450, a break of which would allow a run to the and the major Fibo level at 1.3400

If Cable does manage a squeeze higher, near term resistance will again be seen at 1.500 and at 1.3525/35 ahead of the 200 DMA at 1.3550 and to the 15 May high of 1.3571 ahead of 1.3600/10.


Resistance Support
1.3607 14 May high 1.3450/54 15 May  low /16 May low /Friday low
1.3571/68 15 May  high /17 May  high 1.3425 Minor
1.3550 200 DMA 1.3398 (38.2% of 1.1822/1.4376)
1.3525 200 HMA /Friday high 1.3370 Minor
1.350 Minor 1.3350 Minor

Economic data highlights will include:


T:  Public Sector Net Borrowing Requirements – Apr

W:  UK CPI, PPI, RPI – Apr, CBI Distributive Trade Survey Orders/Realised – May

T: UK Retail Sales – Apr

F: UK Preliminary Q1 GDP

USDCHF: 0.9974
US$Chf headed lower on Friday as safe haven demand for the Chf re-emerged on the back of the Italian political upheaval, sending the dollar briefly down to 0.9950 ahead of a bounce, to finish the week at 0.9975.
1 hour/4 hour indicators: Turning lower. Daily Indicators: Turning lower Weekly Indicators:   Up
Preferred Strategy:  The short term momentum indicators look neutral again today, while the dailies look increasingly toppish and it maybe that the recent uptrend has now run its course, possibly with some choppy trade ahead, allowing the charts to unwind. The weekly charts still point higher though, so looking to buy dips remains the medium/longer term strategy.

If the dollar heads lower, support will again be seen at Friday’s low at 0.9950, ahead of minor levels at 0.9935/15 and 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 0.9880, the weekly cloud top, and at 0.9845/50.

On the topside, 1.0000 will be the first target ahead of Friday’s high at 1.0014 and then further highs in the 1.0030/40 area. Decent resistance will be seen at the trend high of 1.0055, which looks unlikely to be taken out for a while, but above which would open the way to 1.0065/70, which is a major Fibo level, 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.

Sidelined – Look to buy dips.

Resistance Support
1.0099 May 2017 high 0.9949 Friday low
1.0067 (76.4% of 1.0343/0.9187) 0.9935 2 May low
1.0055/56 7 May high /9 May high /11 May high 0.9915 Minor
1.0041/32 15 May  high /17 May  high 0.9890 1 May  low
1.0014 Friday high 0.9880 Weekly cloud top

Economic data highlights will include:                        




T: Trade Balance – Apr

AUDUSD: 0.7510
The Aud chopped around either side of 0.7500 on Friday, ending at 0.7510, and looking to do more of the same today I suspect.
1 hour/4 hour indicators: Neutral Daily Indicators: Turning higher Weekly Indicators:  Turning lower
Preferred Strategy:   With the short term momentum indicators in neutral we could be in for some sideways trade today but the daily charts are pointing a bit higher and it would seem that the Aud may see a runback to 0.7525, the Friday high, possibly on to 0.7535/40 and on to sterner resistance at 0.7565.  Above here would allow a squeeze back to 0.7585, which I think would be a decent area to re-sell the Aud, but above which opens up 0.7600/05 although this seems unlikely to be visited today.

On the downside, support will be seen at the 0.7500 pivot and then at 0.7485. Below here would find minor bids at 0.7470/75 below which could return 0.7445, but which looks safe right now. If wrong, we could then head towards the 9 May low of 0.7411. This is an 11 month low and decent buying interest should arrive at 0.7400/10. Below 0.7400 though, 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.

Buy AudUsd @ 0.7470. SL @ 0.7440, TP @ 0.7570

Sell AudUsd @ 0.7590. SL @ 0.7615, TP @ 0.7470

Resistance Support
0.7603 (38.2% of 0.7916/0.7411) 0.7487 Friday low
0.7583 27 Apr high 0.7475 Minor
0.7566 12 May high/14 May high/(23.6% of 0.7813/0.7411) 0.7447 15 May  low /16 May low
0.7546 17 May  high 0.7411 9 May low
0.7525 Friday high 0.7371 2 June 2017 low

Economic data highlights will include:



W:  Construction Work Done

T: WBC Leading Index


NZDUSD: 0.6918
 The Kiwi fell to 0.6872 on Friday, ahead of a decent bounce that has allowed it to finish near session highs of 0.6921.
1 hour/4 hour indicators: Turning higher Daily Indicators:   Turning lower Weekly Indicators:  Turning lower
Preferred Strategy:   The short term momentum indicators look a little more positive today and we could see a run towards resistance at 0.6935/40, above which opens up a move to the Fibo level at 0.6975 and even back to 0.7000 although this seems unlikely.

Back below 0.6900 would allow a return to 0.6970 and eventually back to 0.6850. This looks unlikely today, but if wrong, further downside pressure could see a move to 0.6815 and perhaps to 0.6780 although unlikely in the near term. Below that though, there is very little support until 0.6670.

In the longer term, the Kiwi appears headed lower so selling rallies is still preferred. The EM fallout will ensure that any upside for the Kiwi (and the Aud$) is limited.

Sell NzdUsd @ 0.6970. SL @ 0.7010, TP @ 0.6850

Resistance Support
0.7000 Minor 0.6872 Friday low
0.6975 (23.6% of 0.7395/0.6850) 0.6849 16 May low
0.6950 Minor 0.6828 11 Dec low
0.6936/38 17 May  high /200 HMA 0.6816 1 Dec low
0.6921 Friday high 0.6780 17 Nov low

Economic data highlights will include:

M: NZ Q1 Retail Sales, NZ Visitor Arrivals