Friday generally reversed the moves seen on Thursday as traders wound back the hopes of a 50bp rate cut from next week’s FOMC Meeting, which had been inspired by the dovish comments from the NY Fed President, Williams. A WSJ article inspired Friday’s reversal and most assets returned to where they had begun Thursday trade, and at the start of the week it looks as though we are going to be in consolidation mode while waiting on next week’s FOMC decision. Of interest, the S+P is beginning to look heavy, although the DJI is not suggesting any major stock-market selloff, so some choppy sideaway action seems likely. Elsewhere, the FX crosses are worth keeping an eye on, with risk sentiment and safe-haven demand likely to be key drivers in the coming session. EurChf and EurJpy look heavy, and if the Middle East tensions ramp up, then this is likely to push both crosses lower. The metals also look heavy in the short term, although the dailies stilllook constructive, while WTI looks mildly bid but will trade off the back of Middle East headlines today I suspect. FX generally looks pretty much ranagebound – at least for Monday trade.
EurUsd: The Euro reversed the gains of the previous day on Friday and fell back into its range while holding on to the key support at 1.1190/1.1200 level, where the neckline of a head-shoulder formation may be building. If so, we would then have a target of around 1.1000, albeit that this is still a long way off. Ahead of that, if 1.1190/1.1200 is currently providing strong support, but if taken out, we could then see a move towards 1.1178 (76.4% of 1.1105/1.1411), which ties in with the 18 June low (1.1181), a break of which would then open the way to 1.1150 and to strong support at 1.1105/15. On the topside, resistance will be seen at 1.1235/40 (100 HMA/200 HMA), above which 1.1250 (100 DMA), 1.1270 and then 1.1280/85, where a minor triple top now lies, will see sellers – (19/15/11 July highs). Above there would target 1.1300 ahead 1.1320/27 (200 DMA/ 61.8% of 1.1411/1.1192) beyond which could eventually see a run towards 1.1360 (76.4%) 1.1400 and the 25 June high of 1.1411. This too, is a long way off but a 50 bp rate cut from the Fed could inspire further gains towards the next target at 1.1447 (20 March high), which ties in with the Fibo level (23.6% of 1.2555/1.1106). The momentum indicators do look mostly neutral on Monday, so a cautious stance s required, but from a structural perspective, keep a lose eye on the neckline at 1.1190/1.1200.
DXY: (97.08) The DXY has reversed the losses of Thursday and is now back within the range defined by the 100 DMA (97.15) on the topside and by the 96.80/73 support (200 DMA/12 July low) on the downside. The 4 hour/daily MACDs are turning neutral, so a cautious stance is currently required, and the technical points are mostly unchanged. On the downside, back below the 97.00 and the 200 DMA would open the way for a decline towards 96.40 (minor) and 96.00 (200 WMA), below which could see a decline to the 25 June/20 March lows of 95.84/74. This area should be quite strong support, but a break would see a move towards the 10 Jan low at 95.03. On the topside, the nearby resistance will be seen at 100 DMA (97.15), above which could allow a return to the recent highs at 97.45 (16 July high), 97.59 (9 July high) and eventually to 97.76 (18 June high). Beyond here would then target 98.00 and the trend high at 98.37 (23 May) although that is a long way off.
US$Jpy: recovered from a Friday low of 107.21, after testing the Fibo support seen at 107.30 (76.4% of 106.78/108.98), to finish the week at 107.70 in what was a choppy session that included a brief spike to 107.97. A neutral stance is needed on Monday and the technical points are unchanged. On the downside, back below the Fibo support/107.20 low would allow for a test of 107.00 although I doubt we see that today. If wrong , then below here would then look to 106.77 (25 June low), which should be strong if/when we get there, beneath which there is only minor support, at 106.50 and 106.20, ahead of the next Fibo level at 105.98 (76.4% of 104.00/112.40). On the topside, resistance will now be seen at 107.95/00, which should be strong on Monday. A break of 108.00 would then allow for a run towards the Wednesday high of 108.31, beyond which, further targets would be at 108.50 (minor) ahead of 108.60 (12 July high), 108.85 and at 109.00.
AudUsd: The Aud reached a session high of 0.7082 on Friday, pulling up just shy of the 200 DMA at 0.7089, before slowly retracing lower to finish in line with the early July highs at around 0.7045. Some bearish divergence now appears on the 4 hour charts, and with some negative momentum we could be in for a retest of 0.7022 (23.6% of 0.6831/0.7081) ahead of 0.7000/05 (200 HMA). I don’t think we go below here today, but if wrong, look for further losses towards 0.6985 (38.2% of 0.6831/0.7081), 0.6970 (minor) and 0.6953/58 (50%/Daily cloud base). More distant downside levels lie at 0.6930/35 and at 0.6910. Below 0.6900 could open the way for a return to the 18 June low of 0.6830 although that remains a long way off and interim bids would be seen at 0.6880 (76.4% of 0.6831/0.7047) and at 0.6850. On the topside, strong resistance will be seen at 0.7080 (Weekly cloud base) ahead of 0.7090 (200DMA), and the Aud$ has not closed above the 200 DMA since March 2018 so a break could be quite bullish. If we do see a run above here, expect 0.7100+ stops to be triggered, which could then propel the Aud$ on towards the 55 WMA at 0.7135 and eventually higher. The momentum indicators are now mixed, with the short term charts looking heavy, but the longer term indicators look mildly bullish. Expect a range trade day today within a 0.7000/80 range I suspect.
NzdUsd: As with the Aud$, the Kiwi made a new trend high on Friday, at 0.6789, before retreating to 0.6760 into the weekend. The 4 hour charts look rather toppish, and on the downside we could see a run back towards 0.6740/50 ahead of the Fibo level at 0.6715/18 (200 DMA/23.6% of 0.6487/0.6789) ahead of 0.6695/0.6700 and then 0.6675 (38.2% of 0.6487/0.6789). On the topside, resistance will be seen at 0.6790 and at 0.6800. Beyond there, unlikely today, look for a run toward s0.6829 (76.4% of 0.6938/0.6487) and on towards 0.6850. The medium term momentum indicators generally still look mildly bullish now, so buying near term dips may still be the plan although we can probably expect an RBNZ rate cut in August, so the upside may be limited.
Gold: reversed the sharp rally seen on Thursday, and after reaching 1452 in early Friday trade it fell heavily to finish at 1425. The price action has been particularly volatile, and this seems set to continue, and it may be that the rally was a false upside break, with further downside potential now ahead of us. If so, below 1415/20 would open the way back to 1400 and possibly to the rising trend support seen at 1392. The daily charts are inconclusive right now and a move back towards the rally high should not be discounted but given the look of the short term momentum indicators selling into strength is probably the way to go on Monday, with a SL placed above 1452. Note that in the longer term charts, the weeklies are pointing higher, so any move back towards 1380/90 would probably be a medium term buying opportunity.
Silver: Having taken out various decent levels of resistance in reaching 16.58 on Friday, coming up just short of the major Fibo level at 16.65 (38.2% of 31.13/13.89), Silver has since headed into reverse and now sits midway between the 100 WMA (15.80) and the 200 WMA (16.35) which could possibly contain the range for the next few days. On top of that, the 100 DMA/200 DMA lies at 16.00 which will also add support. The short term momentum indicators look heavy, so further downside seems possibly today, but with the dailies looking constructive, buying dips towards 16.00 probably remains the overall theme. SL sub 15.80.
Stocks: The S+P gave up about 0.6% on Friday and the charts seem to suggest that there is further downside momentum ahead albeit that the charts for the DJI, which only lost 0.2% on Friday, seem to take a slightly more neutral stance so maybe we just chop around ahead of next week’s FOMC Meeting. If stocks do head lower, then the S+P will target 2953 (23.6% of 2728/3023) and then 2910 (38.2%). On the topside, resistance will be seen at 2990 (minor), ahead of 3000 and the all-time high at 3023. I don’t think we get back above 3000 for a while so selling 2990 with a SL at 3005 may be a plan.
*Trade of the day: July 20, 2019; 12:01 PM(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 @1.1245. SL @ 1.1275, TP @ 1.1180
Buy EurUsd @ 1.1190. SL @ 1.1160, TP @ 1.1280
Sell AudUsd @ 0.7070. SL @ 0.7095, TP @ 0.6970
Buy AudUsd @ 0.7000. SL @ 0.6965, TP @ 0.7080
Sell NzdUsd @ 0.6785. SL @ 0.6805, TP @ 0.6680
Sell Gold @ 1425. SL @ 1440, TP @ 1400
Buy Gold @ 1395. SL @ 1375, TP @ 1430
Sell S+P @ 3000. SL @ 3020, TP @ 2960