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

By | May 23, 2018


EURUSD: 1.1778
EurUsd traded a range of 1.1829/1.1755 on Tuesday, led mostly by developments in Italian politics, initially heading higher on the back of a pullback in Italian yields, before reversing sharply after a story that the Euro-sceptic Savona will be named econpmics minister. We now await the PMIs, and then later on, the FOMC Minutes.
1 hour/4 hour indicators: Turning Neutral Daily Indicators: Down -Becoming Oversold Weekly Indicators:  Turning lower.
Preferred Strategy:   The Euro has traded within the range today and this looks likely to continue until the release of the FOMC Minutes, later in the session. A hawkish lean would see the dollar’s uptrend resume, where the session low at 1.1755 would provide minor support for the Euro ahead of the trend low, at 1.1716, and then 1.1700/10. Once below 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.

If the EU PMIs give the Euro a lift, then we could see a squeeze back to 1.1800 and to the session high at 1.1829. Above here seems unlikely today, but the next resistance lies near 1.1850, beyond which would run into Fibo resistance at 1.1895.

Sell EurUsd @ 1.1825. SL @ 1.1870, TP @ 1.1720

Resistance Support
1.1895 (23.6% of 1.2475/1.1715) 1.1755 Session low
1.1853 16 May high /200 HMA 1.1740 Minor
1.1836 17 May  high 1.1716 12 Dec low/21 April low
1.1829 Session 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:

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

USDJPY: 110.88
US$Jpy traded a range either side of 111.00 on Tuesday and will do more of the same while awaiting the FOMC Minutes although the Nikkei Mfg PMI may provide some interest.
1 hour/4 hour indicators: Mixed. Turning lower Daily Indicators: Turning higher – Possible topping formation Weekly Indicators:  Turning higher
Preferred Strategy:  The short term momentum indicators look a little heavy on Wednesday and a run back towards the session low at 110.80 would not surprise although, with the daily and weekly charts pointing higher, dips look likely to be well underpinned. Below 110.80 would see buyers at 110.60, below which could see a move towards 110.15, where the 200 DMA would provide decent support.

If the dollar does head higher, then above the session high would allow a run back to 111.39 and then to 111.45/50, above which, several minor highs would see sellers ahead of long term trend resistance at 112.20, which would be tough to break at the first attempt, if/when we see it.

Buy US$Jpy @ 110.40. SL @ 109.95, TP @ 111.50

Resistance Support
112.20 Descending trend resistance 110.80 21 April low /Session low
111.86 11 Jan high 110.60 18 May low
111.47 18 Jan high 110.40 Minor
111.39 21 April high 110.15 200 DMA
111.18 Session high 110.02/06 16 May low / 17 May  low

Economic data highlights will include:

Nikkei Flash Mfg PMI – May

GBPUSD: 1.3433
Cable chopped around above the week’s trend lows, but held on above 1.3400, with most of the volatility coming while the Inflation Report Hearing was being delivered. Unable to reverse its trend though, with a fairly benign outlook from the BOE Members, Cable is closing towards its lows.
1 hour/4 hour indicators:  Neutral. Daily Indicators: Possible basing formation. Weekly Indicators:  Turning lower
Preferred Strategy:   The short term momentum indicators look neutral now, and the dailies may be forming a base, so a cautious stance is required, with direction to be decided today by the release of the CPI, PPI, and RPI. (CPI, exp 0.5%mm, 2.5%yy; Core, exp 2.2%yy).

On the downside, support will be seen at 1.3390/1.3400, where the major Fibo level at 1.3398 should see decent buying interest again. A break of 1.3390 would allow a run to 1.3300 and possibly to 1.3220, with not a lot of support to stand in its way, and some soft data could see a move towards that level quite quickly.

If Cable does manage a squeeze higher, near term resistance will again be seen at 1.3450 ahead of the session high at 1.3490.  Above here, 1.3500/10 and then 1.3525 will see sellers ahead of the 200 DMA at 1.3550 and to the 15 May high of 1.3571 ahead of 1.3600/10.


Resistance Support
1.3550 200 DMA 1.3412 Session low
1.3525 18 May high 1.3398 (38.2% of 1.1822/1.4376)
1.3510 200 HMA 1.3390 21 April low
1.3491 Session high 1.3370 Minor
1.3445 Minor 1.3350 Minor

Economic data highlights will include:

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

USDCHF: 0.9924
US$Chf has been heavy today, with some safe haven demand on the back of the Italian political situation causing EurChf to head sharply lower, and breaking below 1.1700 for the first time since mid-March.
1 hour/4 hour indicators: Turning lower. Daily Indicators: Turning lower Weekly Indicators:   Up
Preferred Strategy:  The momentum indicators generally look heavy today, suggesting that the dollar will retain its downside bias although the weekly charts still point higher, so looking to buy dips remains the medium/longer term strategy.

If the dollar does head lower, support will be seen at 0.9950, ahead of minor levels at 0.9917, the session low and then at the 1 May low of 0.9890, beneath which, further bids should arrive at 0.9880, the weekly cloud top, and then at 0.9845/50.

On the topside, 0.9990/1.0000 will be the first target, which has capped further gains over the last couple of days, ahead of 18 May’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
1.0055/56 7 May high /9 May high /11 May high 0.9917 Session low
1.0041/32 15 May  high /17 May  high 0.9890 1 May  low
1.0014 18 May high 0.9880 Weekly cloud top
1.0001 21 April high 0.9850 (23.6% of 0.9187/1.0055)
0.9990 Session high 0.9800 Rising trend support


AUDUSD: 0.7575
AudUsd reached the Fibo level at 0.7605 on Tuesday but then turned lower as risk sentiment waned, falling to 0.7565 ahead of a late squeeze back to 0.7575. The local interest today will come via the WBC Leading Index and the May Construction Work Done. Otherwise, hang on for the FOMC Minutes.
1 hour/4 hour indicators: Turning lower Daily Indicators: Turning higher Weekly Indicators:  Turning lower
Preferred Strategy:   While the dailies still look constructive, the short term momentum indicators are turning lower again and for the coming session we could see a little downside pressure.

If so, support will again be seen at 0.7560/70 ahead of minor levels back towards the 0.7500 pivot. Under here, unlikely ahead of the FOMC Minutes, would open the way back toward 0.7485, below which would find minor bids at 0.7470/75 and then at 0.7445. Further out, we could eventually see a return to the 9 May low of 0.7411, 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.

With the daily momentum indicators looking positive, another topside squeeze would again see sellers at   0.7600/05, above which  would allow a run towards 0.7620 and eventually to 0.7660, although this seems unlikely to be visited today.

It could be building a reverse head/Shoulder formation, which would eventually have a target of somewhere around 0.7720. Just a thought. It would take a big turnaround in the fortunes of the US$ to see the Aud back there.

Buy AudUsd @ 0.7525. SL @ 0.7495, TP @ 0.7635

Sell AudUsd @ 0.7605. SL @ 0.7640, TP @ 0.7505

Resistance Support
0.7660 (61.8% of 0.7812/0.7411) 0.7565 Session low
0.7640 Minor 0.7540 Minor
0.7620 24 Apr high 0.7515 200 HMA
0.7603/05 (38.2% of 0.7916/0.7411)/Session high 0.7502 21 April low
0.7585 Minor 0.7487 18 May low

Economic data highlights will include:

Construction Work Done, WBC Leading Index

NZDUSD: 0.6933
 The Kiwi climbed to 0.6974 on Monday before heading lower again and closing just above session lows of 0.6920.
1 hour/4 hour indicators: Turning Neutral Daily Indicators:   Possible basing formation. – Turning higher? Weekly Indicators:  Turning lower
Preferred Strategy:   The short term momentum indicators look flat today and some quiet range trade above o.6900 would not surprise.

On the topside, 0.6950 will provide minor resistance ahead of 0.6975/80, above which opens up a move to 0.7000, 0.7030 and eventually to the next Fibo level at 0.7058.

The initial support will arrive at 0.6920 and again at 0.6900. Below 0.6900 would allow a return to 0.6870 and eventually back to 0.6850. This looks unlikely for a while now, 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.

Resistance Support
0.7058 (38.2% of 0.7395/0.6850) 0.6920 200 HMA /Session low
0.7030 Minor 0.6900 100 HMA
0.7000 Minor 0.6872 18 May low
0.6978/74 (23.6% of 0.7395/0.6850) /Session high 0.6849 16 May low
0.6950 Minor 0.6828 11 Dec low