It is all change at the start of the week, with stock markets, Gold, the Jpy and the Chf of particular interest following on from Donald Trump’s remarks on Friday. It looks as though there could be a continuation of Friday’s moves and stocks in particular look like they are in for further trouble ahead. The Jpy and Chf are not far behind and trading both currencies from the long side is preferred.
On the FX crosses, the Aud and the Kiwi both look to be in trouble and as we have previously said, if 70.00 gives way in AudJpy, then do not stand in the way. Sterling looks good on the crosses as well, while note also that UsdCny is making new highs and could be heading a lot higher if the trade war scene does not improve.
We have seen some gapping in early Monday trade with safe haven demand ensuring that the Jpy is bid (UsdJpy now at 104.95) while we are seeing some weakness in the Aud (AudUsd 0.6740). Both have minor chart gaps to fill.
*Trade of the day: August 26, 2019; 8:30 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.
Sell EurUsd @ 1.1185. SL @ 1.1205, TP @ 1.1085
Buy EurUsd @ 1.1115. SL @ 1.1085, TP @ 1.1200
Sell AudUsd @ 0.6780. SL @ 0.6805, TP @ 0.6705
Buy AudUsd @ 0.6715. SL @ 0.6695, TP @ 0.6800
Sell NzdUsd @ 0.6420. SL @ 0.6455, TP @ 0.6365
Sell S+P @ 2875. SL @ 2905, TP @ 2805
Buy Gold @ 1505. SL @ 1490, TP @ 1555
Other strategies seem to be: –
The US$ is mixed but over the next 24 hours buying the Euro and selling US$ against the Chf and Jpy seem to be the main play in the FX markets. I still like to be short AudUsd and the Aud/Xs, particularly AudJpy, which fell sharply on Friday and, as we have been saying, it looks as though it could head towards 70.00, below which could see it move an awful lot lower very quickly, where 66.75 is 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.
Note that AudJpy has gapped sharply lower in early Monday trade and currently sits at 70.75. The HS neckline is not so far away now so keep an eye out for a break, which could take the cross sharply lower.
Keep an eye on GbpAud which I think is a buy on dips, albeit that the price action is very choppy. Look to buy declines towards 1.8000 with a SL placed at 1.7800 (or preferably 1.7700), but looking for a strong run higher. Much depends on Brexit here so it is going to be volatile but I think that we are eventually heading back towards 2.0000 so it could be a decent play. The cross finished above the 100 DMA and the 200 DMA for the first time since mid May, while at the same time moving sharply above the 100 WMA/200 WMA, which are crossing at 1.7895.
EurUsd: made a bullish key day reversal on Friday and the Euro suddenly looks a little more healthy following the gyrations seen on the back of Donald Trump’s comments. While the daily momentum indicators seem to have put in a base, at least for the time being, the short term momentum indicators are also looking positive, so some topside action may now be the path of least resistance. If so, on the topside, the first target is seen right here at 1.1152 (Friday high/50% of 1.1249/1.1052), beyond which, look for further offers to arrive at 1.1175(61.8%) ahead of 1.1200 (76.4%). Beyond there, the 100 DMA and the neckline of the HS formation remains at 1.1210/15, which repeatedly stood in the way of further progress 2 weeks ago and will remain an obstacle if/when we get back there. The resistance at 1.1215/1.1230 is very strong, but above which would open the way to 1.1250 ahead of 1.1264 (61.8% of 1.1411/1.1025), 1.1283 (200DMA) and 1.1320 (61.8%). On the downside 1.1100 will probably hold the Euro up on Monday, but below which we could then see a return to 1.1065 ahead of 1.1050. This seems to be on hold for the time being but I suspect that we could see an eventual return to the trend low of 1.1025 (31 July low), ahead of the 1.1000 H/S target. 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. Use 1.1200/1.1100 as a guide today, with a short term view of buying dips.
US$Jpy: fell like a rock after Trump’s comments on Friday and it looks as though there may be further downside ahead of it early in the coming week. The short term momentum indicators look heavy and the dailies appear to be trying to turn lower again, albeit without too much momentum at this stage. If so, support will today be seen at 105.25 (Friday low) and then at 105.06 (13 Aug low) and, as we said before, beneath 105.00 there is little support ahead of the January flash-crash low (104.01). On the topside, resistance will now be seen at 105.50/60, 105.80 (both minor) and at 106.00, which looks fairly safe today. Further out, the 100 HMA/200 HMA are crossing at 106.30/40, with more distant offers to be seen at 106.70/76 (15 Aug high), and then at the 13 Aug high of 106.97. Above 107.00 would open the way to 107.17 (50% pivot of 109.30/105.05) and to 107.67 (61.8%) ahead of 108.00 and even 108.30 (76.4) albeit unlikely in the near term.
UsdJpy has gapped down to 104.80 in early interbank Monday trade but currently sits near 105.00. Further downside pressure looks likely though as we head towards the 104.00 target, beyond which 103.00 will provide some support.
AudUsd: The Aud$ jumped around on Friday following Donald Trump’s comments but having seen a brief gyration between 0.6735/77 the pair ended the week at 0.6750, pretty much unchanged on the day. The inability of the Aud$ to recover is not really surprising given the ramping up of trade tensions , but the dailies having become oversold still seem to be trying to turn higher, so a squeeze back towards 0.6775/80 and then possibly to 0.6800 should not be ruled out. As before, I doubt we see it up 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 continue to arrive nearby at 0.6735 (Friday/14 Aug lows) and at 0.6715/20, ahead of 0.6700 and then at 0.6675 (7 Aug low). 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)).
AudUsd has gapped down to 0.6735/40 in early interbank Monday trade and currently sits at 0.6740. Further downside pressure looks likely though as we head towards the 0.6715/20 target, beyond which 0.6675 will be the next attraction.
NzdUsd: As with the Aud$, the Kiwi still looks heavy at the start of the week although it did manage a minor bounce from the trend lows of 0.6361, in spiking up to 0.6409 after Trump’s comments before closing the week at 0.6390.The daily/weekly charts are heavy so I prefer the downside in the medium term, although the short term momentum indicators do suggest a sideways range may be in store today. Immediate support should arrive at 0.6375/80 ahead of the 0.6316 trend low, below which, the next meaningful support is seen at the January 2016 low at 0.6347 and then at the September 2015 low at 0.6235, More distant bids would arrive at the August 2015 low at 0.6125 although that is a long way off yet. On the topside, resistance will now be seen at 0.6410, (Friday high/200 HMA) and then at 0.6428 (Wednesday high), 0.6445/50, at 0.6461 (23.6% of 0.6789/0.6361), 0.6475 (14 Aug high), and again at 0.6498/0.6500 (9 Aug high). Above here would open the way to 0.6525 (38.2% of 0.6789/0.6361) although not today. In the meantime, selling rallies remains the plan.
DXY: (98.36) The DXY ended Monday at 98.36 and looks underpinned at the start of Tuesday trade, 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. Minor resistance now sits right ahead, at 98.40/50 above which would open the way to 98.70 (minor) and then to the trend top at 98.93. 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 98.13 (Session low), 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 fell by 2.6% on Friday and the short term momentum indicators seem to hint at further losses ahead, and while the dailies are also pointing lower the momentum is not strong. Further exaggerated volatility looks likely and we could easily see another strong swing higher although I think that the downside has greater traction in the medium term, and prefer to trade from the short side. Levels to watch are at 2834 (Friday low), and 2820/25 (minor) ahead of 2802(200 DMA), 2775 (6 August low), and then at 2728/21 (3 June/8 March lows). On the topside, resistance will be seen at 2870/80, at 2900 (200 HMA) 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 last week, selling rallies does seem to be the plan but it is going to be a very choppy ride I suspect.
Gold: rallied sharply on renewed safe haven demand on Friday, climbing from 1493 to 1530, closing the week near the high and looking as though it has the legs for further gains in the sessions ahead. Although the daily momentum indicators are possibly topping out, hinting that it will continue to be a volatile ride the weekly charts remain constructive for further longer term gains. Buying dips is preferred, where support should now arrive at 1510/15 ahead of 1500 and 1490/95. On the topside, resistance will be seen at the 13 Aug high at 1535, and while this should be strong, a break could easily see a quick run to 1550/60 and eventually to 1585 (61.8% of 1921/1046).