30 July: Trend table outlook for FX, Commodities, Indices

By | July 30, 2019

Monday was all about Sterling which fell by over 1% against the US$ and on the crosses as the possibility of a “no-deal” Brexit increased dramatically. This is where most of the action seems to lie on Tuesday and generally being short of Sterling is the plan, although I pretty much remain sidelined here because it is totally driven by Brexit related headlines. Elsewhere the short term momentum indicators suggest that we may be near a base for the Euro, Aud and Nzd although the longer term charts for each still point lower, so selling rallies is still preferred. Overall, a fairly neutral stance is probably best ahead of Wednesday’s FOMC Meeting, where a 25bp cut looks likely, with the Fed suggesting that further patience is required ahead of any future move later in the year.

For those who do want to trade GbpUsd, Cable looks to be in a real mess, and as the weekly charts show, with momentum pointing sharply lower, there is not much support ahead of 1.2108 (March 2017 low), 1.1986 (January 2017 low) and 1.1821 (October 2016 low). I am not trading Sterling right now although the charts look increasingly ominous.

EurUsd: The Euro had a tight 38 point range on Monday, but still holding on above 1.1100, and will now most likely chop around until the next directional move is provided by the Fed, on Wednesday. The short term momentum indicators look mildly underpinned on Tuesday and may be turning a little higher although the dailies are building some downside momentum, so I suspect that selling rallies is still going to be the play. The H/S formation remains intact, and as long as we don’t go back above 1.1200, the downside target is at around 1.1000 and if/when we do break below the current base at 1.1100 there is very little support to stop it getting there quite quickly although I don’t see it happening ahead of Wednesday. On the topside, the initial resistance will be at 1.1150 and 1.1170 (both minor) and 1.1186 (25 July high) above which further sellers 1.1200.  This level will be critical; If 1.1200 gets taken out again, the H/S formation will be invalid and could see an aggressive move higher and would open 1.1220 (38.2% of 1.1411/1.1101) and 1.1240 (100 DMA) and then 1.1255 (50%), and 1.1285/92 where a minor triple top lies along with the 61.8% Fibo resistance, although that is becoming rather distant.  As before, I prefer to be short and to add to the position, with a SL placed tight above 1.1200.

DXY:  (98.06) The DXY reached a high of 98.17 on Monday, closing the session at 98.06 and looking to me as though  the squeeze higher may well continue although the 4 hour charts do suggest that we may see a bit of consolidation/corrective activity today/tomorrow. Any real directional movement may not happen ahead of Wednesday, when the FOMC meet, but the daily momentum indicators remain positive and, if/when 98.10/20 is taken out, we could eventually head back towards the trend high at 98.37 (23 May high). The reverse H/S neckline (97.45), having been broken last week, has a measured target at around 99.25 – a long way off but worth watching.  On the downside, support lies 97.75/80 and at 97.60 (both minor) and then at the neckline – at 97.45. Back below the 100 DMA, at 97.18, would find bids at 97.00 and then at 96.80/73 (200 DMA/12 July low). As before, I prefer to be long Usd against the Euro, with a SL at the neckline 97.45 (1.1200). With the FOMC Meeting now approaching some caution is warranted. I expect the Fed to cut by 25bp but not to be overly dovish on their outlook as the US data has recently been quite strong, and this should help underpin the dollar On the other hand a 50bp cut and a dovish outlook would put a considerable dent in the dollar’s upside momentum, while no cut at all – as predicted by some economists – would send the dollar sharply higher and stocks sharply lower. I don’t see that as a likely outcome.

US$Jpy:  finished Monday of a firm note, at 108.80 ahead of today’s BOJ Meeting, at which interest rates are seen to be kept  on hold, but the resumption of the US/China trade talks and Wednesday’s FOMC Meeting has induced some precautionary lightening up of positions. The situation has not really changed and the momentum indicators are still mixed, so further sideways action below 109.00 would seem most likely ahead of the Fed on Wednesday unless the BOJ spring a surprise. Technically, the initial resistance remains at the 10 July high of 108.99, beyond which would open the way towards 109.17 (61.8% of 110.67/106.77) and eventually to 109.74 (76.4%) and 109.92 (30 May high), ahead of 110.00. On the downside, minor support will be seen at Monday’s session low of 108.41 ahead of 108.25 (minor) and 107.95/108.00). Under here further would arrive at 107.60/65 and at 107.40/45 ahead of the 18 July low of 107.20. I am neutral on US$Jpy although I do have a mildly bullish dollar bias and suspect a slow move towards 109.00+ may be on the cards.

US$Chf:  is a little lower on Tuesday, at 0.9916 and it looks as though we may chop around near current levels while waiting on the Fed on Wednesday.  If so, the initial resistance will arrive at the July high of 0.9951, ahead of 0.9980/90, where the 100 DMA/200 DMA are about to cross, above which could see another attempt to move back above parity. If successful, once above the 18 June high at 1.0013, look for a quick run towards 1.0090/1.0100, 1.0120 and eventually to the 26 April high of 1.0236. If the dollar fails here, then once back below 0.9900, we are likely to see return towards 0.9840/50 where the 200 WMA/100 WMA currently sit. Overall I like the dollar higher and would look to buy dips at around 0.9900, with a SL placed sub 0.9840.

AudUsd:  The Aud had another tough day on Monday, trading down to 0.6893 ahead of a mild bounce, to end the session back at 0.6900. As with yesterday, the hourlies are currently attempting a recovery, while the 4 hour charts are also at oversold extremes and do seem to be trying to form a base. In the short term, I think 6900/0.6890 is likely to provide the initial support  today(0.6890=(76.4% of 0.6831/0.7081), but below which would open the way for a return to the 18 June low of 0.6830,  with only minor support levels seen ahead of that, at 0.6875 and 0.6850. On the topside, the initial resistance will now be seen at 0.6915 (daily cloud base), beyond which the Fibo levels of the move from 0.7081/0.6893are seen at 0.6938 (23.6%), 0.6965 (38.2%) and 0.6987(50%), albeit this is now rather distance. Right now I remain short although I have taken some back around current levels but will look to resell in the 0.6920/50 area should we see it. SL is now above 0.6970.

NzdUsd: As with the Aud$, the Kiwi has moved sharply lower after breaking below the neckline of the head shoulder top, currently at 0.6632, and appears to have a measured target of around 0.6590, with Fibo support also nearby, at 0.6602 (61.8% of 0.6487/0.6789). Below 0.6590 would then open up 0.6567 (10 July low) and 0.6557/0.6553 (76.4%/21 June low). The short term momentum indicators do seem to be building a bit of a base and on the topside, minor Fibo levels f the drop from 0.6489/ 0.6615 lie at 0.6656, 0.6882 and at 0.6702. A break back above the 0.6690 neckline would nullify the head shoulder formation and would then allow for a move back towards 0.6718/20 (200 DMA/Session high), above which the 200 HMA sits at 0.6732 and the 100 HMA is at 0.6742. Selling rallies with a SL above 0.6690 is now the plan.


*Trade of the day: July 30, 2019; 8:56 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 @1.1180. SL @ 1.1215, TP @ 1.1080

Sell AudUsd @ 0.6945. SL @ 0.6975, TP @ 0.6870

Buy AudUsd @ 0.6885. SL @ 0.6960, TP @ 0.6950

Sell NzdUsd @ 0.6660. SL @ 0.6695, TP @ 0.6570

Buy NzdUsd @ 0.6605. SL @ 0.6585, TP @ 0.6650