30 Oct: Forecast: FX: US$/Majors + trade ideas

By | October 30, 2017



EURUSD: 1.1608
Preferred Strategy:  EurUsd closed the week at 1.1600 and in the near term a mild squeeze to the topside looks possible, allowing the short term momentum indicators to unwind their oversold condition. If so, I think we should be looking to sell into rallies at around 1.1660/70 although a decisive break of this could see us back to 1.1700+. In the longer term, the head shoulder trade is now fully in play, in which case the target is at around 1.1250. The weekly close below the neckline (1.1660) is an increasingly bearish sign although there is plenty of work to do before reaching 1.1250, beginning with good support at 1.1575, Friday’s lows, and then again at 1.1510.  With the daily momentum indicators pointing increasingly lower I prefer to be short still but we do need to leave some room for the chance of  a short squeeze, so look to sell into rallies today at around 1.1665, with a SL placed above 1.1730

Sell EurUsd @ 1.1665. SL @ 1.1730, TP @ 1.1500.

24 Hour: Prefer to sell rallies Medium Term: Bearish
FX Charts Position: Short  – Looking  to add to the position into strength
Resistance Support
1.1725 (50% of 1.1879/1.1674) 1.1574 Friday low
1.1690 (38.2% of 1.1879/1.1674) 1.1550 Minor
1.1660 100 DMA/H.S. Neckline 1.1510 Rising trend support/(38.2% of 1.0570/1.2091)
1.1646 (23.6% of 1.1879/1.1674) 1.1490 Minor
1.1630 Minor 1.1450 Minor

Economic data highlights will include:

M:  EU Daylight Saving Ends, German Retail Sales, EU Economic Sentiment Indicator, Industrial Confidence, Services Sentiment, Business Climate, German CPI/HICP US Personal Consumption/Expenditure Price Index, Dallas Fed Mfg Business Climate

T: German Holiday, EU Provisional Q3 GDP, Economic Growth Forecasts, CPI, Case Shiller House Price Index, Chicago Purchasing Managers Index, API Weekly Crude Oil Stock Inventory

W: Partial EU Holiday, US ISM Manufacturing PMI/Prices Paid, Construction Spending, EIA Crude Oil Stocks Weekly Change, FOMC Meeting, Total Vehicle Sales

T: German Unemployment, EU Manufacturing PMI, US Jobless Claims, ISM NY Business Conditions

F: US Jobs/NFP/Average Hourly Earnings data

USDJPY: 113.68
Preferred Strategy: US$Jpy reached 114.45 on Friday but was unable to take out the July highs and the 114.50 barriers, causing  the dollar to sink back towards the end of the session , not helped by the headline that Powell is in line to be the next chair of the Fed.

With both the 1 & 4 hour charts still looking rather uninspired further choppy action looks possible, and the 4 hour charts are showing a degree of bearish divergence, suggesting that we might see some downside pressure, possibly leading to a test of the rising trend support, currently at 113.10, Below 113.00 would see us back in the previous 112/113 range, where 112.75 would be the first level of support ahead of 112.50. On the topside, back above 114.00, minor resistance will be seen at 114.20/25, above which 114.45/50 is an increasingly strong hurdle to overcome. Once broken though,  there is not too much to stop the dollar heading towards the major descending trend resistance, currently at 115.05 and if US bond yields continue to climb, then US$Jpy will be testing that level in the near future

Overall, with the daily momentum indicators still looking mildly positive, buying dips still seems to be the plan although there may be slightly better levels to do so. BOJ tomorrow – no surprises expected.

Buy US$Jpy @ 113.20. SL @ 112.95, TP @ 114.40.

24 Hour: Neutral Medium Term: Prefer to buy dips
FX Charts Position: Flat
Resistance Support
115.05 Descending trend resistance 113.63 Friday low
114.80 Minor 113.33 27 Oct low
114.49 11 July high/Friday low 113.24 24 Oct low
114.20 Minor 113.10 Rising trend support
114.00 Minor 112.75 (23.6% of 107.31/114.44)

Economic data highlights will include:

M:  Japan Retail Trade

T:  Japan Unemployment BOJ Interest Rate Decision/Press Conference/Statement, Housing Starts, Construction Orders

W: Nikkei Mfg PMI


F: Japan Holiday

GBPUSD: 1.3128
Preferred Strategy: Cable remains very choppy within the broad 1.3050/1.3250 range so I prefer to continue with a neutral stance against the US$ although I still like being long GbpAud (with a SL sub 1.7050), which I think is eventually headed to 1.82. As far as Cable is concerned, stay square, as the momentum indicators are generally mixed/flat although the short term momentum indicators are possibly looking a little more positive, so we may see another test of 1.3200 if traders feel that the odds of a BOE rate hike on Thursday are increasing. At this stage, I am not convinced either way although the market seems to think that a hike will take place.
24 Hour: Neutral Medium Term: Neutral
FX Charts Position: Flat
Resistance Support
1.3278 27 Oct high /100 WMA 1.3149 27 Oct low
1.3235 Minor 1.3130 Minor
1.3200 Minor 1.3100 Minor
1.3175 100 HMA/200 HMA 1.3070 Friday low /100 DMA
1.3164 Friday high 1.3035 Rising trend support

Economic data highlights will include:                        

M:  UK Daylight Saving Ends

T:  UK Consumer Confidence

W: Inflation Report Hearing

T: BOE Meeting/Statement/Minutes/Vote Count/APP Facility

F: UK Services PMI

USDCHF: 0.9974
Preferred Strategy: US$Chf screamed up to 1.0037 on Friday but then reversed into the week’s close to finish at 0.9775, and looking in the short term as though a top may be in place. The 4 hour charts hint at a more extended dip, to where support  would lie at 0.9965 and then at 0.9940 and at 0.9920, where I would be looking to rebuild a long dollar position

As before though, with the dailies looking increasingly positive I suspect that the dollar will eventually take another look at 1.0035/40 and beyond, where the next major level is seen at 1.0099.

Buy US$Chf @ 0.9930. SL @ 0.9885, TP @ 1.0070

24 Hour: Prefer to buy dips Medium Term: Mildly Bullish
FX Charts Position: Flat – Looking to buy dips
Resistance Support
1.0099 11 May high 0.9966 Friday low
1.0075 Minor 0.9940 Minor
1.0050 Minor 0.9920 100 HMA
1.0037 Friday high 0.9890 (23.6% of 0.9420/1.0037)
1.0000 Psychological 0.9868 67 Oct low

AUDUSD: 0.7675
Preferred Strategy: AudUsd has managed to recover from its 0.7624 Friday low and wuld seem to have the legs to extend higher on Monday. With both the 1 & 4 hour charts looking positive, a run back to 0.7690/0.7700 would not surprise. Above 0.7700 could see a run back to 0.7740, although I don’t really see it but would sell into it if we were to do so.

In the medium term trading from the short side remains favoured, looking for another run towards Friday’s lows and eventually towards 0.7570 although that won happen today and I suspect we may drift a little higher. Sell AudUsd @ 0.7700. SL @ 0.7755, TP @ 0.7630

24 Hour: Mildly Bullish – Prefer to sell rallies Medium Term: Mildly Bearish
FX Charts Position:     Short  – Looking  to add to the position into strength
Resistance Support
0.7770 Minor 0.7650 Minor
0.7740 (23.6% of 0.8102/0.7624) 0.7630 (61.8% of 0.7328/0.8124)
0.7715 Minor 0.7624 Friday low
0.7690 200 DMA 0.7600 Minor
0.7677 Friday high 0.7571 7 July low

Economic data highlights will include:              


T: New Home Sales, Private Sector Credit, China Manufacturing/Non-manufacturing PMIs

W: AIG Manufacturing PMI, RBA Commodity Index, Caixin China Mfg PMI

T:  Trade Balance, Building Permits

F: AIG Services PMI, Retail Sales, Caixin China Services PMI

NZDUSD: 0.6874
Preferred Strategy: The Kiwi remains heavy but off the 0.6817 Friday low, where we now have a double bottom with the May low.

The dailies remain negative, and as before, trading from the short side and selling rallies seems to be the plan. On the downside, a move back below 0.6817 would then find that there is not too much support ahead of 0.6670 although I don’t think we make new lows today. The short term momentum indicators look a little more positive, and on the topside, resistance will be seen at 0.6885/0.6910, and selling into rallies is preferred. Sell NzdUsd @ 0.6900. SL @ 0.6940, TP @ 0.6815

24 Hour: Mildly Bullish – Prefer to sell rallies Medium Term: Bearish
FX Charts Position: Flat
Resistance Support
0.6970 (38.2% of 0.7210/0.6817) 0.6840 Minor
0.6950 Minor 0.6817 11 May low/Friday low
0.6935 Minor 0.6800 Minor
0.6910 (23.6% of 0.7210/0.6817) 0.6760 Minor
0.6885 100 HMA 0.6720 Minor

Economic data highlights will include:


T: NZ Building Permits, ANZ Activity Outlook

W: NZ Unemployment, Labour Cost Index