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

By | July 31, 2019

As with Monday, the main action was in Sterling, which headed to a new 27 month low against the US$, and looks very heavy on the charts against all the major counterparts heading into Wednesday trade. Overall it is likely to be a choppy session, although there is a fair bit of data out ahead of the FOMC meeting which might provide some directional volatility. The Australian CPI and the China PMIs are both due, with the Aud$ looking very heavy, and that seems to be where most of the action might lie. In particular the Aud currently looks very heavy against the Cad$, which is currently underpinned by the firm oil price. US Stocks currently look neutral, while the ASX looks a bit heavy on the 1 and 4 hour charts, which are hinting at some bearish divergence. WTI had a good day and the short term charts hint at further progress in the coming session, albeit that the dailies look neutral, but we could see a test of the 100 DMA, currently at 59.25..

As with yesterday, for those who do want to trade GbpUsd, it looks to be in big trouble, having fallen again on Tuesday, to a new 2 year low of 1.2118. The weekly charts showthat  momentum is pointing sharply lower and there is not much support ahead of the nearby level 1.2108 (March 2017 low),   below which could head down sharply, towards 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 another tight, 30 point, range on Tuesday, while still holding on above 1.1100, and will now most likely chop around current levels until the FOMC outcome although before then, the EU Q2 Preliminary GDP is due and may create some waves. The short term momentum indicators look mildly underpinned on Wednesday and may be turning a little higher although the dailies are building downside momentum, so I suspect that selling rallies is still going to be the medium term 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 the Fed, if at all. There is minor support at 1.1060 but not much else ahead of 1.1000. On the topside, the initial resistance will be at 1.1165 (Session high) and 1.1186 (25 July high) above which further sellers will arrive at 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), 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 is unchanged on Tuesday , closing the session at 98.06 but still looking to me as though  the squeeze higher may well continue, with the daily MACDs looking constructive. 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$Jpy:  had another range-bound session below 109.00 on Tuesday and this seems set to continue today ahead of the FOMC Meeting. The technical situation has not really changed and the initial resistance remains at the 10 July high of 108.99, beyond which would open the way towards 109.17 (61.8% of 110.67/106.77) and eventually to 109.74 (76.4%) and 109.92 (30 May high), ahead of 110.00. On the downside, minor support will be seen at Monday’s session low of 108.41 ahead of 108.25 (minor) and 107.95/108.00). Under here further would arrive at 107.60/65 and at 107.40/45 ahead of the 18 July low of 107.20. I am neutral on US$Jpy although I do have a mildly bullish dollar bias and with the 25 bp rate cut from the Fed now fully priced in, we shall have to await the statement/Press Conference to provide any directional move.

AudUsd:  The Aud had another tough day on Tuesday, trading down to 0.6868 and ending the session at the lows ahead of today’s CPI reading. As before, the hourlies are currently attempting a recovery and are showing some mild bullish divergence, 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 we should find some bids as we approach 0.6850, 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. If we do head below 0.6830, there is really nothing to stop the Aud$ heading towards the January 3rd flash-crash low, at 0.6715, although that remains some way off. On the topside, the initial resistance will now be seen at 0.6890/0.6900 ahead of 0.6915 (daily cloud base), beyond which the Fibo levels of the move from 0.7081/0.6868 are seen at 0.6918 (23.6%), 0.6950 (38.2%) and 0.6975(50%), albeit this is now rather distant. Right now I remain short although I have taken some back given the oversold nature of the short term charts, but will look to resell in the 0.6900/20 area should we see it. SL is now above 0.6970.

NzdUsd: As with the Aud$, the Kiwi has moved lower, and currently sits at 0.6612 having traded down to a low of 0.6602 (61.8% of 0.6487/0.6789) on Tuesday. After breaking below the neckline of the head shoulder last week, the Kiwi appears to have a measured target of around 0.6590. 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 of the drop from 0.6489/ 0.6602 lie at 0.6646, 0.6873 and at 0.6695. 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 (200 DMA).

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*Trade of the day: July 31, 2019; 8:09 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.

Today’s order are wide because of the FOMC meeting but overall I still prefer to look for levels to buy US$.

Sell EurUsd @1.1190. SL @ 1.1215, TP @ 1.1080

Sell AudUsd @ 0.6915. SL @ 0.6945, TP @ 0.6830

Buy AudUsd @ 0.6830. SL @ 0.6790, TP @ 0.6950

Sell NzdUsd @ 0.6680. SL @ 0.6705, TP @ 0.6570

Sell S+P @ 3040. SL @ 0.3055, TP @ 2950