5 Aug: Trend table outlook for FX, Commodities, Indices

By | August 5, 2019

The NFP were peripheral to the markets on Friday, with the real focus being on the developments in the US/China trade war, and the consequent need for safe haven assets. The main recipients of this were the Jpy and the Chf which were both in strong demand, while the Aud and Nzd were sold again, along with the stock markets, which currently look increasingly toppish and could be building for a bigger move to the downside. Looking ahead seems to be more of the same theme, so staying long the Jpy crosses and looking for levels to sell stocks does seem to be the plan. Interestingly, Sterling looks to be building a base against the Aud and the Nzd and may be worth watching, while UsdCnh also seems to be building for a move higher.

EurUsd:  The Euro did find a base, at 1.1025 on Thursday and has since squeezed back to the initial resistance level at 1.1115, where the pair finished the week. Trade was choppy after the NFP on Friday and although the Euro did try to find some relief, it was unable to make any real progress as German yields headed to new all time lows. Technically, the short term momentum indicators look constructive at the start of Monday trade, and above the Friday high of 1.1115, which should be reasonably long resistance having been a medium term low, would then allow for a run towards 1.1160 (minor) and to 1.1173 (38.2% of 1.1411/1.1025), beyond which would allow for a retest of the 1.1200 H/S neckline. A break of this would see sizable short covering, with 1.1230 (55/100DMAs) and 1.1262 (61.8% of 1.1411/1.1025) being the obvious targets, ahead of 1.1300 (200DMA). The dailies still point lower though, and on the downside, the initial, minor support will arrive at 1.1070 ahead of 1.1050, below which, further support will be seen at the trend low at 1.1025 ahead of the 1.1000 H/S target. 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. Ahead of the NFP I would be reasonably nimble and then go with the flow, but given the look of the dailies, selling rallies remains the preferred plan.

 

DXY:  (98.60) The DXY has continued its retreat from last Thursday’s 98.93, 26 month high, and currently sits at 98.10. The 4 hour charts are pointing lower and the dailies do now seem to be topping out, and if we do break below the nearby support seen at 98.00, we could see an acceleration to the downside, towards 97.75 and 97.50. On the topside, resistance will be seen at 98.30/40 ahead of 98.70 and then the trend top at 98.93. If 98.90/99.00 can be taken out, which looks unlikely for a while, then we could see the measured, reverse H/S target at around 99.25 (EurUsd: 1.1000).  Having been quite bullish on the US$, particularly against the Euro, the index is now being dragged down by US$Jpy and this could feed through to the other currencies so I would take a more cautious stance, although, in the short term, I still look to sell the Euro into rallies back towards 1.1200. Further out though, as can be seen in the weekly chart, below, a long shadow has now appeared on the latest weekly candle and does suggest that added caution is required although the MACD’s are beginning to look a little more positive. If we head down through 98.00 and stay there over the next day or two, it could be that we are headed back toward towards 97.30/40 support, below which could see a return to the 200 DMA at 96.90. That remains some way off and for the time being I err on the side of buying dips, with s a SL placed below 97.30 (1.1210/15)

 

US$Jpy:  Having traded up to a high of 109.30 last Thursday in Asia, it has been one way traffic to the downside ever since, and almost every level of support ahead of the January flash-crash low (104.01) has now been taken out. The way the longer term charts look, it will not be long before we get there, but all will depend on the outcome of the US/China trade negotiations and the consequent effect on bond yields, and if things do not improve, then I suspect that is where we are heading. Near term support will arrive at 106.50 – Friday’s low, but below there would open the way to 105.95 (76.4% of 104.01/112.40), 105.00/104.50 (both minor) ahead of the 104.01 January 3rd flash-crash low. The short term momentum indicators are now oversold though, so we could see a squeeze back towards 107.00 and to the previous support seen at 107.20. Beyond this could open the way to 107.60 (38.2% of 109.31/106.50) although this looks doubtful right now.

 

AudUsd:  The Aud fell to a new trend low of 0.6763 on Friday but did manage a recovery of sorts into the weekend and currently sits at 0.6800. The trade war negotiations will continue to be the focus, while Tuesday’s RBA Meeting is unlikely to offer much reprieve for the Aud$, and the downside still seems to be the medium term direction. If so, 0.6760 is now the initial near term target, below which there is little to hold it up ahead of 0.6715, the interbank flash-crash low of 3rd January. Exporters should continue to provide a degree of support but they may be fighting against the tide, and the Iron Ore price, down 5% on Friday will also weigh. Below 0.6700, 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)). That is a long way off yet and in the meantime, the short term momentum indicators are oversold, so bounces are possible, where resistance is now seen at 0.6818 (Friday high), and then at  0.6838 (23.6% of 0.7081/0.6762), 0.6850 (100 HMA), at 0.6885 (38.2% of 0.7081/0.6762) and at 0.6900 (200 HMA). As before, selling rallies is preferred, but wait for a bit of a bounce towards 0.6830 I think.

 

NzdUsd: fell to a low of 0.6505 on Friday ahead of a bounce to finish the week at 0.6535. As with the Aud, the short term momentum indicators are trying to recover their oversold situation, so a mild bounce towards 0.6550, 0.6572 (23.6% of 0.6789/0.6505) and possibly to 0.6600/15 may be on the cards, where I think it would be worth selling it again. On the downside, support will be seen at 0.6505, at 0.6487/81 (14 June/23 May lows). Below there would open the way to 0.6464 (26 Oct ’18 low) and even to 0.6424 8 Oct ‘18 low). With the dailies pointing lower, selling near term rallies remains the plan.

 

Stocks: The S+P fell sharply lower heading into the weekend as the trade war rhetoric escalated and currently sits at 29240, down from the session high of 2960. The next Fibo support arrives at the Friday low of 2913 (38.2% of 2727/3028) and with the momentum indicators looking increasingly negative we could see a move towards the 100 DMA at 2904 and then to the 50% pivot of 2727/3028 at 2878.On the topside, resistance will be seen at 2945/50 and again at 2960. Above here looks unlikely but if wrong, look for a further squeeze towards 2980 and then back to 2995/3000. Currently selling rallies with a SL placed above 2980 seems to be the plan on Monday.

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*Trade of the day: August 5, 2019; 8:01 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 @1.1175. SL @ 1.1210, TP @ 1.1075

Buy EurUsd @ 1.1075. SL @ 1.1045, TP @ 1.1175

Sell AudUsd @ 0.6840. SL @ 0.6880, TP @ 0.6720

Buy AudUsd @ 0.6780. SL @ 0.6755, TP @ 0.6860

Sell NzdUsd @ 0.6570. SL @ 0.6610, TP @ 0.6485

Buy NzdUsd @ 0.6510. SL @ 0.6475, TP @ 0.6600

Other strategies seem to be:

Yen strength on all fronts – a possible near term bounce in US$Jpy and in X/Jpy may be seen but selling rallies is preferred

Stocks weakness generally, so look to sell rallies in the S+P

A bounce in the Aud$ would put additional downside pressure on the ASX

Gold to remain highly volatile

UsdCnh looks as if it wants to test 7.0000