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

By | August 6, 2019

It was all about the trade war and China’s decision to allow UsdCny to break above 7.000 early on Monday, which had ramifications for the rest of the financial asset classes throughout the rest of the day – and is continuing to do so in early Asia. Stocks are looking very precarious and seem to have further to fall on the downside although they just did so by another 1.5% as I write, while Gold will be a major beneficiary. This looks set to continue. If the trade war does escalate, diminishing demand will not help oil although the charts are currently in neutral mode, while the commodity currencies will come under increasing downside pressure, with the Aud$ looking particularly vulnerable ahead of today’s RBA meeting. The Jpy will continue to be the centre of attention.

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*Trade of the day: August 6, 2019; 7:28 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.

Buy EurUsd @ 1.1175. SL @ 1.1355, TP @ 1.1275

Sell AudUsd @ 0.6820. SL @ 0.6850, TP @ 0.6720

Buy AudUsd @ 0.6720. SL @ 0.6690, TP @ 0.6820

Other strategies seem to be:

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

The Aud looks weak against both the Nzd and the Cad. Parity may be looming for AudNzd

EurGbp has made new highs and seems to have the medium term momentum to head higher

EurChf has negative momentum but the SNB will not allow the cross to go too far I suspect, so best avoided.

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

Gold to remain highly volatile but the charts have a positive bias

EurUsd:  Having found a base, at 1.1025 last Thursday, the Euro has bounced strongly on Monday to meet the neckline of the Head/Shoulder formation, at 1.1212, We have spoken about this level previously being quite important, and a break above – just 10 points away right now – would allow further acceleration towards 1.1220/30 ((50% pivot of 1.1411/1.1025 & 55/100DMAs) and to 1.1264 (61.8% of 1.1411/1.1025), ahead of 1.1300 (200DMA) and 1.1320 (61.8%). With the 4 hour and daily charts looking more positive today, buying dips does seem to be the plan, but I would wait for a break of the neckline to do so. If wrong, on the downside, the initial, minor support will arrive at 1.1160 (23.6% of 1.1025/1.1212) ahead of 1.1140 (38.2%) and 1.1120, where the 100 HMA/200 HMA and 55 HMAs are all converging. Below 1.1100 would allow for an eventual return to the trend low of 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. Right now, buying dips does seem to be the plan but the Euro has plenty of problems of its own and I would not be getting too carried away on the topside as I think that 1.1000 and lower will be seen at some stage down the track.

DXY:  (97.52) The DXY did much as we thought on Monday, and having broken below 98.00 it has headed back to the 97.40/50 area which currently holds, although with the daily momentum indicators now looking heavy, further downside pressure seems likely. If so, good support should arrive at 97.25/30, where the neckline/rising trend support and 100 DMA are converging, but below which would allow for the 200 DMA at 96.90 to come under pressure. Below here would then look towards 96.70, 96.25 and to the 25 June low at 95.84. If the dollar holds the nearby support, then we may see a return to 97.80 (minor) and to 98.00, although this looks unlikely today. If wrong, above 98.00 would open the way to 98.30/40 ahead of 98.70 and then the trend top at 98.93 and further out, 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). Some choppy trade now looks likely with a mild downside bias, although as a longer term strategy, I still prefer to buy dips. The charts though suggest that we may see better levels to do so and right now selling dollar rallies seems to be the plan.

US$Jpy:  plunged to 105.77 on Monday as safe haven demand flooded the market and the pair has now taken out almost every  level of support ahead of the January flash-crash low (104.01) although we are currently hovering near the Fibo support at 105.95 (76.4% of 104.01/112.40). That level slowly seems to be giving way though and early Asia is attempting to break through 105.75, which would then allow for a move towards 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 above 106.00 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 0.6747 on Monday and is currently struggling to hold on to that level early in Tuesday trade, ahead of today’s RBA Meeting. The RBA are unlikely to offer much help to the Aud$ and a decisive break of 0.6750 would find  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 another 5% on Monday, so that 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 4 hour indicators are oversold, so bounces are possible, where resistance is now seen at 0.6770/80, at 0.6800, 0.6818 (Friday high), and then at  0.6825 (23.6% of 0.7081/0.6747), where the 100 HMA also lies. Further resistance would be seen at 0.6875 (38.2% of 0.7081/0.6747/200 HMA) but that won’t be bothered for a while. As before, selling rallies is preferred.