9 May: Forecast: FX: US$/Majors + trade ideas

By | May 9, 2018


EURUSD: 1.1863
The US$ briefly headed to a new trend high against the Euro in the US session, reaching 1.1838 while being underpinned by stronger US bond yields. The US exit from the Iran deal stemmed further dollar gains, allowing a bounce back to 1.1885 before settling the US session at 1.1863. A pretty empty calendar will see political developments dominate the action.
1 hour/4 hour indicators: Mixed. -Bullish Divergence Daily Indicators: Down Weekly Indicators:  Turning lower.
Preferred Strategy:  The daily charts point increasingly lower and I think we are in for a run towards 1.1600 in the days ahead although the short term momentum indicators do hint at some minor bullish divergence so, as we said yesterday, while keeping a core short Euro position it would might be wise to lighten up a little down here as we could see a squeeze higher, and need to leave room to sell into it.

If we do see a bounce, minor resistance will be seen at 1.1885 and at 1.1900, ahead of the session high of 1.1938 and the Monday high of 1.1977.

On the downside, support will be seen at the session low at 1.1838, where the 55 WMA has so far propped the Euro up. A downside break would find bids at 1.1815, below which allows for a run towards 1.1785. below which there is little support to be seen ahead of 1.1700/10

While keeping a core short position, selling into near-term rallies seems to be the plan.

Sell EurUsd @ 1.1900. SL @ 1.1955, TP @ 1.1790

Resistance Support
1.1994 4 May high 1.1850 Minor
1.1977 7 May high 1.1837 Session low/ 55 WMA
1.1938 Session high 1.1816 22 Dec low
1.1900 Minor 1.0800 Minor
1.1885 Minor 1.1787 (76.4% of 1.1553/1.2555)

Economic data highlights will include:

US PPI – Apr, Wholesale Inventories – Mar

USDJPY: 109.14
US$Jpy has been choppy again on Tuesday but ended up pretty much unchanged, just above 109.00,  after a range of 109.34/108.83, with the dollar again underpinned by the 100 DMA.
1 hour/4 hour indicators: Neutral. Daily Indicators: Turning lower. Weekly Indicators:  Turning higher
Preferred Strategy:  The short term momentum indicators are neutral heading into Wednesday, while the daily charts are increasingly suggesting that a medium term top may be in place. In the absence of any key data until Thursday’s US CPI, we may see further sideways trade near 109.00 but with a possible retest of the 100 DMA. Note the possible emergence of a minor head/shoulders top that is forming in the 4 hour chart, with a neckline at around 108.80, and a target of around 107.60. Before then, below the 100 DMA would find further bids nearby, at Friday’s low of 108.63 and then at 108.50/55, a break of which could then head back to the neckline of the major, reverse head/shoulders formation (as opposed to the minor topping formation, mentioned above), currently at 108.10. If seen this might be a decent buy opportunity but I would be keeping a pretty tight SL placed below 107.60.

On the topside, resistance will be seen at the session/7 May highs of 109.35/40 ahead of minor resistance at 109.75, a break of which could possibly see a return to strong resistance at 110.00 although this looks doubtful today. If wrong, on a break of 110.00 look for a move to 110.20/25, which should also be strong, ahead of 110.50 and 110.85. Note that the reverse SHS formation, with the neckline break being at 107.85, suggesting a target at somewhere near 110.70.

Resistance Support
110.20/25 200 DMA /(61.8% of 114.73/104.60) 108.72/75/82 100 DMA /7 May low /Session low
110.02 2 May high 108.63 4 May low
110.70 Minor 108.54 24 Apr low
109.40 7 May high 108.30 Minor
109.34 Session high 108.10 Neckline

Economic data highlights will include:

Leading Economic Index, Coincident Index – Mar

GBPUSD: 1.3547
Cable had a choppy session, initially falling to the current trend low on poor house price data, before turning higher after some M&A news. After a range of 1.3484/1.3592, Cable has finished at 1.3950, holding up well on the crosses, which now sees EurGbp back at 0.8750. We could now be in for a sideways session, using the 200 DMA as a pivot,  while waiting on tomorrow’s BOE Meeting/Statement/Minutes/Vote Count/APP Facility.
1 hour/4 hour indicators: Turning higher Daily Indicators: Turning lower Weekly Indicators:  Turning lower
Preferred Strategy:   The short term momentum indicators look mildly positive on Wednesday, and if Cable does manage a minor squeeze higher, near term resistance will again be seen at 1.3580/90 ahead of 1.3600. Beyond there, 1.3640/50 and the 2 May high 1.3665 would see sellers although that seems some way off right now.

The longer term charts still look very heavy though, and a retest of 1.3515 and then the session/trend low of 1.3485 would not surprise in the days ahead. A break of this would open the way to the January low at 1.3457 and the major Fibo level at 1.3400 (38.2% of 1.1821/1.4376) .

Neutral. Possible sell rally scenario although the daily charts are becoming oversold.

Resistance Support
1.3665 2 May high 1.3535 200 DMA
1.3629 3 May high 1.3515 Minor
1.3600 Minor 1.3485 4 May low/Session low
1.3592 Session high 1.3457 11 Jan low
1.3575 Minor 1.3425 Minor

USDCHF: 1.0018
US$Chf, was rangebound on Tuesday, with safe haven demand for the Chf, following the US exit from the Iran deal, ensuring that the dollar was able to make further headway. US$Chf traded a relatively tight range of 1.0002/1.0045.
1 hour/4 hour indicators: Turning lower Daily Indicators: Up Weekly Indicators:   Up
Preferred Strategy:  With the medium term indicators still looking positive for further gains in US$Chf there is no change to the view of trading from the long side, although the short term charts are starting to hint at the chance of a minor dip, due to the bearish divergence that seems to be building.

If the dollar can make further gains, a break of the trend high of 1.0055 would open the way to 1.0065/70 and to 1.0100. Further out we are potentially looking at a run up to 1.0170 and even to the December 2016 high of 1.0343 albeit probably not for a while to come.

The near term momentum indicators could be hinting at a short term top, and if so, on the downside, support will again be seen at 1.000 and at 0.9980. Under here would head to minor levels at 0.9965/35/15 ahead of the 1 May low of 0.9890. This looks unlikely right now but if wrong, on a break of 0.9890, further bids should arrive at 0.9870 and at 0.9845/50.

Buy US$Chf @ 0.9970. SL @ 0.9930, TP @ 1.0100

Resistance Support
1.0170 March 2017 high 1.0002 Session low
1.0107  Apt 2017 high 0.9985 7 May low
1.0099 May 2017 high 0.9965 4 May low
1.0067 (76.4% of 1.0343/0.9187) 0.9935 2 May low
1.0055/45 7 May high / Session high 0.9890 1 May  low

AUDUSD: 0.7452
The Aud took a hit in early European trade, falling to 0.7450 and eventually to a low of 0.7433 ahead of a bounce to finish the day at 0.7450. The fall had more to do with the commodity currencies underperforming against the stronger US$ as well as on speculation on the Iran deal rather than the Australian Budget, and technically it seems that the Aud has further to run. Keep an eye on the building downside pressure in the Emerging Markets. If that accelerates and spreads to the Asian markets, then the Aud will have plenty of downside potential in the weeks to come. We have today seen Argentina seek a financing deal with the IMF to address peso volatility. So far this seems contained just to Argentina, but if the EM concerns spread, the Aud will not react well. Rising US yields, capital outflows and cooling economic growth are already not helping the cause of the EM currencies – or the Aud$.
1 hour/4 hour indicators: Mixed – Turning lower? Daily Indicators: Turning lower Weekly Indicators:  Turning lower
Preferred Strategy:   The short term momentum indicators are mixed today although the longer term charts still look heavy, with the dailies building a bear flag, so staying short and looking to sell into any near term strength still seems to be the way to go.

If we do see a near term squeeze higher, as the hourlies hint as being possible, then minor resistance will be seen at 0.7470 and then again at 0.7500 ahead of the Tuesday high of 0.7527. This seems unlikely to be visited today but if wrong look for further resistance at 0.7545/50, at 0.7560 and at 0.7575, ahead of the 26 April high at 0.7588.

The longer term charts remains heavy and would seem to have further losses to come in the days ahead. Below 0.7435 would then head towards minor support at 0.7400, although there really is not too much to hold it up ahead Fibo support at 0.7385 and then the 1 June 2017 low at 0.7371 and the may low of 0.7328

Sell AudUsd @ 0.7480. SL @ 0.7530, TP @ 0.7385

Resistance Support
0.7559/50 4 May high 0.7433 Session low
0.7542 7 May high 0.7400 Minor
0.7527/22 Session high /(23.6% of 0.7813/0.7433) 0.7385 (76.4% of 0.7160/0.8135)
0.7500 Minor 0.7371 1 June 2017 low
0.7470 Minor 0.7328 9 May 2017 low

Economic data highlights will include:

WBC Consumer Confidence – May

NZDUSD: 0.6969
 The Kiwi followed the Aud$ lower on Tuesday, falling to the 20 Dec low/support at 0.6953, ahead of a minor bounce to currently sit at 0.6965.
1 hour/4 hour indicators: Mixed.- Turning lower? Daily Indicators:   Down Weekly Indicators:  Turning lower
Preferred Strategy:   The Kiwi has traded to the 0.6953 support levels and looks as though it is going to take that out at some stage. If so, below 0.6950, there is not much to hold the Kiwi up ahead of 0.6935 (76.4% of 0.6780/0.7438) and then 0.6915, long term rising trend support, which is where I think we are eventually heading.  A break of 0.6900 would open up a move to 0.6815 and then to 0.6780

On the topside, sellers will be found at 0.6980/85, at 0.7000 and at the session high of 0.7030. Above here, unlikely,  a bounce to 0.7040/50 would see sellers, beyond which allows for 0.7080 and then 0.7095/00, but probably not for quite a while now.

Sell NzdUsd @ 0.7000. SL @ 0.7035, TP @ 0.6875

Resistance Support
0.7051/57 4 May high/ (23.6% of 0.7395/0.6953) 0.6953 20 Dec low/Session low
0.7030 Session high 0.6935 (76.4% of 0.6780/0.7438)
0.7015/20 100 HMA/200 HMA 0.6915 Rising trend support
07000 Minor 0.6900 Minor
0.6985 Minor 0.6870 Minor

Economic data highlights will include:

Electronic Card Retail Sales – Apr