It has been a choppy session while waiting on the outcome of the talks between the US and China, with Vice Premier Liu He to visit Washington on Thursday/Friday in a last-ditch effort to strike a deal. Otherwise, the US will raise tariffs to 25% from 10% on $200 billion worth of Chinese imports on Friday. Stocks ended flat, while in the FX world, the US$ has had a fairly steady session, with the main attraction being seen in Sterling which saw another selloff as the day’s Brexit headlines were negative. The other move of interest was in the metals, which headed back to the lower end of their narrow range, while WTI staged a mild recovery..
EurUsd: Once again there is little change after another rangebound session that has ended Tuesday just under 1.1200. as we said before, after having dipped to a session low of 1.1134 following last Friday’s jobs data, the Euro has since recovered to chop around in a tight range near 1.1200, and with the momentum indicators stuck in neutral, further choppy consolidation looks likely in the days ahead although I still prefer the downside. Minor resistance is now seen at the session high, at 1.1216 and then again, nearby at 1.1220/30 ahead of last Thursday’s high of 1.1265, beyond which would then target 1.1300 and 1.1318/25(61.8% of 1.1447/1.1110/17 April high). Near term support remains intact at 1.1150/60 and then again at Friday’s low of 1.1135, which lies ahead of the 26 April low at 1.1110. Below 1.1100 would target 1.1060/65, where the base of the descending wedge should see decent bids. A downside break would then open the way to 1.1020 (minor) and to 1.1000. I mildly prefer to look for levels to be long US$/ short Euro although on Wednesday we may see better levels than currently trade in order to do so. Neutral6
DXY: (97.55) is virtually unchanged again on Wednesday, and the daily momentum indicators look indecisive, albeit they seem to be turning slightly negative, while the weeklies are in neutral so a nimble stance is required. On the downside support will again arrive at 97.25/15, but below which there is not too much to hold it up until the 12 April low at 96.75 and then the 100 DMA/ rising trend support, seen at 96.67. On the other hand, a topside squeeze could see a return to 97.80 and possibly to 98.00, ahead of a return to the 98.33 trend high. I don’t think we see too much volatility today in the absence of any economic news, but further gains would see a run towards 98.80, where the top of the rising wedge lies, and then towards 100.10 (76.4% of 103.82/88.25).A cautious stance is required on Wednesday although I still prefer to buy dips in the dollar.
US$Jpy: headed lower on Wednesday, breaking below 110.00 support before a mild recovery to finish the day at 110.10. Below the session low would open the way to 109.70 (25 March low) and 109.55 (6 Feb low), below which would allow for the 38.2% Fibo support of the flash crash low at 109.18 (38.2% of 104.01/112.40). On the topside, the initial, minor, level to watch would be at 110.30 ahead of the strong resistance seen at the previous support at 110.60 100 DMA) and at 110.70 (100 WMA/ /61.8% of 109.75/112.40). Further, minor resistance would then be seen at 111.05, which would fill the chart gap, ahead of 111.40 and then at 111.70, 111.80/85 and at 112.00 (200 WMA) and then, possibly, 112.40, albeit it that this is a long way off now. The short term momentum indicators are a little more positive so we could see a squeeze higher but the dailies look heavy, so trading from the short side seems to be the initial plan and selling rallies towards 110.60/80 seems to be the plan for Thursday.
AudUsd: The Aud has traded a 0.6985/0.7025 range on Wednesday but is closing near the lows and looks heavy heading into Thursday. The momentum indicators look heavy, and with the risk-off mood going through markets, ahead of Friday’s deadline in the US/China tariff war, the downside seems set for further tests. On the downside, the near term support is currently intact at 0.6985 below which would open 0.6965 and then 0.6950 and eventually to 0.6900 and lower Technical resistance now lies at 0.7000 and at 0.7020/25 ahead of the post RBA high at 0.7047. Further out, beyond there, levels to watch are at 0.7055 (38.2% of 7206/0.6965), 0.7070, 0.7100, and then 0.7112 (61.8%) and 0.7110 (100 DMA). My longer term objective is 0.6650/0.6700. As before, I prefer to sell rallies, while holding a core short position, in anticipation of the inevitable rate cut.
NzdUsd: The Kiwi remains heavy after the RBNZ decision to cut rates, and with the momentum indicators pointing lower the downside seems set to come under further pressure. The initial target is seen at t 0.6560 (January flash crash low), and then at 0.6525, yesterday’s spike low. Below there would look to the long term rising trend support at 0.6500 – from March 2009, a break of which would look at the October spike low at 0.6465. On the topside, resistance will be seen at 0.6600 ahead of the 100 HMA at 0.6610 and then at 0.6625/35 (200 HMA). Further out, resistance would arrive at 0.6650 and, then at the 0.6880/85 resistance which capped last week’s recovery. I prefer to be short and look to sell rallies. .
Gold: is back at 1280, after having reached 1291 on Wednesday, and continues to respect the neckline of the SHS formation at 1285 on a daily close basis, and, as before, while it does so I still prefer the downside, as I suspect the US$ strength will eventually return to place downside pressure on commodities. As before, tight stops on short positions should be in place above the 100 DMA, at 1292; preferably above 1300. Should the SHS formation work as planned, the downside target is seen at 1218 but that is a long way off right now. Ahead of that, the immediate downside target is at 1267/70, ahead of 1253 (200 DMA). Some caution is required as there could easily be some safe haven demand in the event that the US/China trade talks break down completely, potentially sending Gold higher, so keep stops in place.
Silver: as with Gold, Silver has been choppy, currently a little lower at 14.83. I prefer to remain short for now, but stops should be placed tight above 15.00/05 (50% pivot of 13.89/16.21), above which could then see a run toward the 100 DMA at 15.32. On the downside, support will be seen at 14.80 (minor) and again at last Friday’s low at 14.60. Further downside support would be seen at 14.45 (76.4% of 13.89/16.21), 14.20 (minor) and at 14.00 but with an eventual, long term target being at 13.85. While a good deal of caution is require here if short, I prefer to trade this way, as I think 14.00 – and lower – is eventually on the cards, in line with a stronger US$.
Stocks: ended flat on Wednesday, with traders uncertain of direction ahead of the ongoing US/China trade talks, and as the Friday tariff-deadline looms. In the absence of any real progress in the negotiations the downside looks to be the weaker link. While the short term momentum indicators are mixed, the dailies are pointing lower and the weeklies are looking a little toppish so right now I prefer to be short, with a tight SL placed above 2910, or preferably above 2940 (S+P) and 26250 (DJI). The opposite is true if we see a breakthrough between the US/China, in which case the S+P and Nasdaq will be in blue sky territory, closely followed by the DJI.
WTI: is up 1% on Thursday although, as the trade tariffs loom and with the dailies pointing lower, a return to 60.00 would not surprise. Having said that, the medium term charts are still showing conflicting messages (4hour- higher; dailies – lower), so I would stand aside and possibly look for a wide range trade. Support will arrive at the 200 DMA @60.50 and again at 60.00, while sellers will be seen at 62.90/63.00, above which could see a return to 64.00/70. Overall I prefer to sell rallies but stay nimble!
*Trade of the day: May 9, 2019; 9:14 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 @1.1245. SL @ 1.1270, TP @ 1.1145
Buy EurUsd @ 1.1145. SL @ 1.1105, TP @ 1.1235
Sell AudUsd @ 0.7020. SL @ 0.7060, TP @ 0.6920
Sell WTI @ 63.50. SL @ 64.80, TP @ 63.00
Sell S+P @ 2900. SL @ 2945, TP @ 2825
Sell DJI @ 26250. SL @ 26500, TP @ 25750