Pound And Euro Now At Major Support

Last week’s NFP caused a very strong push higher for the dollar and bent the rest of the market quite out of shape as a result. There is no denying the bullishness of the dollar at the moment after repeated warnings from Yellen that the market may be underestimating the time-frame for rate hikes. We are left with some big hurdles to jump though this week for numerous currency indexes and key pairs. EURUSD is nestling just above 1.2500 and this major psychological number may take a few goes to break, especially considering the pace of acceleration for the dollar last week and the likelihood of some of that consolidating back to dollar support. The GBP% index is now testing major support which suggests 1.6550 as key support for Cable. The Yen is still holding above recent lows even with the large spike higher for the dollar on Friday. The Australian dollar is now at recent support once again. All in all, we seem ripe for some consolidation in order to refresh the current trends.

This week’s FOMC meeting minutes will be very closely analysed for further hints of imminent rate hikes. As will the MPC meeting.

Mon Oct 6
7:00am EUR German Factory Orders m/m

Tue Oct 7
Tentative JPY Monetary Policy Statement
4:30am AUD Cash Rate & RBA Rate Statement
Tentative JPY BOJ Press Conference
9:30am GBP Manufacturing Production m/m
9:30am GBP BOE Credit Conditions Survey
3:00pm GBP NIESR GDP Estimate
3:00pm USD JOLTS Job Openings
6:20pm USD FOMC Member Kocherlakota Speaks
8:00pm USD FOMC Member Dudley Speaks

Wed Oct 8
2:45am CNY HSBC Services PMI
7:00pm USD FOMC Meeting Minutes

Thu Oct 9
1:30am AUD Employment Change & Unemployment Rat
12:00pm GBP Asset Purchase Facility
12:00pm GBP Official Bank Rate & MPC Rate Statement
1:30pm USD Unemployment Claims
4:00pm EUR ECB President Draghi Speaks

Fri Oct 10
12:50am JPY Monetary Policy Meeting Minutes
7:45am EUR French Industrial Production m/m
9:30am GBP Trade Balance

If you have any questions or comments then feel free to tweet me @LFXMark

USD% Index

usd index sun 5 oct 14
The dollar has once again carved an even steeper trajectory although we can’t yet reliably fit a channel to it. Yellen has been continually warning the markets that they may have not priced in a soon enough rate hike and after the strong NFP, traders seem to be getting the message loud and clear. It is a seriously one way street for the USD right now and if you aren’t buying, you aren’t trading. We have now bumped into some big levels again though so should consolidate again ahead of the FOMC meeting minutes this week. I am bullish USD%

USD% Index Resistance (EURUSD support): EURUSD 1.2500, 1.2450, 1.2400
USD% Index Support (EURUSD support): EURUSD 1.2562, 1.2600

USD% Index M5 Chart

usd index sun 5 oct 14 M5

EUR% Index

eur index sun 5 oct 14
1.2500 for EURUSD represents the 238.2% fib expansion support for the EUR% index and we have again popped slightly out of the bearish channel having recently steepened it. We should see some reduction in the pace of downward movement and dare I say it, we might even go higher slightly, although as soon as the moving averages can catch up the momentum crowd will pile back in to really test the big 1.2500 level, although perhaps after the FOMC meeting minutes on Wednesday. I am bearish EUR%

EUR% Index Resistance: EURUSD 1.2583, 1.2657, 1.2683
EUR% Index Support: EURUSD 1.2500, 1.2383

EUR% Index M5 Chart

eur index sun 5 oct 14 M5

JPY% Index

jpy index sun 5 oct 14
A pretty impressive result considering how strong bullish dollar sentiment was last week, we still remain above key support for the JPY% index, the Nikkei and S&P500 remain below recent highs and as such there remains a risk of further Yen strength, although there is perhaps also a risk that the stronger than expected NFP could trigger further stock strength which would weigh on the Yen. We should wait and see how stocks begin the week to determine the sentiment as to whether we trust another test of this key Yen support. USDJPY 110.31 is now the level to break with 111.00 the next level after that. The green 200 period MA on the M5 chart seems to be good source of resistance and support currently for the Yen so we should see how the market behaves when that is tested. I am bullish JPY% while above the purple trend line support

JPY% Index Resistance (USDJPY Support): USDJPY 108.70, 108.37
JPY% Index Support (USDJPY Resistance): USDJPY 110.37, 111.00, 111.77

JPY% Index M5 Chart

jpy index sun 5 oct 14 M5

GBP% Index

gbp index sun 5 oct 14
We are at strong support for the GBP% index which is showing quite a marked divergence from GBPUSD currently since the corresponding support level for GBPUSD has long since been broken. Technically we could retrace back to 1.6174 and still be within the bearish channel and on course for further downside so we should reassess things if we get there since a profit taking bounce ahead of the MPC meetings seems sensible. I am bearish GBP% although expect a bounce in the short term

GBP% Index Resistance: GBPUSD 1.6083, 1.6174
GBP% Index Support: GBPUSD 1.5950, 1.5861

GBP% Index M5 Chart

jpy index sun 5 oct 14 M5

AUD% Index

aud index sun 5 oct 14
The Aussie did what was suspected and sold from the suggested sell zone although we failed to make a new low and now risk retracing higher once again if the dollar pulls back from such extremes. key resistance to the upside is 0.8793 and to the downside a break below 0.8620 would signal the next leg lower. I am bearish AUD%

AUD% Index Resistance: AUDUSD 0.8838, 0.8920
AUD% Index Support: AUDUSD 0.9671, 0.9536

CHF% Index

chf index sun 5 oct 14
Very bearish once again as EURCHF rallies from lows and the CHF% index easily breaks through support to the downside during the dollar rally. USDCHF longs remains a better bet than EURUSD shorts although both look due some consolidation this week. USDCHF 0.9600 seems a key level to test for continuation lower for the CHF% index. I am bearish CHF%

CHF% Index Resistance (USDCHF support): USDCHF 0.9600, 0.9593
CHF% Index Support (USDCHF resistance): USDCHF 0.9688, 0.9728, 0.9800

LittlefishFX Relative Currency Index Strength

All of the currency indexes used for this analysis are available as a NinjaTrader indicator from the link below. They are eight indexes, USD, EUR, JPY, GBP, AUD, CHF, CAD and NZD with each index made up of the remaining seven pairs, weighted in accordance with the distribution of global FX volume as measured by the Bank of International Settlements in their Triennial Survey.

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