With only German Factory Orders the event of the day, Monday was quite slow, but that didn’t stop most FX pairs retracing most of Friday’s NFP moves. The dollar broke back inside the bullish channel, the Euro bounced from key support, the pound rejected strong resistance and the Aussie rallied from lows. UK manufacturing production will likely cause a stir since the manufacturing sector in the UK had been doing well. This is quite a noise figure though so this reduces the impact on the market unless very outside of range.
We have a few Fed speakers on Tuesday ahead of the FOMC minutes on Wednesday so they usually use occasions like this to give forward guidance on the sentiment of the statement so both speakers will be carefully dissected for divergence from their typical stances. Jolts jobs data will also be keenly watched.
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The dollar has totally rejected the whole NFP move and we now sit right back where we started although technically that means a weaker position for the dollar. There could be some fear creeping in that the FOMC meeting minutes will highlight a less hawkish than priced in circumstance so the one way street of dollar longs may begin to lock in some profit ahead of the event. These are some pretty major levels that we have just rejected too so it really wouldn’t be a shock to see a moderate retracement of the current trends. After all, nobody raised rates yet in the US or implemented QE in Europe so this is all a very speculative move pricing in the outcome before the events take place, which gives the meeting minutes the ability to make the wheels come off in the near term regarding the dollar bull trend if the minutes or the speakers say all the wrong things. The blue 100 hour moving average was broken late in the London afternoon before finding support at the 200 hour moving average and trend line supporting the 1.2671 region for EURUSD. Major dollar support comes in at the 1.2745 level for EURUSD which is also close to the 400 hour USD% index moving average. I am bullish USD% although expect a further retracement lower first
USD% Index Resistance (EURUSD support): EURUSD 1.2611, 1.2604, 1.2571, 1.2523
USD% Index Support (EURUSD support): EURUSD 1.2671, 1.2722, 1.2745
A total U-turn for the Euro from the bottom of the bearish channel and away from the major 1.2500 level for EURUSD, which many clearly were using as a profit target for short EURUSD positions. We also saw non-commercial futures traders unwind some shorts suggesting that perhaps we could be posting a medium term bottom for the Euro or at least a push towards to the top of the bearish channel to refresh the trend if the previous high can be broken. It would take a brave trader to start piling into EURUSD longs at the moment though but the FOMC minutes should be illuminating. Trend will break if the 400 hour moving average and the channel top in the EURUSD 1.2775 region. I am bearish EUR% although expect a further bounce higher
EUR% Index Resistance: EURUSD 1.2685, 1.2745, 1.2775
EUR% Index Support: EURUSD 1.2642, 1.2567, 1.2500
The Yen has retraced having not quite tested lows again which looks suspiciously like a bottom also. We still need to break the bearish channel at 108.41 but we are now making higher highs and higher lows. Stocks didn’t open the week strongly and in fact dropped lower both in America and Japan so the positive NFP clearly had other drags, perhaps the very low participation rate, which took the shine off it’s ability to maintain the dollar bull run. We have the BOJ monetary policy statement overnight but personally i feel that unless we get something totally new and unexpected in terms of stimulus or tax then this will be another non-event. I am bullish JPY% while above the purple trend line support
JPY% Index Resistance (USDJPY Support): USDJPY 108.41, 107.70
JPY% Index Support (USDJPY Resistance): USDJPY 109.57, 110.18
I love it when my indexes show something totally unique that other charts don’t, this potential double bottom from the GBP% index has now pushed away from support although the level that we need to break in order to confirm the double bottom is rather high and dictated by the referendum spike higher. COT last week showed that non-commercial futures traders held net long for the pound increasing long their position, while this week commercial traders switched net short, indicating that we both types of traders expected upside for the pound. We still have a lot of resistance to break through in order to realise that bounce for the pound but suffice to say I will set my GBPUSD longs from 1.5953 to break-even and see what happens, adding to them if we can build a base above the 100 hour moving average. I am bearish GBP% although expect a bounce in the short term
GBP% Index Resistance: GBPUSD 1.6178, 1.6300
GBP% Index Support: GBPUSD 1.6000, 1.5970
Some big new overnight for the Aussie as the RBA release their rate decision and statement, although as with the Japanese policy statement this feels rather predictable and as such likely to be a non-event. The RBA are still refraining from further rate manipulation as a policy tool to lower the Aussie, but with the dollar doing such a good job of pushing things lower anyway they hardly seem like the RBA would need to do anything at all and still get the result they want. Regardless of fundamentals though if we push just slightly higher then this downward move may, if only temporarily be in trouble. I am bearish AUD% while the blue channel holds
AUD% Index Resistance: AUDUSD 0.8783, 0.8800, 0.8917
AUD% Index Support: AUDUSD 0.8662, 0.8600, 0.8535
EURCHF has pushed higher through resistance which is keeping the CHF% index from rallying with quite such a much gusto as the Euro having already broken the existing bearish channel quite convincingly. As such we could see the 0.9586 level as a key level to break or reject. Trend remains bearish but the whole market is retracing strongly right now.
I am bearish CHF%
CHF% Index Resistance (USDCHF support): USDCHF 0.9586, 0.9541, 0.9513
CHF% Index Support (USDCHF resistance): USDCHF 0.9696, 0.9700
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.