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USD/JPY: weekly Ichimoku report

Weekly USD/JPY

On the weekly chart there was another hammer-like candle formed last week, the same as the week before. The market seems well supported above 78 yen whether it’s due to the risk of the Bank of Japan’s intervention or something else.

Tenkan-sen (1) is no longer eager on the upside: the line has turned horizontal at 79.26 and provided resistance for the prices. The next resistance lies at Cloud’s top and the long-term downtrend resistance line around 80.50.

USD/JPY is going sideways and will soon face the bottom on the Cloud which is turning upwards. This line may help the pair if the bulls manage to grasp it and head up following its lead. If the bears pull the pair below Kumo and key support in the 78 yen area, USD/JPY will become more vulnerable for further declines. The next support lies at 77.30 (lower border of the Cloud).

The Ichimoku Cloud (3) remains extremely thin indicating that the market is in the indecision mode.

Chart. Weekly USD/JPY

Daily USD/JPY

On the daily chart the prices managed to get above Tenkan-sen (1). Now this line together with the recent minimums is supporting USD/JPY. As for the resistance, there’s one at 79.00, psychological level plus the horizontal Kijun-sen (2). The bulls will also face some hurdles around 78.60/75, the upper line of the pair’s current consolidation range.

The lines on the chart are going sideways, so, as it was last week, the chart doesn’t show potential for some extensive moves. This week we will probably see the pair above 78 yen as it continues to struggle on the upside. The Bank of Japan will probably stay on hold, but all speaks in favor of more easing in future.

Chart. Daily USD/JPY

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CFTC trader positioning data

The latest Commitments of Traders (COT) report, released on Friday, August 4, by the Commodity Futures Trading Commission (CFTC), showed that on a week ended July 31:

Non-commercial currency traders decreased their bets in favor of the U.S. dollar two days before ECB President Mario Draghi disappointed the markets. The value of the dollar's net long positions fell to $13.65 billion in the week ended July 31 from $20.44 billion the previous week.

Euro net short positions declined in the latest week to 139K contracts from 155K contracts in the prior week. From the chart below you may see that the number of euro shorts squeezed to the January level. At the same time, the single currency trades about 700 pips below its January levels. It means the potential for further short squeezing is low.

Source: Zerohedge

Demand for safe Japanese yen keeps growing: net long positions increased to 32K contracts by 7K contracts.

British pound net short positions declined to 1.8K contracts.

Investors cut Swiss franc net short positions by 7K to 19K contracts. It is necessary to note the demand for

Canadian dollar grew significantly to 12K long contracts.

Net long New Zealand dollar positions increased by 1.3K to 10K contracts, while net long Aussie positions rose by 10K to 73K contracts.

It’s necessary to note that the figures cited above are always a week old at the time of their release. Never the less, CFTC data gives a good oversight into how the market is positioned and if/how these positions are being unwound. Although the CME speculators represent a small fraction of trading in the currency markets, their trades are widely seen as typical of hedge fund investors' currency movements.

In the COT report all the market players are divided into three categories: hedgers (commercials), big speculators (non-commercials) and small traders (non-reportable positions). We analyze only non-commercial positions (mainly, these are banks and investment funds).

We recommend you paying attention to:

Extreme Positions: If everyone is already long or short it is a strong indication price may reverse because there is no one left for buyers to buy from and no one left for sellers to sell to.

Changes in Market Positions: When large speculators change their position and go from net long to net short or vice versa, there typically is a good reason they do this.

Changes in Open Interest: Rising or falling open interest may reflect directional commitment or lack thereof and therefore indicate strength or potential reversal of a particular price trend.

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USD/CHF: 'head and shoulders'

Last week we’ve written about the potential ‘head and shoulders’ pattern at USD/CHF chart. Now, as you may see at the H4 chart, the pair breached the neckline at 0.9735, so the model is completed.

As a result, we expect the pair to slide to 0.9660 (June 8 and 29 maximums) and then to 0.9580/70 (January maximums).

If the bulls gather their strengths and push the greenback above 0.9735, the pair will get chance to return to 0.9870 (the tops of the shoulders).

Chart. Daily USD/CHF

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BNZ: outlook for NZD/USD

Specialists at Bank of New Zealand recommend buying NZD/USD on dips towards $0.7850, because they expect the pair to edge higher by the end of 2012. In their view, the likelihood of further global policy easing, a high and rising interest rate differential, and buoyant soft commodity prices will support the kiwi.

Chart. Daily NZD/USD

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BBH: comments on AUD/USD

According to specialists at BBH, AUD/USD weekly close above $1.0550 opened the way to the $1.0640-70 area.

Analysts warn, however: investors don’t expect RBA to cut rates and buy Aussie ahead of the RBA meeting. As a result, AUD is vulnerable to "buy the rumor, sell the fact" trading after the RBA. What’s more, squeezing of short positions on EUR/AUD may also hurt the Australian currency.

Chart. Daily AUD/USD

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Macroeconomic indicators

The table below provides recent data on the main macroeconomic indicators and is an extremely valuable resource for any trader.

Table. Main macroeconomic indicators

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August 7-10: economic events

Tuesday, August 7

Australia: According to the consensus forecast, the RBA will keep rates unchanged at 3.5% after cutting the borrowing costs in May and June and staying on hold in July. Australian headline inflation was at 1.2% in June, at the lowest annual level in 13 years. The RBA’s preferred measure of inflation, which abstracts from volatile price movements, grew by 2% in June (y/y), which is at the bottom of the Reserve Bank’s inflation target of between 2-3%. Although the RBA has room to cut rates, it seems that the central bank may wait to see how the things elsewhere in the world are going. The nation’s Treasurer Wayne Swan said Australia's “rock solid economic fundamentals” were in stark contrast to conditions in Europe and elsewhere.

Switzerland: The unemployment rate fell from 3.2% in April to 2.9% in May an June. In July the figure is expected to remain unchanged. The SNB’s foreign currency reserves have been rising so far and rose to CHF 364 billion in June – now July data is due for release. Swiss CPI fell by 0.3% in June and analysts expect a sharper decline of 0.5% in July. Deflationary figures indicate a slowdown in economic activity.

Euro area: Italian GDP may have contracted by 0.7% in Q2 (q/q) after declining by 0.8% in the first 3 months of the year. This would be the forth quarterly decline in a row.

Britain: Manufacturing production may have contracted by 3.9% after adding 1.2% in May, surviving the biggest decline since March 2009. Also watch the NIESR GDP estimate which attempts to estimate the quarterly GDP release on a monthly basis. The previous reading was a weak -0.2%. The markets will be hoping for a July reading in positive territory.

US: Another speech of Bernanke. This time the Chairman will dwell on the need of financial education in the wake of the recent financial crisis. The audience will be allowed to ask questions.

Canada: Ivey PMI fell from 60.5 in May to 49.0 in June. An improvement to 51.7 is predicted in July. Building permits, on the contrary, may have dropped by 3.5% in June after rising by 7.4% in the previous month.

Japan: According to the forecasts, Japanese current account increased from 0.28T yen in May to 0.75T in June. Note however, that for 2 last times actual data came far below the predictions.

Wednesday, August 8

Switzerland: SECO consumer climate index, released every 3 months, been moving upwards in the last 3 releases. This time economists are looking forward to another gain in July to -4 points from the previous reading of -8.

Britain: The Bank of England will release Inflation report which may contain clues for the next moves of the central bank. The BoE will likely lower its current growth forecast as there were enough disappointing data since the report was last time released in May. Lower forecasts increase the likelihood of the BoE’s announcing additional asset purchases in September, though the current round of stimulus finishes only in November. The Bank is expected to predict almost zero growth for the economy in 2012, while just 3 months ago it was forecasting growth of around 0.7%.

New Zealand: The nation’s unemployment rate may have declined from 6.7% in Q1 to 6.5% in Q2.

Thursday, August 9

Australia: Australian labor market may have added 10.3K jobs in July after the unexpected contraction of 27K in June, while the unemployment rate may edge up from 5.2% to 5.3%.

China: Analysts predict CPI to continue its declining trend and even hit a 30-month low of below 2%. Low inflation is welcome news to government officials looking to enact additional stimulus measures in the face of slowing growth. The recent PMI figures have pointed to evidence that recent efforts by the Chinese authorities to reinvigorate growth have at least managed to stabilize the economy, though a return to trend growth still seems elusive. Markets expect retail data to show that sales increased by 13.6% y/y in July, down slightly from 13.7% growth in June. Industrial output likely expanded by 9.8%, up from 9.5% in June. Fixed asset investment levels – a key component of China's economic expansion over the past decade – are expected to have edged up to 20.6% growth ytd/y from 20.4% at the end of June.

Japan: The Bank of Japan is expected to keep monetary policy steady but may escalate its warnings over slowing global demand and renewed gains in yen, signaling its readiness to ease again if the economy’s recovery comes under threat. Deflation remains one of the main concerns of Japanese monetary authorities and there’s scope for future stimulus.

US: American trade deficit probably shrank in June as cheaper oil reduced the import bill and slower global growth led to reduced demand for American-made goods. According to the consensus forecast, the gap probably narrowed to $47.5 billion, the 4-month minimum, from $48.7 billion in May. Weekly jobless benefit claims are expected to edge up to 371K from 365K in the previous week.

Friday, August 10

Australia: The RBA releases its quarterly monetary policy statement. In the February the central bank reduced near-term forecasts for both economic growth and inflation. Then in May the RBA not only reduced near-term economic growth forecasts but also reduced the forecasts at the bottom of its indicative range for growth through to the end of 2013. At the same time, the RBA trimmed inflation forecasts to the end of 2012. This time, the RBA may lift the near-term economic growth estimate but it is likely to retain the medium-term view that economic growth will be around “normal” levels of 3.0-3.25%. Little change is expected in the inflation forecasts with the Reserve Bank projecting that inflation will hold in the 2.0-3.0% target band. In short, the Reserve Bank will leave the door open to further rate cuts over 2012.

China: Trade surplus may have expanded from $31.7B in June to $35.1B in July.

Britain: PPI Input index has been well below the zero line since April. However, the markets are forecasting a much stronger July reading, with an estimate of a 1.3% gain.

Canada: According to the economists, the number of employed people rose by 10.2K in July, while the unemployment rate rose last month to 7.3% from 7.2% in June.

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August 7: forex news

Euro got some support as German government supported the ECB’s bond buying plan. Last week the ECB’s President Mario Draghi outlined a plan under which the central may buy debt of the region’s problem nations together with the euro area’s bailout fund, while saying the details still need to be worked out over the coming weeks. Italian Prime Minister Mario Monti called for more urgency in efforts to lower borrowing costs.

EUR/USD is trading on the downside, though little changed, just below $1.2400. Yesterday the single currency reached 1-month maximum at $1.2443. Spanish 10-year yield closed at 6.74% yesterday, down by 11 bps, while Italian ones – at 6%, down by 4 bps.

USD/JPY remains stuck in the 78.00/78.65 area. The Bank of Japan’s meeting starts tomorrow and the majority expects the central bank to keep policy unchanged.

The MSCI Asia Pacific Index (MXAP) of shares added 0.4%. AUD/USD tested $1.0600 (highest in more than four months) after RBA kept interest rates unchanged at 3.5% at a policy meeting today. The decision was widely expected by market participants. In general, the RBA statement is relatively upbeat about domestic economy and Asia. Policymakers, however, noted the Europe remains weak. NZD/USD yesterday closed above $0.8200 and keeps moving up. Meanwhile, USD/CAD consolidates around parity.

Events to watch today:

Switzerland: The SNB’s foreign currency reserves have been rising so far and rose to CHF 364 billion in June. Swiss CPI fell by 0.3% in June and analysts expect a sharper decline of 0.5% in July.

Euro area: Italian GDP may have contracted by 0.7% in Q2 (q/q) after declining by 0.8% in the first 3 months of the year.

Britain: Manufacturing production may have contracted by 3.9% after adding 1.2% in May, surviving the biggest decline since March 2009. Also watch the NIESR GDP estimate – the previous reading was a weak -0.2%. The markets are hoping for a July reading in positive territory.

US: Ben Bernanke will speak about the need of financial education in the wake of the recent financial crisis.

Canada: Analysts predict Ivey PMI to rise from 49.0 in June to 51.7 in July. Building permits may have dropped by 3.5% in June after rising by 7.4% in the previous month.

Japan: According to the forecasts, Japanese current account increased from 0.28T yen in May to 0.75T in June. Note however, that for 2 last times actual data came far below the predictions.

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Key options expiring today

Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (2 p.m. GMT).

Here are the key options expiring today:

EUR/USD: $1.2250, $1.2400, $1.2425, $1.2500;

GBP/USD: $1.5750;

USD/JPY: 78.00, 78.50, 79.50, 80.00;

USD/CHF: 0.9700, 0.9800;

AUD/USD: $1.0500, $1.0550, $1.0615, $1.0635;

EUR/GBP: 0.7800, 0.7910, 0.7925, 0.7970.

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BofA: EUR/GBP may reverse the trend

According to analysts at Bank of America, EUR/GBP may reverse its yearlong downtrend.

In their view, a break above the strong resistance at 0.7916/20 opens the way for a further rise to 0.8018. A further move above 0.8140 would confirm a trend reversal.

Chart. Daily EUR/GBP

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EUR/USD: technical update

As you may see on the daily chart, EUR/USD formed a long-legged doji yesterday. This is the sign of the market’s indecision.

Today the pair was consolidating around $1.2400 in Asia, but then moved up breaking above the 50-day MA.

Resistance: $1.2443 (yesterday’s maximum), $1.2470 (resistance line drawn through June and July maximums), $1.2500 (psychological level), $1.2620. 41.2692.

Support: $1.2340/25, $1.2248 (July 31 minimum, July 12 maximum).

Risk appetite is based on new speculations regarding a potential ECB bond purchases. In addition to that the Monetary World Fund (IMF) signals a “progress in Greece”, which means that the hopes that the nation will remain in the euro area have not been completely wiped out yet. The outlook for EUR/USD will improve, if the pair surpasses yesterday’s maximum at $1.2443.

Chart. Daily EUR/USD

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Commerzbank: bears on EUR/GBP

Analysts at Commerzbank expect the corrective upside of EUR/GBP to end soon. In their view, a break below 0.7832 will confirm the end of the upside corrective phase and signal a slide back to 0.7753 (July minimum).

Chart. Daily EUR/GBP

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AUD/USD: technical comments

On Tuesday AUD/USD consolidates around $1.0585. The pair trades close to a four-month high at $1.0603, tested earlier today. The pair still trades close to the upper boundary of the upward channel existing since mid-June. On the daily and H4 chart the pair trades above the up-directed 200-, 100- and 50-period MAs. As can be seen from the H4 chart, RSI has nearly reached 70, what means the pair is overbought. Moreover, we see a bullish divergence.

In our view, a medium-term uptrend looks rather resilient. The next resistance lies at $1.0640/70 (March 19 and 7 maximums), $1.0750/60 (Sep. and Oct. 2011 maximums) and at $1.0855 (2012 maximum). Support lies at $1.0540, $1.0475 and $1.0435 (August 2 minimum). Bulls have a clear advantage above $1.0475 (April 27 maximum, beginning of a sharp May decline). However, we concede a correction to $1.0400 (middle of the channel) and to $1.0280 (lower boundary and the 200-day MA). Exit from the upward channel will pave the ground for a further decline to $1.0176 (July 25 minimum) and to $1.0100 (July 12 minimum).

Chart. H4 AUD/USD

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The Bank of Japan will likely stay pat

The Bank of Japan starts its 2-day meeting today. The consensus is that the central bank will keep the benchmark interest rate unchanged at 0.1% and maintain the size of its asset-purchase program, its main policy tool, at 70 trillion yen ($895 billion) saving easing options for later.

Note that this will be the first meeting with new board members Takahide Kiuchi and Takehiro Sato – both officials have signaled willingness to consider fresh forms of easing. BBH said the 2 policymakers are “are known to be sympathetic to more unconventional easing, but like the RBA, a ‘wait and see’ stance by the BOJ is more likely now.”

Japanese Finance Minister Jun Azumi claimed today that the nation’s government will extend its dollar credit facility aimed at helping Japanese companies invest overseas by 6 months until the end of the fiscal year in March 2013. This is one of the ways to fight with yen’s appreciation. This program started in August 2011 can deploy up to 10 trillion yen ($127.81 billion). To compare: Japanese authorities spent 8 trillion yen in the record unilateral intervention in the currency market October 31 2011. Since then Japan stayed out of the market, but resumed verbal pressure so far as yen remains strong. The possibility of Japan’s action keeps USD/JPY above 78 yen after the levels was firstly tested in June.

Jun Azumi. Photographer: Kiyoshi Ota/Bloomberg

If the Fed decides to act in September adding stimulus, the BOJ will really need to have some bazooka in store as easing in the US will weaken the greenback versus yen. The BOJ may also decide to make its next move in October as the semiannual forecasts on the economy and prices are released on October 30.

If the BOJ stays pat on Thursday, USD/JPY will keep drifting gradually lower.

Chart. Weekly USD/JPY

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NZD/USD: technical comments

On Tuesday NZD/USD consolidates around $0.8200. Yesterday the pair reached a three-month high at $0.8222.

H4 chart

NZD/USD trades above the up-directed 200-, 100- and 50-day MAs. However, RSI is close to 70, indicating the kiwi is overbought. Moreover, signal line has just crossed the MACD histogram, giving a sell signal. In addition, there is a bullish divergence on the H4 chart.

Chart. H4 NZD/USD

Daily chart

We also see a bullish divergence and RSI is close to 70. In our view, these days kiwi’s prospects are worse than Aussie’s as NZD/USD approaches a very strong resistance area.

The next resistance for the pair lies at $0.8233 (April 26-27 double top), at $0.8316 (April 13 maximum) and at $0.8469 (February 29 maximum). There is also a resistance line, connecting August 2011 and February 2012 maximums. On a downside, support lies at $0.8060 (August 1 minimum, March minimums and early July highs) and at $0.7962 (100- and 200-day MAs crossing).

Chart. Daily NZD/USD

BNZ: The likelihood of further global policy easing, a high and rising interest rate differential and buoyant soft commodity prices all speak in favor of NZD/USD uptrend. However, this week we expect some consolidation in a $0.8100-0.8245 range

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USD/JPY: technical investigation

On the daily USD/JPY chart we see descending triangle pattern – the odds are that the greenback will break the horizontal resistance line at 78 yen to the downside. On the upside, the pair is still caped by 20-day MA (indigo line on the chart). The 50-day MA has recently gone below the 200-day one – bearish signal. The move A-B-C is another confirmation of the bearish view.

The IMF said this week that yen’s “moderately overvalued.” According to Bloomberg Correlation-Weighted Indexes, Japanese currency added 3.7% in the past 3 months versus 10 developed-nation currencies. The Bank of Japan's seem to support the greenback for now, but the situation may change if the central bank doesn't deliver any easing (such outcome will be in line with forecasts). Another serious supporting factor is the risk of the BOJ intervention. Well, things are always quite complicated with USD/JPY.

Chart. Daily USD/JPY

On H4 chart the picture is better. USD/JPY keeps trading in the 78.65/00 area sloping a bit upward within this range. There’s still some scope for consolidation to continue. USD/JPY may revisit the recent maximums in the near term on the upward leg of the sideways trading.

Resistance: 78.55, 78.65, 78.77 79.00 and 79.13.

Support: 78.15, 78.07, 78.00 and 77.90.

Chart. H4 USD/JPY

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GBP/USD extends gains

On Tuesday GBP/USD reached $1.5670 after yesterday investors’ indecisive behavior. The pound was supported as data released today showed UK industrial production declined less-than-expected in June.

On the H4 chart GBP/USD trades above the up-headed 200-, 100- and 50-day MAs. Note the pair broke above triangle resistance today. It means GBP/USD is bullish in a near-term and is likely to strengthen at least to the upper boundary of a sideways channel. The pair trades in a $1.5450-1.5750 range existing since June after trading in a bearish channel in May.

In a medium-term, however, we expect GBP/USD to remain flat because of the strong resistance levels concentrated in the $1.5735/85 area (200-day MA and 50% Fib. retracement from a May drop). A close above $1.5780 could open the way for a further rise to $1.5904. On a downside the next support for the pair out of the bounds of the sideways channel lies at $1.5392 (July 12 minimum) and at $1.5267/33 (June and 2012 minimums).

Chart. H4 GBP/USD

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EUR/USD: bulls vs. bears

If the pair EUR/USD manages to break above $1.2443 (1-month high, 61.8% retracement of the decline from June 29 maximum), it will be able to rise to $1.2500. Still, it seems that the bulls are moving euro up with great struggle as there are many who wait for the opportunity to sell. If euro’s advance keeps stalling, some bullish players may decide to take profit.

Chart. H1 EUR/USD

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August 8: forex news

The MSCI Asia Pacific Index (MXAP) of stocks rose 0.9%, following a 0.7% advance in the MSCI World Index yesterday. Risk sentiment, however, remains subdued: demand for high-yielding currencies is rather weak. AUD/USD slid from yesterday’s highs below $1.0550, demonstrating a 3-day decline. According to data released today, Australian home loans increased by 1.3% (forecast: 2.1%; previous: -0.9%). NZD/USD fell to $0.8130 levels after touching $0.8218 yesterday. USD/CAD slightly strengthened, though the pair trades below the parity level. GBP/USD remains under pressure ahead of BoE inflation report.

USD/JPY rose yesterday testing the upside of its current trading range around 78.65 yen as global stocks rose and the extra yield on 2-year U.S. Treasuries over Japan’s government bonds widened to the most in one month. The pair, however, was contained by resistance and has edged lower today – investors don’t expect much of the BOJ meeting the results of which will be announced tomorrow.

EUR/USD has once again begun trading day below $1.24. On the H1 chart we see consolidation in the $1.2443/2365 continue.S&P revised the outlook on Greece’s CCC credit rating from stable to negative saying that the nation risks losing its estimate if it fails to obtain the next disbursement from the EU and IMF rescue package. Spanish 10-year yields closed yesterday at 6.86%, 12 bps up, while Italian ones – at 5.97%, 3 bps down.

The Fed’s Chairman Ben Bernanke defended yesterday the central bank’s zero rate policy claiming that it’s necessary “to help the economy recover and restore more normal levels of employment and growth.” According to Bernanke, the effects of the crisis on the US “are pretty significant.”

Events to watch today:

Euro area: Watch for German data – trade balance at 06:00 GMT and, probably most important, German industrial production at 10:00 GMT. The nation will offer up to 4 billion euro in 10 year bunds at 06:00 GMT.

Britain: The Bank of England will release Inflation report (9:30 GMT) which may contain clues for the next moves of the central bank. The BoE will likely lower its current growth forecast as there were enough disappointing data since the report was last time released in May. Lower forecasts increase the likelihood of the BoE’s announcing additional asset purchases in September, though the current round of stimulus finishes only in November. The Bank is expected to predict almost zero growth for the economy in 2012, while just 3 months ago it was forecasting growth of around 0.7%.

New Zealand: The nation’s unemployment rate (22:45 GMT) may have declined from 6.7% in Q1 to 6.5% in Q2.

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[ryuroden]

GBP/JPY: time to buy, says Nomura

Analysts at Nomura are pretty sure that risk premiums are set to fall as the odds of the great disaster in Europe diminish. As a result, the specialists claim that it’s time to sell the ultimate safe haven – Japanese yen.

Nomura recommends selling yen versus British pound. “Interest rates are so low in Britain that any more quantitative easing isn’t likely to weigh on the pound.” According to the bank, this is already the second chance in 2012 for yen crosses to trade higher. GBP/JPY rose from January minimum in the 117 area to 133 in March, when investors’ risk appetite improved in Q1. The same revival of risk appetite is happening again, with stocks rallying and both the ECB and the Fed expected to unleash a wave of bond-buying to spur economic activity.

Note, however, that Nomura warns that current levels are less than perfect for entry, so don’t open large positions, but add on sterling’s declines.

Chart. Daily GBP/JPY

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[ryuroden]

Key options expiring today

Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (2 p.m. GMT).

Here are the key options expiring today:

EUR/USD: $1.2250, $1.2300, $1.2320, $1.2400, $1.2410, $1.2475, $1.2495;

GBP/USD: $1.5600, $1.5810;

USD/JPY: 78.50, 78.80, 79.00, 79.85;

USD/CHF: 0.9705;

AUD/USD: $1.0450, $1.0500, $1.0515;

EUR/GBP: 0.7800.

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[ryuroden]

AUD/USD: technical comments

AUD/USD slid from yesterday’s highs below $1.0550. We see that the market players are unsure: small candles formed this week indicate indecision, especially the ‘spinning top on Monday’. Such dynamics isn’t really surprising after all the way up the pair has made to the upwards so far and some cautiousness ahead of the data releases.

Medium-term (daily chart)

Aussie trades close to a 4-month high at $1.0603, tested on Tuesday, and the upper boundary of the upward channel existing since mid-June. On the daily and H4 chart the pair trades above the up-directed 200-, 100- and 50-period MAs.

In our view, the medium-term uptrend looks rather resilient. The next resistance lies at $1.0640/70 (March 19 and 7 maximums), $1.0750/60 (Sep. and Oct. 2011 maximums) and at $1.0855 (2012 maximum). Support lies at $1.0540, $1.0475 and $1.0435 (August 2 minimum). Bulls have a clear advantage above $1.0475 (April 27 maximum, beginning of a sharp May decline).

Chart. Daily AUD/USD

UBS: In an environment where the central banks are maintaining a trend of zero rates, demand for the Aussie is likely to increase, not to mention triple-A demand adding to the interest.

Near-term (H4)

On the H4 chart we can see a bullish MACD divergence. We concede a correction to $1.0450 (middle of the channel) and to $1.0280 (lower boundary and the 200-day MA). Exit from the upward channel would pave the ground for a further decline to $1.0176 (July 25 minimum) and to $1.0100 (July 12 minimum).

Chart. H4 AUD/USD

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[ryuroden]

EUR/USD: ‘inverse head and shoulders’ (RBS)

Technical analysts at RBS claim that Friday’s 200-pip advance of EUR/USD completed an ‘inverse head and shoulders’ pattern at the daily chart. In addition, the pair broke above resistance of the downtrend line that began and had held since May 1. The outlook for euro is bullish in the short-term and the single currency may rise to $1.2540. There’s now a support at $1.2341 (neckline).

RBS recommend longs on the dips to $1.2293/1.2341 targeting $1.2445 and probably $1.2539.

Chart. Daily EUR/USD

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[ryuroden]

GBP/USD ahead of BoE inflation report

GBP/USD is currently bouncing back towards $1.5600 psychological level after a fall to $1.5572 low just ahead of the BoE inflation report.

According to specialists at ING, the report is expected to be dovish. Both GDP and CPI forecasts are to be revised down, permitting the regulator to adopt more stimulus. However, a new policy easing is unlikely to happen before November, with last QE round introduced by the central bank only in July and the funding for lending scheme launched just recently.

Chart. H1 GBP/USD

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NZD/USD slid from a three-month high

On Wednesday NZD/USD slid to $0.8140 levels, demonstrating a two-day decline. On Monday the pair reached a three-month high at $0.8222.

H4 chart

NZD/USD trades above the up-directed 200-, 100- and 50-day MAs. Today the pair bounced back from the 50-period MA at $0.8122

Chart. H4 NZD/USD

Daily chart

On the daily chart we see a bullish divergence. In our view, these days kiwi’s prospects are worse than Aussie’s as NZD/USD is close to a strong resistance area.

The next resistance for the pair lies at $0.8233 (April 26-27 double top), at $0.8316 (April 13 maximum) and at $0.8469 (February 29 maximum). There is also a resistance line, connecting August 2011 and February 2012 maximums. On a downside, support lies at $0.8060 (August 1 minimum, March minimums and early July highs) and at $0.7962 (100- and 200-day MAs crossing).

Chart. Daily NZD/USD

BNZ: The likelihood of further global policy easing, a high and rising interest rate differential and buoyant soft commodity prices all speak in favor of NZD/USD uptrend. However, this week we expect some consolidation in a $0.8100-0.8245 range.

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