With the FOMC meeting looming this week, all hopes of a taper have been dashed and confirmation of no taper is to be expected. This may have largely been priced into the dollar already though so we may see a strengthening in that respect away from oversold as the price action returns to a more normal market-led price action rather than central bank led price action. As such, the recent dollar battering may take a breather to allow a relief rally to bring the order books back to sensible levels again before any continuation of the dollar selling.
The pound looks likely to correct lower although the bullishness of the EUR/GBP may keep EUR/USD afloat perhaps a little longer.
Australian dollar having corrected lower seems to be resisting the drop more than NZD, and could eventually see a bounce to set it’s sights on parity once again, although for the mean time remains a sell.
JPY is quite a frustrating trade currently, with sharp yet not very long lasting movements. Dollar strength this week may see a return to bullishness for USD/JPY, although much remains in the hands of the performance of the Nikkei 225, which recently triggered a sharp drop in the dollar and significant Yen strength. The Japanese stock index has recently met support though having bounced from the bottom of the daily Ichimoku kumo, although a drop lower to meet a confluence of bullish trend line support and weekly S1 support may still be possible and the outlook is slightly uncertain in the short term.
This week’s data focus is on the following releases:
Monday Oct 28
2:00pm USD Pending Home Sales
10:30pm AUD RBA Gov Stevens Speaks
Tuesday Oct 29
12:30pm USD Core Retail Sales
12:30pm USD PPI m/m
12:30pm USD Retail Sales
2:00pm USD CB Consumer Confidence
Wednesday Oct 30
12:15pm USD ADP Non-Farm Employment Change
12:30pm USD Core CPI
6:00pm USD FOMC Statement
8:00pm NZD Official Cash Rate
8:00pm NZD RBNZ Rate Statement
Thursday Oct 31
12:00am NZD ANZ Business Confidence
12:30am AUD Building Approvals
TBC JPY Monetary Policy Statement
TBC JPY BOJ Press Conference
12:30pm USD Unemployment Claims
Friday Nov 1
12:30am AUD PPI
1:00am CNY Manufacturing PMI
9:30am GBP Manufacturing PMI
2:00pm USD ISM Manufacturing PMI
All times are London time (GMT)
USD% Index
Still displaying quite marked bullish RSI divergence but unable to pick it’s self up off the bottom of the bearish channel, The USD% index seems to be consolidating it’s recent bearishness having met the 100% fib expansion and could push higher within it’s wide bearish channel before a continuation lower. While now a buy-the-dips, the slight deterioration in correlation between some major pairs like the EUR/USD , GBP/USD and USD/CHF could see some spikes lower before a medium term reversal, however these should be good dollar buying opportunities.
I am bullish USD
USD% Index Resistance (EUR/USD support): EUR/USD 1.3732, 1.3700, 1.3650
USD% Index Support (EUR/USD support): EUR/USD 1.3819, 1.3838, 1.3850
EUR% Index
A slightly messy push through the 100% fib expansion could see a slight continuation higher to meet the upper bounds of the bullish channel before a reversal, but the Euro is currently quite overbought and this may mean a bout of profit taking to correct the recent excess of bullishness. Dollar sentiment may eventually allow for a continuation higher, most likely from the bottom the current bullish channel but a retracement seems likely in the short to medium term. I bearish EUR%
EUR% Index Resistance: EUR/USD 1.3838, 1.3867
EUR% Index Support: EUR/USD 1.3800, 1.3789, 1.3700
EUR/USD Trade Positioning
Short from 1.3785, stops at 1,3944
JPY% Index
A gap lower for the Yen at this weeks open reflects the lack of problems arising from the minor earthquake and tsunami on Friday afternoon. This has broken support now though which may allow for a drop lower and aid dollar bullishness for the time being. Overall, the Yen remains quite directionless and is still trading within the quite wide range dictated by.August and September’s price action. Without a catalyst from Japan in terms of definite economic improvement or an alteration to the stimulus program, this may be the range for JPY until the Fed finally taper.
I am bearish JPY
JPY% Index Resistance (USD/JPY Support): USD/JPY 97.31, 96.88
JPY% Index Support (USD/JPY Resistance): USD/JPY 98.00, 98.40, 99.00
USD/JPY Trade Positioning
Long from 97.35 , Stops at 95.77
Nikkei 225
GBP% Index
Technically displaying the most bearish indication of a turn, the pound seems to have reached a medium term top and is likely to drop lower on profit taking unless some economic shock occurs to the dollar to push it though support. EURGBP remains bullish, which should again weaken the pound in the event of any dollar strength. Recent data has been mixed, but last week’s on target positive print for the GDP numbers failed to cause a rally, which again reaffirms the pound’s inability to push higher given the current market conditions. Still displaying what could turn out to be quite a messy head and shoulders formation a break below 1.6020 is need to confirm GBP bearishness in the medium term. I am bearish GBP
GBP% Index Resistance: GBP/USD 1.6213, 1.6317, 1.6377
GBP% Index Support: GBP/USD 1.6090, 1.6020, 1.6000
GBP/USD Trade Positioning
Short from 1.6182, stops at 1,6198
AUD% Index
Having broken bullish trend last week, the AUD% index seems likely to reluctantly push lower, although the speech by RBA’s Stevens may be instrumental to decide the short to medium term direction for the Aussie, with rate cut concerns at the forefront of traders’ minds. Slightly less doveish than expected last time, the resultant rally became quite overbought but has since retraced modestly. A repeat of this less doveish stance could see another push higher, but for now the Aussie remains a sell, as does the NZD.
I am bearish AUD
AUD% Index Resistance: AUD/USD 0.9633, 0.9650, 0.9700
AUD% Index Support: AUD/USD 0.95534, 0.95550, 0.9538
AUD/USD Trade Positioning
Short from 0.9623, stops at 0.9778
NZD/USD Trade Positioning
Short from 0.8414, stops at 0.8580
CHF% Index
Still yet to meet the 200% Fib expansion, the CHF% index remains quite strong and could push slightly higher to meet this significant level before a turn. The index remains in a wide bullish channel and is still the strongest of the major currencies at the moment, but has begun to stall, indicating that the trend is tiring somewhat and could begin to consolidate and drop lower in the medium term.
I am bearish CHF
CHF% Index Resistance (USD/CHF support): USD/CHF 0.8876
CHF% Index Support (USD/CHF resistance): USD/CHF 0.8931, 0.8955, 0.8986