GROWTHACES.COM Forex Trading Strategies
Taken Positions
EUR/USD: short at 1.0930, target 1.0750, stop-loss 1.1015, risk factor *
NZD/USD: short at 0.6620, target 0.6400, stop-loss 0.6710, risk factor *
EUR/GBP: short at 0.7025, target 0.6905, stop-loss 0.7070, risk factor **
EUR/CHF: long at 1.0380, target 1.0580, stop-loss moved to 1.0420, risk factor **
AUD/NZD: long at 1.1220, target 1.1470, stop-loss 1.1120, risk factor *
Pending Orders
USD/JPY: buy at 123.40, target 125.80, stop-loss 122.60, risk factor *
USD/CHF: buy at 0.9560, target 0.9700, stop-loss 0.9490, risk factor *
USD/CAD: buy at 1.2860, target 1.3055, stop-loss 1.2790, risk factor *
AUD/USD: sell at 0.7450, target 0.7250, stop-loss 0.7530, risk factor *
GBP/JPY: buy at 192.20, target 195.00, stop-loss 191.30, risk factor **
GBP/USD: BoE Hikes Are Coming
(stay sideways)
- Minutes of the Monetary Policy Committee's meeting, which ended on July 8, showed its members voted 9-0 to leave rates at their record low of 0.5%. However, for “a number” of policymakers, the risks of inflation rising above the Bank's 2% target was increasing and it was the “very material factor” of Greece's debt stand-off that influenced their vote to keep rates on hold. The unity among the BoE's rate-setters is expected to end in August.
- All members agree that the margin of spare capacity had continued to shrink and cost pressures had increased. There was also less concern that low inflation would feed through into wage settlements and prolong the period of sub-target inflation. For “a number of members”, the balance of risk of meeting the inflation target over the medium term was becoming “skewed to the upside”.
- A stronger-than-expected acceleration of earnings growth, revealed in data published last week, may prove to be the final evidence for MPC members Martin Weale and Ian McCafferty that the economic recovery can withstand a rate hike.
- MPC member David Miles, who steps from the Monetary Policy Committee next month, said the time for an interest rate hike is nearing and it is highly likely that rates will continue to rise over the next few years. We cannot exclude that Miles that has never voted for an interest rate hike since joining the BoE in 2009, will vote for monetary tightening in his final MPC meeting in August.
- That speech raised the possibility that August's meeting could see a renewed split among rate setters. In our opinion three votes for a hike in nine-members MPC are possible next month. The meeting on August 6 will be the first to see the BoE release the minutes alongside the policy announcement which will also be accompanied by the release of the quarterly Inflation Report.
- We expect the market to continue the re-pricing of expectations towards an earlier hike on possible hawkish comments from the BoE policymakers in the near future. We believe that the GBP and the USD should be two strongest currencies among major currencies in the short term, but we stay sideways on the GBP/USD pair. We went EUR/GBP short at 0.7025 yesterday, in line with our strategy and set the target at 0.6905.
Significant technical analysis' levels:
Resistance: 1.5673 (high Jul 17), 1.5676 (high Jul 15), 1.5701 (61.8% of 1.5930-1.5330)
Support: 1.5529 (low Jul 21), 1.5453 (low Jul 14), 1.5366 (low Jul 10)
AUD/USD: RBA Unlikely To Cut Again
(sell at 0.7450)
- Tuesday's data from the Australian Bureau of Statistics showed consumer prices rose 0.7% in the second quarter, from the first quarter when CPI edged up just 0.2%. The annual pace of inflation ticked up to 1.5%, from 1.3%, but came in below expectations (1.7%). Key measures of underlying inflation favoured by the Reserve Bank of Australia rose around 0.6% for the quarter to match market forecasts. The annual pace of core inflation at around 2.3% stayed in the RBA's target band of 2 to 3%.
- Australian inflation is much higher than in other major economies. This is largely due to costs for goods and services that are not open to international competition. Non-tradable inflation amounted to 2.6% yoy in June, while tradable prices fell 0.3% yoy.
- Reserve Bank of Australia rates are already at an all-time low of 2.0% having been cut twice this year. RBA Governor Glenn Stevens said yesterday the prospect of more interest rate cuts remained on the table, but cautioned that too much easing could lead to longer-term dangers through risk-taking and excessive borrowing. Recently the central bank has been concerned that borrowing to invest in property was heating up home prices and regulators have taken steps to restrain lending by banks. Stevens noted that the Australian labour market was performing better than he had expected just three to six months ago, with employment growing fast enough to stop a further increase in the jobless rate.
- Glenn Stevens noted that the AUD was adjusting lower as desired and having a welcome expansionary impact on the economy. In his opinion weaker AUD would help offset a downturn in mining investment and commodity prices.
- In our opinion RBA policymakers’ focus will shift to the labour market and retail sales data and inflation data will be less important now. We do not expect any monetary easing this year and the next change in the RBA policy will be probably an interest rate hike at the beginning of 2016.
- The AUD/USD was very close to the suggested entry level for short position of 0.7450 yesterday but the order was not filled. The AUD/USD dropped to 0.7372 in reaction to weaker-than-expected CPI reading, but recovered soon. We do not change our strategy today. We continue to look for a move towards the 0.7204 fibo support – 76.4% of 0.6007-1.1081 rise in 2008-2011. If our order is filled we would place the target slightly above this level at 0.7250.
Significant technical analysis' levels:
Resistance: 0.7449 (high Jul 21), 0.7489 (high Jul 15), 0.7497 (high Jul 10)
Support: 0.7372 (hourly low Jul 22), 0.7328 (low Jul 20), 0.7241 (low May 2009)
NZD/USD: 50 Bps Cut Is On The Table Today
(short at 0.6620)
- In contrast to the Reserve Bank of Australia, the Reserve Bank of New Zealand is considered almost certain to cut interest rates today. The decision will be announced at 21:00 GMT.
- In our opinion there are two scenarios for today: a 25 bps cut and flagging more rate cuts soon or a 50 bps cut but with wait-and-see guidance and softening the language on the NZD. The uncertainty is high and we expect that trading would likely be volatile after the rate announcement, especially if the central bank softens its language on the NZD and delivers stronger rate cut.
- The NZD/USD recovered to 0.6655 yesterday and we used higher levels to go short at 0.6620, in line with our trading strategy. 6-year low at 0.6498 should continue to attract. We target a move to 0.6400, near 61.8% retrace of the 2009-2011 rise.
Significant technical analysis' levels:
Resistance: 0.7449 (high Jul 21), 0.7489 (high Jul 15), 0.7497 (high Jul 10)
Support: 0.7372 (hourly low Jul 22), 0.7328 (low Jul 20), 0.7241 (low May 2009)
Source: Growth Aces Forex Trading Strategies