Tuesday's FX Trade Ideas
EUR/USD is trading within a kind of descending triangle. The key support is at $1.2830. A break below will make the pair test $1.2790. However, sellers lack momentum for a decisive move lower. The outlook will remain bearish as long as the pair’s trading below $1.2930. Comments of Mario Draghi were mildly bearish. Tomorrow watch the release of PMI indicators in the euro area.
GBP/USD returned to the $1.6350 area after hitting $1.6290 in the Asian trade. Market players remain puzzled: which direction the cable is about to choose? The pair remains well supported at $1.6275/6300 – this is the ascending trend line. However, the price has to recover above $1.6400 to confirm the bullish power. We’ll stay out of the market until the medium-term trend won’t be defined. Great Britain will release public sector net borrowing (public deficit is expected) and mortgage approvals on Tuesday.
USD/JPY consolidates slightly below the Friday’s 6-year high of 109.45, daily support lies at 108.60. Note that Tuesday is a bank holiday in Japan. Both Japanese and US economic calendars for the coming week are relatively light, so the pair will be driven mostly by the technical factors. Corrective selling could easily bring the price down to the 108.50/00 area. Next support lies at 107.30 and 106.80. We maintain a strategy of buying the pair on dips with a medium term target of 110.00 yen.
AUD/USD didn’t stay in the sideways range for long. The pair breached support and fell to 6-month minimums in the $0.8864 area. From the technical point of view, Aussie reached 76.4% Fibo of the advance from January low to July high and there’s divergence at MACD and RSI at H4. Attention is now focused on China’s HSBC Flash Manufacturing PMI for Sep. (consensus forecast sees a decline in the index). Reading worse than expected could bring the pair to $0.8820. However, the pair’s oversold and a better reading will cause a correction. Resistance is at $0.8930. We’ll regard any rallies as a chance to enter shorts.