Key Levels Are Tested Before A Potential USD Rally

Today saw a bumpy day for most pairs although the dollar firmly held flat overall. Key levels in the GBP/USD and EUR/USD were met although there remains a test of key levels in the USD/CHF to complete the set. As such, we could see more cross pair movement to square things up in preparation for a medium term change of direction as dollar buyers step in to buy the dips.

US unemployment claims and Manufacturing PMIs were both quite lacklustre today although both had little impact overall on the dollar.

Carney’s speech and presser today, as per usual gave the pound a lift, although the EUR/GBP was in the driving seat and pushing the GBP/USD around.

USD% Index

The USD% index met the 100% fib expansion level as suggested before rejecting and churning all day. This level is now not quite the bottom of the bearish channel, so a push lower could see EUR/USD 1.3833 tested before the eventual turn, particularly if we see further strength from the CHF% index to meet key levels there. We now have bullish RSI divergence which again suggests upside potential once the chop and churn has exhausted it’s self. I am bullish USD

USD% Index Resistance (EUR/USD support): EUR/USD 1.3796, 1.3709, 1.3681
USD% Index Support (EUR/USD support): EUR/USD 1.3822, 1.3833

EUR% Index

An early test of the key 100% fib expansion from the July lows was met in early trading today and rejected, although bullish momentum has pushed the pair higher, despite poor European data and the threat of Euro area banking stress tests rocking the apple cart. As such we saw messy overshoot of this level but closed the day back under. A further run up to the top of the bullish channel could be on the cards in the near term before a reversal in the medium term, but the rally looks like reversing soon.
I bearish EUR%

EUR% Index Resistance: EUR/USD 1.3804, 1.3833, 1.3863
EUR% Index Support: EUR/USD 1.3782, 1.3700

EUR/USD Trade Positioning

Short from 1.3785, stops at 1,3944

JPY% Index

A completely flat day for the JPY% index and the potential to go either way makes Yen trading a challenge currently. Momentum is to the upside although this will only happen if the European selling is more biased towards Yen pairs rather than Dollar pairs, which given that this is a dollar led move may not be the case. As such another drop lower through the recently claimed high ground could be the more favourable option currently I am neutral JPY, although suspect a drop lower

JPY% Index Resistance (USD/JPY Support): USD/JPY 96.93, 96.30
JPY% Index Support (USD/JPY Resistance): USD/JPY 97.36, 98.00, 98.44

USD/JPY Trade Positioning

Long from 97.39 , stops at 95.76

GBP% Index

A bumpy day for the pound, which started with some decent selling right up until the Carney speech, which met a more bid tone, but stopped short of breaking out of the key 1.6210 level. A break here would nullify the lower time frame head and shoulders pattern which may be forming. At the bottom of the chart we can see quite how influential EURGBP has been on the pound recently, so continuation higher there is sought for a reversal in the GBP% index I am bearish GBP

GBP% Index Resistance: GBP/USD 1.6210, 1.6300, 1.6313
GBP% Index Support: GBP/USD 1.6100, 1.6000

GBP/USDTrade Positioning

Short from 1.6182, stops at 1,6198

AUD% Index

Good Chinese manufacturing PMIs failed to make the AUD% index sustain a rally which is a very bearish signal for the AUD% index, coupled with that the break of bullish channel support, which was being retested into the close provides quite a bearish outlook. It is not clear how long this bearish pressure will last though and in the longer term, parity may be back on the cards again before the RBA will likely step in to dampen the rally. I am bearish AUD

AUD% Index Resistance: AUD/USD 0.9624, 0.9712
AUD% Index Support: AUD/USD 0.9592, 0.9550

AUD/USDTrade Positioning
Short from 0.9623, stops at 0.9778

NZDUSDTrade Positioning
Short from 0.8414, stops at 0.8580

CHF% Index

A struggle to push higher today to meet the 200% fib expansion level which would see as test of USD/CHF 0.8875 saw the index run out of steam slightly. A retracement is overdue and the index remains quite overbought, so a turn to the downside will likely happen sooner rather than later. It may take some news volatility to reach the key reversal level though

I am bearish CHF

CHF% Index Resistance (USD/CHF support): USD/CHF 0.8875
CHF% Index Support (USD/CHF resistance): USD/CHF 0.8941, 0.8950, 0.8984