EUR/GBP Setup for Euro Zone PMI Releases (July 24, 2013)
Two of the largest economies in the euro zone, namely Germany and France, will be printing their manufacturing and services PMIs in today’s UK session. Small improvements are expected, although most of the figures are likely to stay below the 50.0 level indicating industry expansion.
Strong data could allow the euro to go for more gains and possibly end the day stronger against the pound. As seen on the 4-hour time frame, the pair is finding support at the former resistance level around .8600.
Stochastic has moved out of the oversold region and is still pointing upwards, suggesting that further rallies could be in sight. If that’s the case, EUR/GBP could climb back up to its recent highs around .8700.
A stop below the 61.8% Fib or .8570 might be a safe enough line in the sand if you plan to go long.
AUD/USD suffered a heavy selloff in yesterday’s trading, as the .9300 handle held as strong resistance and pushed the pair to the middle of its range.
Weak Chinese PMI was the culprit for the selloff, as the HSBC figure printed a deeper contraction for July. However, the quarterly inflation report from Australia came in line with consensus and printed a 0.4% uptick in price levels.
AUD/USD could be on its way to test the bottom of the range and, if you’re in the bear camp, you can still catch a short trade from its current levels or on a shorter-term retracement until .9050. On the other hand, if you’re in the bull camp, you can wait for a test of .9050 before going long.
Stochastic is already in the oversold region but hasn’t quite moved up yet, which suggests that the selling pressure is still there but it could run out soon.
AUD/USD appears to be forming a smaller range on its 1-hour time frame. The pair is on its way to test resistance at the .9300 major psychological level while stochastic is giving the overbought signal.
There are no reports due from Australia or the U.S. today, which suggests that the pair could stay within consolidation.
If that’s the case, AUD/USD could edge back down to test the bottom of the range around the .9150 minor psychological level by the end of the week or next week. A tight stop above the previous spike near .9320 would yield a good reward-to-risk ratio.
NZD/USD has enjoyed a strong rally last week, as the RBNZ interest rate statement turned out relatively hawkish. Governor Wheeler specified that the central bank might keep rates low until next year only, prompting traders to speculate that a rate hike could be in the cards for 2014.
With that, NZD/USD broke past the .8000 major psychological barrier and reached the .8100 area. At the moment, the pair is consolidating below this level, waiting for a bigger push.
An upside break from the bullish pennant could mean another 100-pip rally to the .8200 handle or higher. On the other hand, a downside break could trigger a test of the .8000 former resistance.
Stochastic is still pointing up, which suggests there’s still enough upward momentum.
The range on AUD/USD is still holding for now, as the pair found resistance at the .9300 major psychological level earlier this week. The pair is now on its way to support around the .9050 minor psychological level.
Stochastic is in the oversold region, suggesting that a bounce might take place soon. There are no major reports from Australia today, which means that the ranges could hold, unless there’s a huge shift in market sentiment.
As for the US, only the CB consumer confidence and the S&P/CS house price index are up for release and these aren’t expected to cause wild price swings.
Trading GBP/USD for the US GDP Release (July 31, 2013)
GBP/USD retreated from its recent highs during yesterday’s trading, and this may have been a result of profit-taking ahead of today’s major US events.
The US Advanced GDP reading is up for release and the economy is expected to have grown by 1.1%, slower than the previous 1.8% expansion. Take note that the Q1 GDP reading was already revised lower from the initial estimate of 2.2%.
A weaker than expected reading would therefore be very negative for the dollar as it would remind traders that the economy is still weak and might not survive with less stimulus.
GBP/USD seems to be finding support at the 38.2% Fib, which is in line with an area of interest and the 1.5200 major psychological level. A bounce could take the pair up to its recent highs around 1.5400.
AUD/USD has finally broken below its recent range, with resistance at .9300 and support at .9050. The pair has dipped below the .900 handle but it could still make a retest of the former support before heading any lower.
Stochastic has been in the oversold region for quite some time already, which suggests a potential move up. However, given the weak Chinese and Australian fundamentals, the downtrend could remain intact.
The .9000 to .9050 levels form a good sell zone as one could aim for new lows if the selling pressure remains very strong.
Dollar strength is still persistent, as USD/CHF already broke above the falling trend line on its 1-hour time frame. This suggests that a new trend is about to form, but that price might pull back first before heading any higher.
Using the Fibonacci retracement tool on the USD/CHF 1-hour chart shows that the Fibs are in line with the broken trend line. In particular, the 38.2% Fib level is in line with an area of interest, which has acted as support or resistance in the past.
Stochastic is in the overbought region for now, suggesting that the dollar bulls are running out of steam. Strong US NFP figures could revive the dollar rally later on though.
The Reserve Bank of Australia cut interest rates by 0.25% during their monetary policy statement today and, judging from AUD/USD’s reaction, this was expected by most market participants.
However, a rate cut is still a rate cut. In comparison to the Fed which is looking to reduce stimulus soon, the RBA is still more dovish, which could mean that AUD/USD could continue to trend lower.
A short trade around the .9000 to .9050 former support area could be a good entry. Aiming for the recent lows or for new lows with a 50-pip stop would yield a high reward-to-risk ratio. Stochastic isn’t in the overbought region yet, which suggests the pair could pull up higher before resuming its drop.
USD/JPY: Support Turned Resistance (August 8, 2013)
USD/JPY just broke below a key support level, as dollar weakness continued to dominate price action in yesterday’s trading. After that strong drop though, USD/JPY might retrace for a bit before heading any lower.
The Fibonacci retracement levels on the recent swing high and low on the 1-hour time frame show that the 38.2% level lines up with the broken support at 97.70. Stochastic has already reached the oversold region and moved up, suggesting that dollar bears might need to catch their breath first.
A short trade at 97.70 with a stop above the 61.8% Fib and a target of the previous lows near 96.25 would yield a 1:1 reward to risk ratio.
