11 Dec: Forecast: FX: US$/Majors + trade ideas: FXCharts

Friday’s NFP report showed 228k growth in jobs in November, above expectation of 200k, while the previous month’s figure was revised down to 244k from 261k. The headline unemployment rate was unchanged at 4.1%, as expected, but the main focus was on the average hourly earnings, which only rose 0.2% mm, below expectation of 0.3% mm, causing a mixed reaction to the US$ which remained firm against the Yen, Aud and Sterling but gave up a little ground elsewhere. The other main action on Friday was in Sterling, which headed sharply lower despite the breakthrough between the EU/UK over the outlines of the Brexit divorce talks.

Chinese November CPI came in at 1.6% on Saturday, slightly below expectations of 1.7%, and may impact on the Aud today.

In other markets, US stocks headed about 0.4% higher after the US data, while the metals were held in fairly tight ranges and WTI headed a little higher on the back of stronger Chinese demand.

Although it will be a quiet start to the week in terms of data, we will get a 24 hour period on Wed/Thur when Interest Rate Decisions will be forthcoming from the US, UK, Switzerland and the EU, and they will override everything else.  There is plenty of other data to be released though, including the Australian MYEFO, the EU ZEW and UK CPI (Tue), UK Unemployment figures and German & US CPI (Wed), Australian, China Retail Sales, EU/U ) flash PMIs, UK & US Retail Sales (Thur) and the Japan Tankan  and US Industrial Production & Capacity Utilisation (Fri).

The main focus will be in the Fed, who are widely expected to hike by 25bp, and it will be the statement, dot-plot, forecasts and Janet Yellen’s press conference that will guide the price action. The last dot-plot indicated the Fed was on track to hike rates three more time in 2018 although the market is currently pricing in less than two 25bp hikes. Most analysts believe the Fed will keep the dot plots largely in line with the previous result but there are some looking at the possibility that the Fed may be a bit more aggressive due to the ongoing jobs growth and the growing possibility of fiscal stimulus emanating from the Republican tax plan.

EURUSD: 1.1768
€/Usd was confined to a 45 point range following Friday’s US jobs data and a neutral stance is required as we head towards the Fed and ECB Meetings, due Wed/Thur.
1 hour/4 hour indicators:Neutral Daily Indicators: Neutral Weekly Indicators:  Neutral
Preferred Strategy:  The short term momentum indicators look mixed at the start of the week and I remain fairly neutral although the daily charts do appear to be turning a little lower and may be hinting of further dollar strength ahead. With no major data, look to trade 1.1740/1.1800 today.
Resistance Support
1.1877 4 Dec high 1.1755 Daily Kijun
1.1847 6 Dec high 1.1730 Friday low
1.1814 7 Dec high 1.1707 (61.8% of 1.1553/1.1943)
1.1800 100 DMA 1.1685 Rising trend support
1.1775 Friday high/55 DMA 1.1650 (76.4% of 1.1553/1.1943)


USDJPY: 113.49
US$Jpy finished the week on a positive note, assisted by a minor uptick in US yields (US10Y – 2.377%) and still  looks pretty firm on all fronts, so trading from the long side is preferred.
1 hour/4 hour indicators:Turning higher Daily Indicators: Turning higher Weekly Indicators:  Neutral
Preferred Strategy:  With the momentum indicators aligning higher, a test of 113.80 would not surprise, beyond which 114.00/05 will see sellers ahead of a possible towards 114.30 and even 114.75. Look to buy dips towards 113.00/10 with a SL placed sub 112.80.Buy US$Jpy @ 113.10. SL @ 112.85, TP @ 114.20
Resistance Support
114.73 6 July high 113.37 Daily cloud top
114.33 7 July high 113.07 Friday low
114.06 9 Nov high 112.95 (23.6% of 110.83/113.58)
113.80 (76.4% of 114.73/110.83) 112.55 (38.2% of 110.83/113.58)
113.58 Friday high 112.20 (50% of 110.83/113.58)


GBPUSD: 1.3402
Having reached an early European high of 1.3520 on the news of a Brexit breakthrough on Friday, the pair was then sold heavily as longs took profit, falling to a low of 1.3353 before trading within 1.3432-1.3399 after the underwhelming NFP.
1 hour/4 hour indicators: Neutral Daily Indicators: Turning lower?                                                                     Cable fell to a 1-wk low at 1.3358  amid Brexit uncertainty, ending NY 1.3375 Weekly Indicators:  Turning higher?
Preferred Strategy:  It looks set to remain choppy for Sterling, with Brexit headlines likely to guide the direction again this week, at least until the FOMC Meeting (Wed) and the BOE Meeting (Thur).I would remain neutral for the time being and possibly look to play a range of 1.3300/1.3500.
Resistance Support
1.3538 4 Dec high 1.3353 Friday low
1.3520 Friday high 1.3319 7 Dec low
1.3480 Minor 1.3295 (50% of 1.3038/1.3549)
1.3450 Minor 1.3280 Minor
1.3417 200 HMA/Weekly cloud top 1.3250 Minor


USDCHF: 0.9925
US$Chf has traded a tight range of 0.9924/77 on Friday, leaving the mildly positive, medium term outlook unchanged on Monday.
1 hour/4 hour indicators:Turning lower Daily Indicators: Turning higher Weekly Indicators:  Neutral
Preferred Strategy:  With the short term charts looking a bit heavy, a test of 0.9900/0.9885 would not surprise although the daily momentum indicators still look constructive and buying dips is preferred as I suspect that we could eventually see a run back to 1.0000 and possibly to 1.0040.Buy US$Chf @ 0.9890. SL @ 0.9865, TP @ 0.9980.
Resistance Support
1.0015 Minor 0.9923/20 Friday low /(23.6% of 0.9742/0.9977)
1.0000 Psychological 0.9900 Minor
0.9971 Friday high 0.9985 (38.2% of 0.9742/0.9977)
0.9965 (76.4% of 0.1137/0.9816) 0.9854 6 Dec low / (50% of 0.9742/0.9977)
0.9945 Minor 0.9835 100 WMA /5 Dec low


AUDUSD: 0.7509
After a brief spike to 0.7533, AudUsd is trading heavy after Friday’s NFP figures, currently just holding above 0.7500 but seemingly set to test strong support at 0.7470/80. Below here, unlikely today I think, would allow a run towards 0.7400.Note that the Chinese November CPI came in at 1.6% on Saturday, slightly below expectations of 1.7%, and may impact on the Aud today.
1 hour/4 hour indicators: Mixed Daily Indicators: Turning lower Weekly Indicators:  Turning lower
Preferred Strategy:    Although the short term momentum indicators are a bit mixed, trading from the short side continues to be the plan ahead of the FOMC Meeting (Wed), when the Fed is expected to hike rates. I therefore suspect that further upside for the Aud will be limited and selling into rallies is still preferred.  The 0.7470/80 area will be strong, so taking some profit on shorts and looking to resell into a rally may be a plan.Sell AudUsd @ 0.7530. SL @ 0.7580, TP @ 0.7475.
Resistance Support
0.7600 Minor           0.7501 Friday low
0.7585 100 HMA/200 HMA 0.7480 Rising trend support
0.7570 Minor 0.7470 Weekly cloud top/Weekly cloud base
0.7540 100 WMA 0.7450 Minor
0.7533 Friday high 0.7415 Minor

Economic data highlights will include:

M:  New Home Sales – Oct, China New Loans



NZDUSD: 0.6839
As before, the Kiwi is being pulled down by the soft Aud$, and it would seem that the indicators suggest that we will see lower levels ahead. In the short term though, Friday’s range of 0.6822/0.6870 may well cover it today.
1 hour/4 hour indicators:Neutral Daily Indicators: Neutral Weekly Indicators:  Turning lower
Preferred Strategy:  While the short term and daily momentum indicators both look neutral, the weeklies are heavy and I suspect that we will eventually see another leg to the downside, where 0.6780/6800 would provide decent support, but below which would open the way to sub 0.6700. For today, a range of 0.6710/0.6870 might cover it.
Resistance Support
0.6928 29 Nov high 0.6823 7 Dec low /Friday low
0.6916 6 Dec high 0.6816 1 Dec low
0.6900 Minor 0.6779 17 Nov low
0.6885 Minor 0.6750 Minor
0.6869 Friday high /200 HMA 0.6720 Minor

Economic data highlights will include:

M:  Electronic Card Retail Sales – Nov


Leave a Reply