European Open – August 18th

Good morning

Asian stock markets are mostly higher, with the Nikkei 0.10 % higher, Shanghai Comp gaining 0.40 % and ASX up 0.30 %. Hang Seng dropped 0.45 % so far. Commodities are mixed this morning; Gold and Crude Oil are slightly lower at $1302 and $94.85 respectively, while Silver is steady at $19.55 (+0.20 %).

There were no important data releases overnight. However, comments from Bank of England Governor Carney over the weekend got the Sterling moving. Carney said that the BoE doesn’t have to wait for wage growth to increase before hiking interest rates. This surprised the market a bit since the BoE stressed last Wednesday in their last QIR that they remain on the path of a rate hike in early 2015 provided that wage growth shows signs of improvement.

Cable gapped higher as a result of the Carney comments, from 1.6690 to 1.6735. The pair has been consolidating in a 1.6710-1.6730 range for most of the Asian session and is now slowly approaching the earlier session high. I expect further GBP short covering as London opens and some pressure on EUR/GBP.

EUR/USD has traded 1.3387-1.34 overnight. Specs are likely getting frustrated as downside momentum fails to build. The 1.3330 level has been well defended so well and barriers at 1.3325 and 1.33 will only slow things further. Without any significant catalyst, shorts will have a difficult time pushing the EUR lower given crowded positioning. Plenty of trailing stops resting above 1.3430.

USD/JPY opened at 102.35, rose to a high of 102.44 and then eventually dropped to 102.25. There are solid bids from local names towards the big figure and I expect it to hold in the near-term. To the topside, good resistance 102.90-103.00. We have some important data releases out of the US this week, but most traders will be anticipating Fed Chair’s Yellen speach in Jackson Hole on Friday for further clues on the Fed policy.

Light flows in AUD/USD and NZD/USD. Markets are not expecting any surprises from the RBA statement tomorrow. No tier 1 data releases out of NZ this week. I see Aussie and Kiwi trading slightly higher into the Jackson Hole meeting if geopolitical tensions do not increase significantly. Aussie resistance 100 DMA at 0.9350, swing high at 0.9375. Support 0.9285 and 200 DMA at 0.9250.

Good luck!

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