There is plenty going on ahead of today’s FOMC meeting, mostly on the back of the comments during Tuesday from Draghi/Trump. The end result is that we appear to be in for some short term strength in the commodity currencies and Sterling although medium term weakness in all three currencies seems set to continue. Elsewhere in the FX space, things look a little messy, although the Euro is beginning to show downside cracks.
Elsewhere, US stocks look increasingly positive, as does WTI, and these are likely to be volatile following today’s Fed announcement so I am staying square for now. A less dovish than expected Fed though would see a sharp turn lower so caution is warranted. The same applies to the metals, which also currently look mildly constructive for further gains.
EurUsd: The Euro is a little heavy today although it has recovered from its lows of 1.1180, seen after Mario Draghi’s comments, and currently sits at close to 1.1200. All will now depend on the Fed, but the dailies look slightly negative so a test of 1.1170 (76.4% of 1.1115/1.1346) would not surprise at some stage. A break of this would then open the way to 1.1150 and lower, where 1.1135 is minor support ahead of the 30 May low of 1.1115 and the 23 May spike low of 1.1106. On the topside, short term resistance will be seen at 1.1220 (23.6% of 1.1346/1.1180) and at the Monday session high of 1.1246, which ties in with the 38.2% Fibo level. Beyond there, further Fibo levels lie at 1.1263 and 1.1285 and 1.1307. While selling rallies is the plan, caution is required ahead of the Fed meeting so a neutral stance is probably best until then.
DXY: (97.65) The DXY remains well bid, with the daily momentum indicators looking supportive, so the preference is to trade the dollar form the long side. Nearby resistance remains intact at 97.75/80 beyond which could allow a run to 98.00 and to the trend high seen on 23 May, at 98.37. On the downside, support will be seen at 97.35, and then at the 100 DMA at 97.00 and further out, at 96.51 (200 DMA). Looking to buy dips is still favoured, with a SL placed below 97.00.
US$Jpy: has had a mostly flat session, with a couple of hours panic thrown in following Donald Trump’s intervention, which provided the entire days range of 108.05/67, before settling in familiar territory, at 108.45. The Jpy will be volatile following the Fed decision, dragged around by risk sentiment and the need (or not) for safe haven demand. Right now it all look neutral and the range will likely cover it. The daily momentum indicators do look constructive for further gains though, where the points of resistance are seen at 108.79 (11 June high) and then at 108.88 (23.6% of 112.39/107.80). Above here, 109.00/15 offers resistance, beyond which would run into 109.55 (38.2% of 112.39/107.80). On the downside, support will again be seen at 108.05/15 and at 108.00 ahead of 107.80. A break of this would be significant and would allow a move to the next target seen at 107.50 (4 Jan low) and possibly lower.
US$Chf: traded higher on Tuesday, currently at parity and building a base above the 200 DMA at 0.9970. Further gains look possible, although 1.0000 may continue to be a hurdle (38.2% of 1.0237/0.9853), but above which would see a run towards to 1.0035 (100 DMA), 1.0045 (50% of 1.0237/0.9853) and 1.0090 (61.8% of 1.0237/0.9853). On the downside, support will be seen at the 200 DMA, below which would open the way to 0.9945/50, 0.9925 and then to 0.9900. Overall, buying dips is favoured although, as with the Euro, it may be choppy and directionless ahead of the Fed.
AudUsd: The Aud once again traded in a heavy fashion throughout much of Tuesday in making a new trend low at 0.6831 before recovering sharply, care of Donald Trump, to end the day at 0.6875. The short term momentum indicators now look mildly constructive, and further gains could see a run towards 0.6885 (minor), 0.6904 ( 38.2% of 0.7020/0.6831), 0.6918 (23.6% of 0.7207/0.6831) and then at 0.6925 (50% of 0.7020/0.6831)/200 HMA. The daily momentum indicators are still heavy though, and on the downside, a break of 0.6850 would open the way back to 0.6830 and the January 2016 low at 0.6826. Further out, a move towards 0.6600/0.6700 seems to be on the cards although much will depend on the Fed and the RBA and what monetary policy looks like further down the track. Wait for the Fed today for the next move.
NzdUsd: The Kiwi looks resilient right now and after a low of 0.6890, it has since squeezed up to 0.6537 before ending the day nearby, at 0.6537. The short term momentum indicators look positive and further gains could see a move towards 0.6545 (minor) and then to 0.6560 (38.2% of 0.6680/0.6487) and possibly on towards 0.6585 (50%) and 0.6606 (61.8%). The downside will find bids at 0.6500 and again at 0.6480/90, which will be strong, although unlikely to be seen in the short term. If wrong, below 0.6480 would target 0.6464 (26 Oct 2018 low) and then 0.6426 (9 Oct ‘18 low). On the topside, resistance will be seen at.6515 (Session high), ahead of 0.6525 (minor) and 0.6533 (23.6% of 0.6681/0.6487)..
On the crosses, the main interest lies once again seems to lie in Jpy and Chf strength, andAud, Nzd and Gbp weakness. From a technical perspective:
Both AudJpy and NzdJpy appear to have some near term upside momentum with targets seeming to be at 75.00 and 75.50 (AudJpy) and at 71.25 and 71.75 (NzdJpy). The daily charts still look heavy though, so selling rallies is preferred as I still think both crosses are headed lower eventually. AudJpy may be headed to 73.00/72.50, while the same applies to NzdJpy; where a longer term target appears to be somewhere around 69.50.
EurGbp looks increasingly toppish on the daily charts, with the short term momentum indicators also now looking heavy. Although I am largely avoiding Sterling because of Brexit headlines, I am short at 0.8930, as per yesterday’s outlook, with a SL placed at 0.8985.
*Trade of the day: June 19, 2019; 8:20 AM(AET)
*This is a personal opinion only, based on the look of the table below, and carries no guarantee of success.
All trades are good till 5.00pm NY time. All “in the money trades” should have the SL raised to break-even, or managed manually. All “out of the money trades” should keep original SL in place.
Today’s levels are wide and are unlikely to be triggered ahead of the Fed decision. Alternatively stay square until the noise dies down after the decision is known.
Sell EurUsd @1.1275. SL @ 1.1305, TP @ 1.1185
Buy EurUsd @ 1.1130. SL @ 1.1095, TP @ 1.1065
Sell AudUsd @ 0.6915. SL @ 0.6940, TP @ 0.6800
Sell NzdUsd @ 0.6565. SL @ 0.6590, TP @ 0.6485
Buy US$Chf @0.9945. SL @ 0.9915, TP @ 1.0020
By June 19, 2019