It has been a wild ride on the markets following the Tweet from Donald Trump that has increased the trade war tension with China, with the major moves being seen in the stock markets, oil and the Jpy. This all comes ahead of today’s US employment data so a very cautious stance is required, but from the look of the charts, stocks have further downside ahead, while the Yen strength appears set to continue. Other standouts are Aud$ weakness and UsdCnh, whish after moving sideways for some time seems to be lining up for another test of the all-time high at 6.98 and possibly at the 7.00 barrier.
EurUsd: The Euro has found a base, at least temporarily, at 1.1025 and has turned higher as the dollar weakened a little, and currently sits at 1.1080. The short term momentum indicators look constructive today, and above the session high of 1.1095 would allow for a return to 1.1100/15, which should be reasonably strong resistance, having previously been a medium term low. Beyond this would then allow for a run towards 1.1160 (minor) and to 1.1173 (38.2% of 1.1411/1.1025), beyond which would allow for a retest of the 1.1200 neckline. A break of this would see sizable short covering, with 1.1220/30 (50%/100DMA) and 1.1262 (61.8%) being the obvious targets ahead of 1.1300 (200DMA). The dailies still point lower though, and on the downside we are likely to chop around above 1.1050 for now, below which, further support will be seen at the session low at 1.1025 ahead of the 1.1000 H/S target. If/when we get below 1.1000, there is good trend support at 1.0965 – at which point I would square up any short Euro positions and take a nimble stance. Ahead of the NFP I would be reasonably nimble and then go with the flow, but given the look of the dailies, selling rallies remains the preferred plan.
DXY: (98.60) The DXY has retreated from yesterday’s 98.93, 26 month high, and currently sits at 98.39, the previous trend high. Ideally we should hold this level but the 4 hour charts are pointing lower and we could be in for a return to 98.00, below which could see an acceleration to the downside towards 97.75 and 97.50. The dailies though, still look positive and if 98.90/99.00 can be taken out then we could see the measured, reverse H/S target at around 99.25 (EurUsd: 1.1000). While cautious today, I still prefer to buy dips looking for an eventual return to the topside.
US$Jpy: initially broke higher in taking out the minor double top at 109.00, and reaching 109.30 before collapsing after the tweet from Donald Trump, to currently sit at the day’s low of 107.30. The charts don’t look healthy and further Jpy strength seems very possible although all will depend today on the US jobs data and further updates from the POTUS’ Twitter Account. The short term momentum indicators are pointing lower, where the initial target sits nearby, at 107.20 (18 July low) but below which would took to 107.00 and the 25 June low at 106.77 Below there would be a worry for the dollar and could see an acceleration towards 106.00 (76.4% of 104.01/112.40) a break of which is a black-hole, back to the flash-crash low of 104.00. On the topside, resistance will be seen today at the minor Fibo levels of the overnight fall, these being at 107.70, 108.00, 108.26,108.50 and at 108.80. Be very cautious. If stocks, bond yields head lower and Donald Trump gets busy on Twitter, then there is plenty of downside potential for the dollar, and much will depend on today’s US jobs numbers .
AudUsd: The Aud has had its 10th consecutive down day and is currently going through 0.6800, with little to hold it up ahead of 0.6715, the interbank flash-crash low of 3rd January. Exporters should provide a degree of support but Donald Trump’s Tweet will do little to help the cause, and the Iron Ore price, down 3% on Thursday, will also weigh. However the short term momentum indicators are oversold, so bounces are possible, where resistance is now seen at 0.6830 (minor), 0.6860 (23.6% of 0.7081/0.6794), 0.6875 (100 HMA) and at 0.6905 (38.2% of 0.7081/0.6794). As before, selling rallies is preferred. Don’t forget the Australian Retail Sales today (exp 0.3%mm).
NzdUsd: has consolidated on Thursday, and having traded down to 0.6533 it is currently back at 0.6550, underpinned by some selling of AudNzd, where the cross is now back at a 5 month low (1.0375) and looking very heavy. As for the Kiwi, while the daily momentum indicators look heavy, the short term charts do look slightly more positive, and if the Kiwi can grind higher, targets will be seen at 0.6575 (minor), 0.6595(23.6% of 0.6789/0.6533) and at 0.6600/15, where I think it would be worth selling it again. On the downside, support will be seen at 0.6530/35 and again at 0.6510 (minor) and at 0.6487 (14 June low).
*Trade of the day: August 2, 2019; 8:42 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 order are wide because of the NFP and a very cautious stance is required but overall I still prefer to look for levels to buy US$, particularly against the Euro and the Aud$.
Sell EurUsd @1.1115. SL @ 1.1165, TP @ 1.1000
Buy EurUsd @ 1.0985. SL @ 1.0945, TP @1.1100
Sell AudUsd @ 0.6830. SL @ 0.6870, TP @ 0.6720
Other strategies seem to be:
Yen strength on all fronts – EurJpy, GbpJpy, AudJpy, NzdJpy etc
Stocks weakness generally, so look to sell rallies
Gold to remain highly volatile
AudNzd looks very heavy – Parity beckons?
UsdCnh looks as if it wants to test 7.0000
By August 2, 2019