Dollar Reaches Oversold As JPY Sells Off

Further dollar weakness today with temporary Yen strength and continued European strength. The Australian dollar got a boost from some good import and export data from China which overruled the mixed data out of Australia. However, the rally may soon turn lower if CPI, PPI, Fixed Asset Investment and Industrial production data from China overnight disappoints with these releases critical for the Aussie’s direction in the medium term.

USD% Index

Further USD weakness today saw the index RSI dip into oversold levels and reject modestly, ending the day still markedly down. There seems no reason for the index to go this far and not test support which seems likely in the coming sessions. We are also very close to the levels we were at Pre-Fed taper announcement which seems a logical conclusion to this summer’s theme following the dramatic talking down of the markets from Bernanke. I expect a test and strong rejection from the two main support levels at approximately EURUSD 1.3439 and 1.3467 with a preference for the lower USD% index support level. I am bullish USD but will wait for confirmation of a turn

USD% Index Resistance (EURUSD support): EURUSD 1.3320 ,1.3260 USD% Index Support (EURUSD support): EURUSD 1.3439, 1.3487, 1.3500

EUR% Index

Another bullish day for the EUR% index although stopping short of testing the double top and the upper trend-line that defines the bullish channel. With more room below in the USD% index I expect these levels to be tested and likely rejected in the coming session. I am bearish EUR but will wait for confirmation of a turn

EUR% Index Resistance: EURUSD 1.3400, 1.3421, 1.3450 EUR% Index Support: EURUSD 1.3367, 1.3276

EURAUD Trade Positioning

I am short EURAUD from 1.4825

JPY% Index

The JPY% index pushed through trend-line resistance and up to the 138.2% fib expansion at USDJPY 95.80 before rejecting nicely to bring the index back within the bearish channel and closing the day lower at support. A rally up to test the broken trend-line again and rejection would print a nice head and shoulders although possibly a little obvious. That said, the index is currently overbought and could do with a retracement if a continuation is on the cards. I am bearish JPY.

JPY% Index Resistance (USDJPY Support): USDJPY 96.32, 95.75 JPY% Index Support (USDJPY Resistance): USDJPY 96.71, 97.28,

USDJPY Trade Positioning

I closed my long from 96.50 at break-even and re-entered long at 95.84

GBP% Index

Having held onto it’s post Carney gains the GBP% index rallied up to retest the trend-line again before retracing slightly. With the USD% index still not at support I expect this to push the GBP% index further yet, although I am still defiantly waiting for a reversal. The 138.2% Fib Expansion at 1.5600 seems an interesting level for a potential rejection. Tomorrow could see this level meeting index trend-line resistance also.I remain defiantly bearish GBP% for the medium term although it is hard to argue with GBP strength in the short term.

GBP% Index Resistance: GBPUSD 1.5569, 1.5600 GBP% Index Support: GBPUSD 1.5500, 1.5440

AUD% Index

Increased Chinese imports and exports gave the AUD% index a boost after the mixed Aussie data earlier in the Asian session, allowing for a continuation of the recent rally from trend-line support. A slew of data from china overnight will decide the medium term direction for the AUD% index. Good data will certainly find keen Aussie buyers. However, the data has been sketchy lately leaving a real chance of another sell-off. I am neutral AUD until Chinese data is known

AUD% Index Resistance: AUDUSD 0.9167, 0.9250, 0.9362 AUD% Index Support: AUDUSD 0.9050, 0.9015, 0.8878

CHF% index

The CHF index barely did anything today. dollar weakness saw it grind slightly higher still hugging the trend-line. This will continue until the dollar finds support. Trend is still bullish but some weakness may be around the corner.