It may come as no surprise given the very bullish reaction to the forward guidance earlier in the month that today’s speech from Carney did little to quell the market’s doubts about the BOE’s ability to hold inflation low enough to not place the stimulus program at risk.
Cable closed the day with a large daily pin bar and seems very well supported for the time being, with large bids entering the market on any dips to push the pair higher. The dollar finally broke out of the bearish channel that has defined it’s price action since the 10th of July however it failed to breach the long standing consolidation channel that has been so critical for support and resistance this year. This indicated a lack of upwards momentum and in turn reflects the market’s doubts regarding the scale or timing of the Fed’s taper following yet more poor US data today. The Nikkie and therefore USDJPY found some bids today following a test of two trend lines on the Nikkei, and now has a bit of headroom above for a further rally before running into resistance. Risk-off has not materialised yet properly as a result of the Syrian issue but this may change if bombs start to drop.
Rallying in the Asian session from USDJPY strength, the USD% index pushed through major bearish trend line resistance during Carney’s speech today before the European components of the index capped any further gains with a retracement back from earlier losses. Currently back inside the bearish channel it seems safe to call this breakout a dud and expect sideways price action until more important data regarding the taper comes out. We won’t need to wait long thankfully with US GDP and Unemployment Claims out tomorrow. Likely to remain contained by the blue consolidation channel if the data is soft, the long awaited FED taper rally may have to wait for another day as continuation of European strength holds the USD% index in check for now. I am bullish USD% in the medium term, although expect a slight drop in the short term unless US GDP and Employment data tomorrow is impressive
USD% Index Resistance (EURUSD support): EURUSD 1.3333, 1.3311, 1.3259 USD% Index Support (EURUSD support): EURUSD 1.3370, 1.3400, 1.3438
A definite down day for the EUR% index to test major bullish trend line support before rejecting moderately. The lack of power of the rejection indicating uncertainty regarding the continuation and the market may be waiting for US data tomorrow for a clue to the medium term direction from the dollar and therefore the EUR% index. I am short term bullish, medium and long term bearish EUR%
EUR% Index Resistance: EURUSD 1.3356, 1.3381, 1.3395, 1.3409 EUR% Index Support: EURUSD 1.3311, 1.3254
The Yen found some offers today with a rally in the Nikkei from a confluence of two trend lines. USDJPY held onto it’s gains into the close and could show a further rally to 98.26 before running into resistance. The same could be said of the Nikkei unsurprisingly. On a longer term outlook, the Yen is starting to look quite bullish and may perhaps be carving out a bottom, indicating that doubts are starting to creep in regarding the effectiveness of Abenomics. I am bearish JPY% index in the short term
JPY% Index Resistance (USDJPY Support): USDJPY 97.19, 96.72, 95.78 JPY% Index Support (USDJPY Resistance): USDJPY 98.26, 99.14, 99.58
A very interesting day for the GBP% index today with a powerful rejection from support following the release of Carney’s speech having sold off strongly ahead of the speech, This seems like the return of market vigilantes again, with the market showing it’s dislike of Carney’s get-out clauses for stimulus, Inflation targets seemingly the main bug-bear. Until further action is taken in the form of increased stimulus or a relaxation of inflation targets, we may continue to see a buy the dips mentality from the pound. I am neutral GBP% until it stops giving conflicting signals
GBP% Index Resistance: GBPUSD 1.5555, 1.5611 GBP% Index Support: GBPUSD 1.5517, 1.5418. 1.5369
A relatively calm day for the AUD% index ending the day largely flat after a failed push through support. We could see a bounce from either here or the support below at AUDUSD 0.8856 and a retest of resistance at 0.9047 as the market treads water regarding the US dollar. If a rally tests a confluence of resistance and trend line resistance at AUDUSD 0.9050 this may provide a good sell signal for further down the line, although this is a few steps ahead yet. I am short term bullish, medium term bearish AUD%
AUD% Index Resistance: AUDUSD 0.9047, 0.9116, 0.9230 AUD% Index Support: AUDUSD 0.8924, 0.8858
Yesterdays conflicting price action was sold off again today to bring us back to where we started the day yesterday. As a leading indicator currently of taper sentiment, this really highlights the confusion in the market right now, with the index continuing vaguely in it’s current trend until something major tells it otherwise. Tomorrow’s US GDP and Unemployment data could be that major thing with poor data sealing the continuation of the rally for European currencies. I am bullish CHF% the taper is convincingly likely to meet market expectations
CHF% Index Resistance (USDCHF support): USDCHF 0.9234, 0.9262, 0.9290 CHF% Index Support (USDCHF resistance): USDCHF 0.9163, 0.9154