Now that the dust has settled somewhat, we still don’t seem closer to a clear signal for dollar direction. Sure, it gained after the FOMC minutes, but is this really a breakout? There are arguments for both USD bulls and bears which I will outline below:
USD Bull: – FOMC still hinting towards September taper – EURUSD , GBPUSD , USDCHF and AUDUSD retail order books all at quite unprecedented extremes (all greater than 70% either net long or net short) – The market expects a dollar rally with analyst consensus seemingly dollar bullish – GBP% and JPY% ended the day today poorly – Overall Trend in US data is largely bullish – It may cause market chaos to not taper in September – Bullish USD% index RSI divergence USD BEAR: – USD% Index not convincingly broken out into a bullish trend – USD% RSI still not reached 60 for the entire down-trend. It is currently at 54. – FOMC minutes increased talk regarding recent poor data releases – Inflation still miles away from target – Taper sensitive stock indexes like the S&P rallied after FOMC minutes, ending today above yesterdays highs. – The market expects a dollar rally with analyst consensus seemingly dollar bullish :p – Poor Jobless Claims this week – Poor Flash Manufacturing PMI this week – EUR% and AUD% ended the day today strongly – JPY% weakness may be partly due to the large Nikkei retracement today. further weakness in the Nikkei could reverse this. – GBP% weakness could be correctional after a blazing rally up this month and positive UK data tomorrow could push sterling higher – CHF% convincingly rejected the dollar rally today ending the day flat – Recent Trend in US data has fallen lightly short of expectations
After the wild price action last night the dollar stabilised somewhat today, with a rally up to a long term trend line which rejected nicely ending the London / NY session flat although still up on the day as a result of the rally in the Asian session. The Nikkei seems to be the thorn in the USD% index’s side currently, with this morning’s retracement higher in the Japanese stock index giving USDJPY a meaningful boost when all other pairs looked poised to advance on the dollar. The channel shown in blue has provided strong support and resistance for the entire spring and summer and we still haven’t convincingly broken bearish trend with the dollar. For this reason I am short term bearish, long term bullish USD% although admit that we have to have a reversal soon if only to get some sensible position ratios back in the retail orderbooks.
USD% Index Resistance (EURUSD support): EURUSD 1.3324, 1.3283, .1.3190 USD% Index Support (EURUSD support): EURUSD 1.3393, 1.3462, 1.3500
The failed push higher in the USD% index has given Euro bulls a chance to enter long at a good price, and this has boosted the EUR% index to end the day up and looking bullish. Overall the data from Europe was constructive today, with French PMI’s a disappointment, and German and Euro-zone PMI’s being impressive. The Dollar rally / correction still hasn’t pushed the EUR% index out of a bullish channel which indicates the potential for further upside, although liquidity may become a restricting factor with the orderbooks at such extremes. I am short term bullish, long term bearish EUR%
EUR% Index Resistance: EURUSD 1.3388, 1.3442, 1.3460 EUR% Index Support: EURUSD 1.3333, 1.3300, 1.3263
EURAUD Trade Positioning
I am have closed my EURAUD long from 1.4515 for 330 pips profit
EURUSD Trade Positioning
I am Long EURUSD from 1.3315
Several oposing themes on the JPY% chart. We have a larger head and shoulders, with price currently at te necline. This is contained within a bullish channel and trend since the beginning of july has been making a series of higher lows. The shakey performance of the Nikkeui has forced the JPY% index higher and if this were to continue, the JPY% index may break through to the upside from a very long term long term bearish channel. I am Neutral JPY% until the conflicting chart resolves.
JPY% Index Resistance (USDJPY Support): USDJPY 98.33, 98.00, 96.76 JPY% Index Support (USDJPY Resistance): USDJPY 98.75, 99.66, 99.77, 100.00
Still contained withins a well defined bullish channel, the weakness of the last two days may prove to have merely been a well needed correction before continuation. With the AB=CD 100% Fib expansion level already breached this may no longer offer such robust resistance should we rally from positive GDP data tomorrow. Converesly, a poor GDP print leaves the index vulnerable to swift profit taking which would quickly push the index through nearby major bullish trend lines and force a break of trend. I am short term bullish, long term bearish GBP%
GBP% Index Resistance: GBPUSD 1.5622, 1.5690, 1.5728, 1.5814 GBP% Index Support: GBPUSD 1.5550, 1.5523
GBPUSD Trade Positioning
I have closed my long from 1.5600 at BE and re-entered at 1.5573
Positive Chinse HSBC PMIs gave the aAUD% index a boost today in tough conditions. The Dollar strength limited the upside for the rallies, although still looking bullish for the mean time. A test of support at AUDUSD 0.9041 may see us break to the upsde and retest the upper range of the green bearish channel. I am bullish AUD%
AUD% Index Resistance: AUDUSD 0.9041, 0.9150, 0.9226 AUD% Index Support: AUDUSD 0.8916, 0.8850
AUDUSD Trade Positioning
I am long AUDUSD from 0.8985, stops below 0.8930
Dollar strength weighed heavily on the CHF% index today, forcing the index down to Fib Expansion support before a powerful rejection saw the index end the day higher and looking bullish again. Strong resistance needs to be broken first before another continuation so the next few session may be decisive.. I am short term bullish, Long term bearish CHF%
CHF% Index Resistance (USDCHF support): USDCHF 0.9200, 0.9170, 0.9155 CHF% Index Support (USDCHF resistance): USDCHF 0.9290, 0.9335
USDCHF Trade Positioning
I am short USDCHF from 0.9271, stops above 0.9325.