Retail Traders Buying US Dollars could point to further strength in Euro and Pound, however, we suspect this could be short lived as the COT report highlights Non Commercials last week positioning themselves for further strength in the US Dollar. The Retail Order books therefore seem poised for reversals.
Our overall outlook is that we suspect we could see a rather choppy week with the potential to find a bottom in US Dollar and tops in EURUSD and GBPUSD as the orders get cleared in sideways trade. Ideally we would like to see Retail Traders to switch to longs in these pairs for their to be good momentum and follow through.
Few key risk events that could help this, would potentially point to a mid week catalyst if data falls in the right way:
- US Home Sales (Existing – Monday) (New – Tuesday)
- Aussie CPI and Chinese PMI – Wednesday
- UK GDP figures – Thursday
- German IFO Business Climate Index – Thursday
- Us Durable Goods and Initial Jobless – Thursday
RTAS Order Book systems remain long this pair at the 1.3000 level as we saw further Retail Trader selling into the Close on Friday.
Although we did see an increase in selling we suspect the majority of this was some profit taking and closing of short positions, if this continues we would expect the pair to test the 1.3200 / 1.3250 mark again. That said if we see an increase in buying in the pair as Retail Traders lose faith in the immediate turn around, expect this pair to move lover.
The Daily chart continues to show some immediate support around the 200 day SMA and therefore looks relatively supported. WE still like the idea this pair is forming a head and shoulders pattern and would expect any pushes higher to be capped around the 1.3250 mark.
Given recent price action we suspect this pair could chop around before moving lower again.
COT report interestingly shows a couple of key points. That Non Commercials flattened offer their relatively aggressive selling in this pair and although they remain net short it is only just. It also shows the relatively strong opinion of Speculators at the moment with them as point to net short.
This aligns with our current opinion that we may pause at these levels and chop a bit before setting our next major direction.
RTAS Order Book systems came extremely close to closing longs and switching to shorts on Friday only to have Retail Traders step in and aggressively sell the pair ensuring our systems stayed long.
Order book systems are extremely close to switching still in this pair though and although they backed off slightly from shorts a switch in the Order Book would quickly revert the systems.
Daily chart looks relative supportive but the pair now sits just below a key resistance zone. It will be interesting to see how it fairs. Watch the UK GDP figures this week, these could be key for the pairs next big move.
Weekly chart and COT report really does lend perspective in this pair and the Non Commercials moving to increase short positions again highlights we are extremely close to moving lower. The weekly chart also shows the key level around the 1.5400 region. Whilst we sit below this key level we suspect we could easily see a test of the 1.4800 mark again watch for price action this week.
Aussie really bounced around late last week and we suspect it is likely to see another choppy week with Australian CPI and Chinese PMI out on Wednesday morning. We maintain our Order Book systems on short time-frames and note they have been doing extremely well lately.
We keep our outlook on the Aussie, with the view the pair is forming a bottom but with the view that there is still likely to be a lot of chop, especially as the Order Book remains at rather extreme levels which need to be cleared in order for the pair to really break higher.
Non Commercials keep their Net Short positions in the Aussie and we would like to see these come off of their low levels before we see this pair push higher.
Order Book systems remain short but are on the edge with regards to switching. Order Books flirted with longs and shorts but remained pretty static at the moment.
We maintain our outlook on this pair with the 200 day SMA and the 0.9320 levels being key for support. We can however see this pair chopping around at these levels.
Non Commercials heading back towards long positions, we could therefore see this pair start to set an interim bottom this week and that could well work out across the wider pairs with US Dollar strength kicking again.
A push higher could aim to test parity.
With the RTAS Order Book system remains short from around the 1.4400 mark. Retail Traders started selling this pair again towards the end of the week, however if the Aussie does find some support and the US Dollar also finds support then this pair could offer a much larger move lower.
Ideally we would like to see Retail Traders continue to buy this pair in order to provide some momentum to the downside.
We maintain our outlook on the daily chart, with the view this pair is setting an interim top. A nice RSI divergence on the Daily Charts and the extremes in the Order Books gave initial clues, we now need to see some follow through in the Order Book with further Retail buying in this pair to ensure this isn’t just an initial pull back.