What now for USD Dollar pairs?

EURUSD

The Euro remains well supported, as the price continues to channel higher and approaches next target at 1.3300, with weekly close just under the barrier. Friday’s Doji would signal further consolidation, before the price resumes larger rally that commenced from 1.2754, 09/07 low and targets 1.3414, 18/19 / 06 peaks. Positive technical s remains supportive for final push higher, with 1.3250/00 zone offering initial support and expected to protect the downside.

Res: 1.3300; 1.3325; 1.3400; 1.3414
Sup: 1.3250; 1.3220; 1.3200; 1.3164




GBPUSD

Cable ended Friday’s trade with Doji candle, as the price moved within 1.5350/80 consolidative range. However, positive tone dominates on lower timeframes studies and favors further upside. Clear break above 1.5400 barrier that was cracked on spike to 1.5433, is required to open 1.5476, 26/06 high and psychological 1.5500 barrier. Positively aligned daily studies are supportive, with Friday’s low at 1.5354, reinforced by 20DMA, offering initial support, ahead of psychological 1.5300 handle. Only loss of last week lows at 1.5262, would delay bulls.

Res: 1.5402; 1.5433; 1.5476; 1.5489
Sup: 1.5350; 1.5327; 1.5300; 1.5262




USDJPY

The Dollar/yen ended week in red, after repeated failure to hold gains above psychological 100 level, triggered fresh weakness. Friday’s extension lower that broke below 98.22, previous low, probed below 98.00 support. This completed daily failure swing and opens way for broader weakness. Break below important supports at 97.65/58, 50% retracement of 93.78/101.52 ascend / daily Ichimoku cloud base, is required to confirm bearish resumption from 101.52 and 100.85 highs and open 97.00, round-figure support and 96.74, Fibonacci 61.8% retracement, as daily indicators are attempting below their midlines. Negative tone prevails on lower timeframes, with the downside being favored, however, bears may be interrupted by corrective rally on oversold conditions.

Res: 98.33; 98.70; 99.00; 99.38
Sup: 97.62; 97.22; 96.95; 96.74




AUDUSD

The pair ended week during which the pair tested both, 0.9000/0.9300 near-term range borders, with positive tone prevailing on a bounce towards the upper boundary. Friday’s trading was seen as consolidation under the range top, as the price held above 0.9200 support. Positively aligned short-term studies keep the upside focused, with clearance of 0.9316/43 barriers, required to confirm bottom and commence recovery phase. Conversely, repeated upside rejection would signal further sideways trading and increase downside risk, if price falls below 0.9200/0.9150, Fibonacci 38.2% / 50% of 0.8997/0.9316 range.

Res: 0.9286; 0.9316; 0.9343; 0.9400
Sup: 0.9226; 0.9200; 0.9167; 0.9127

Charts Trending?

USD/JPY

GOLD

EUR/USD

GBP/USD

FTSE 100

Gold Market Update

Bullion Round Up

Does the current breakout warrant higher prices or has the media overblown the potential for higher prices? We would like to take this opportunity to remind our readers that gold continue to trade in a bearish market environment as discussed this morning in the  Live Trading Room. The current rebound may well be a short one as we have not seen enough evidence that gold prices could recover and continue higher. Ironically, we are starting to share the same view as Chairman Bernanke that our understanding on gold could be rather limited.

Recent monotonous price movement has led many investors asking questions about the prospect of holding gold as safe haven assets. We have seen outflow from gold backed ETFs as the primary instigator on the fall in price. Physical demand from China, India and Middle East managed to support the recent price action. In addition, the GOFO rate on gold bullion has been trading in the negative zone for the past 10 day’s added pressure. Speculators have decided to cover their shorts at this level but further advancement in gold price may remain limited due to various resistance levels at $ 1338, $ 1350 and $ 1375.

We have covered the current temporary short covering event weeks before it happened. As a forward looking publication, we will not discount the fact that gold could maintain this bull run in the event that physical demand increases, confidence among investors are restored and more short covering among the sellers (as we approach end of July). Short term support is at previous resistance (now support) at $ 1301 level but other supports are at $ 1270, $ 1250 and $ 1208 area. With a weaker US dollar index, gold prices can maintain its current rebound. However, we will remain cautious on US economic data that could well increase the potential of “septapering” or even increase the size of tapering.

Gold Technical Outlook

The recent price action in gold reached our short term objective at $ 1325 / $ 1338 area. We continue to see strength in the current rebound and prices could consolidate in the next few days. However, we advise caution because investors and speculators may change stance should the US economic data improved.

Chairman Bernanke made it clear that tapering is data dependant and he promoted an accommodative stance for now. Global equities rally on the back of his dovish remark, followed by other risk assets. Given that gold reached an oversold territory (when it was trading at $ 1180), there are rooms for dip buyers and speculators to trade higher. Bloomberg survey shows that hedge funds are more bullish and have increased their long bet on gold.

Prices could continue higher after it break pass previous resistance at $ 1298 and the psychological level of $ 1300. Potentially, prices could retest $ 1325 and short covering rally may push the current rebound higher.

Despite that, the medium term bearish perception has not changed. Once the rebound rally is exhausted, we would strongly recommend our readers to short sell the yellow metal again.
Resistance: $ 1326, $ 1338, $ 1387 Support: $ 1302, $ 1270, $ 1208.
Traders Notes: Expect a short period of short covering before the market resume lower. Short sellers are looking to short at $ 1326 and $ 1338 area target remains open at the moment. Stop loss is advice at $ 1350 area.

Short Term (1 week)	Medium Term (1-3 weeks)	Long Term (1-3 months)
Bullish – target 1325/1338	Bearish – target 1155	A rebound rally?

USD/JPY ready for more weakness?

This Sunday Japan will vote a new Upper House, with the ruling party already having an overwhelming majority in the lower one. According to polls, Kuroda and Abe will get the all needed power to lead the country, something that will happen first time since 2007. Back then, the USD/JPY was trading above 120.00 levels never seen again. And in the meantime, both leaders reassure market players that they are ready to continue with their ultra lose policy of monetary easing.

Has the time come then, for USD/JPY to resume the upside?  So far nothing indicates so, according to the daily chart, although technical readings indeed favor the upside: latest June kneejerk down to 93.70 was barely corrective as the level represents the 38.2% retracement of the October/May bullish run. But the recovery stalled around a shorter Fibonacci retracement area, 78.6% retracement of its latest fall at 101.50, and the pair is having a hard time to hold above the 100.00 level these past couple of weeks.

Elections however, are those kind of events that can trigger a couple hundred rally in a day, and set a new outlook for a pair, and this weekend elections may be no exception: if current leaders get the overwhelming majority suggested by polls, the pair can easily breach the 101.50 resistance on Monday,  and once there, the way towards 103.70 yearly high, will be open. But steady gains above that 101.50 are a sine qua non condition to confirm the pair is ready to resume the upside.

On the other hand, summer in the north hemisphere keeps majors ranging, and boards with no actual volume: if 101.50 contains any attempt of advance further, the pair will continue hovering below 100.00, with a strong support around 98.20/80 price zone for the upcoming week.

View Live Chart for USD/JPY

FOMC Minutes release

The US dollar was not able to hold its previous gains and lost ground against its major counterparts over the past week. Following the FOMC meeting’s minutes release, it became clear that the Fed will continue its stimulus measures as Chairman Bernanke said the central bank has no intention to change its aggressive policy in the near future.

Forex markets were very quick to react on the news and just a few hours were needed for the dollar to plummet sharply against both the euro and the pound. At the end of the week, the EUR/USD traded at 1.3067, or having a 239 pips gain, while the GBP/USD added 204 pips to its value, closing at 1.5103 on Friday. The USD/JPY lost 186 pips, with the last quote for the week being at 99.34.

Indices
FOMC minutes and Bernanke’s subsequent statement were expected with great interest by the capital markets as well. After the central bank’s firm stance became evident, the major US indices took the upward movement, registering significant weekly gains. The S&P500 closed at the record 1,678 points, or 2.84% higher; the Dow increased its value by 2.14% to 15,452 points, while the Nasdaq100 rose by 3.81% to 3,075 points. Additional boost in investors’ optimism came from the better-than-expected financial results of JPMorgan Chase and Wells Fargo.

Meanwhile, European markets were trading mixed in the past week. Germany’s DAX30 and France’s CAC40 rose significantly by 4.61% and 1.99%, respectively, while Spain’s IBEX and Italy’s S&P/MIB reported falls within 1%.

Commodities

Bernanke’s speech also triggered action in gold and silver buyers. Gold (XAUUSD) added 5.09% to reach $1,284 per troy ounce, while silver (XAGUSD) rose to $19.91, or 5.57% per troy ounce.

What to expect this week?
This week’s start is mainly focussed on reports from the US and China, as the majority of economic events on Monday are coming from the two countries amid a closed Japanese market due to a holiday and a lack of data from the Eurozone countries. China has already published its GDP, with figures showing another slow growth for a second consecutive quarter.

The country’s economy increased by 7.5% YoY compared to 7.7% for the same period the previous year, while it also revealed slightly weaker-than-expected Q2 results at 1.7%, opposite forecasts for a 1.8% rise. One of the main reasons contributing to the country’s lower GDP growth lays in the declining world demand for Chinese goods. However, many analysts commented that the current GDP results in the case of China are not a negative signal and it is still a healthy pace of growth. Later in the session, the US is due to publish its Retail Sales for June, while New Zealand will publish its Consumer Price Index, both on quarterly and annual bases. Tuesday will see the release of a series of UK economic data, including the country’s Consumer and Retail Price Indexes, both for QoQ and YoY bases, and the Bank of England Inflation letter. Other highlights of the day will be the meeting’s minutes of the Reserve Bank of Australia and the Bank of Japan, the Consumer Price Index for both – the Eurozone and the US, along with Germany’s ZEW Survey on economic sentiment.

Wednesday’s focus will shift to the Bank of England meeting’s minutes and the country’s Claimant Count Change as well as the US Building Permits data for June. Thursday will produce the UK’s Retail Sales on quarterly and annual bases, along with the US Initial Jobless Claims. Friday’s main entries will come from Germany’s Import Prices for June and Canada’s Consumer Price Index, as the trading day will be rather quiet in terms of economic events.

Outside of the economic calendar, some leading US companies will publish their financial results and heat the market as the earnings season is gathering speed: Citigroup (C) on Monday, Coca-Cola (KO) and Johnson & Johnson (JNJ) on Tuesday, Bank of America (BAC), International Business Machines (IBM), American Express (AXP) and Intel (INTC) on Wednesday, Verizon Communications (VZ) on Thursday and General Electric on Friday.

The precious metals were the big winners last week

The precious metals were the big winners last week, but with some noticeable twists. The precious metals with industrial uses – palladium, silver, platinum – rose more than gold, as did WTI. This suggests the move had more to do with renewed optimism for the global economy than any increased confidence in QE. But then why did copper lag? Perhaps because it is simply less volatile (standard deviation of 6.4% so far this year, vs 16.0% for silver) or perhaps because of the continued slowdown in China (see below). Nonetheless given the overall drop in the dollar last week, gold’s performance can only be termed disappointing. It simply confirms to me that baring some unforeseen disaster, the trend for gold remains down.

The most important indicator for the day (and perhaps the week) is already out: China 2Q GDP. It hit the consensus forecast exactly at +7.5% yoy, down from +7.7% in Q1. That confirms the slowdown in the economy. But with the Finance Minister recently saying that growth of 6.5% or 7.0% wouldn’t be a problem, it may be somewhat of a relief, because even if it were worse, the government wouldn’t necessarily have done anything to boost growth. In addition, industrial production, fixed asset investment and retail sales for June were announced at the same time and they too were largely on target and confirmed the slowdown. Retail sales on the other hand accelerated, perhaps showing that the government is having some success in reshaping the economy to be more dependent on domestic demand. Nonetheless the business climate index and entrepreneur confidence index both fell, indicating that businessmen are getting nervous.

No doubt the recent spike in interbank rates and the difficulty in getting loans is having an impact on business sentiment. It seems likely that the slowdown in China will continue for some time, especially with the problems in the banking system. That suggests a weaker AUD and struggling base metal prices, in my view.

The other main event of the week will be Fed Chairman Bernanke’s testimony to the US House and Senate Banking Committees on Wednesday and Thursday, in which he will once again get an opportunity to send the markets into wild gyrations as he repeats himself for the umpteenth time. I don’t expect anything new from him; the only question is how the markets react to what he says. It appears from last week’s action that investors have finally gotten the message, which would imply little volatility, but one never knows. For today, there are no major Eurozone indicators out. Mr. Asmussen of the ECB will be speaking. Last week he sent EUR/USD to the low for the year with his comment that the ECB’s pledge to keep rates low for “an extended period of time” extends beyond 12 months. The ECB quickly backpedalled his comments in an email sent to journalists. He’s not likely to make that same mistake again and so I do not expect anything particularly revealing from him. The calendar in the US is thin but worth watching. The Empire State manufacturing index is forecast to have slipped a bit in July to 5.0 from 7.84 in June; retail sales on the other hand are forecast to have risen by 0.8% mom in June vs +0.6% in May. The retail sales “control group” (excluding autos dealers, building materials and petrol stations) is forecast to show the same +0.3% mom rise as it did the previous month. Continued growth in retail sales would probably be supportive of USD, given the US economy’s reliance on consumption.

The Market

EUR/USD

• EUR/USD remains unchanged since Friday with outlook remaining to the upside. Resistance levels can be found at 1.3200 and 1.3290, support at 1.3014 and 1.2890.

USD/JPY

• USD/JPY ended slightly higher. Outlook remains to the upside. Resistance levels can be found around the 99.80-100.00 region and 100.70, support at 98.60 and 97.00.

EUR/GBP

• EUR/GBP ended slightly higher. The outlook for the pair remains to the upside back up by a strong rising trend line support. Stochastic is in overbought region so a break of this trendline may see an imminent drop. Resistance is the 0.8690 level followed by 0.8790, support is at 0.8610 followed by 0.8590

Gold

• Gold continued its gaining streak after bouncing higher from its middle Bollinger Bands (4-Hour). Gold maintains strong momentum and we think it is highly likely that the 1300 level may be tested. A breakout of this level could see Gold soar much higher. However with the stochastic being in overbought region we may observe a down correction today if this level is not broken. Resistance levels can be found at 1300.00 with a breakout leading all the way to 1343, support at 1260.00 followed by 1226.50

Oil

• WTI moved higher after bouncing up from the 104.50 support, its middle Bollinger Bands. A further move to the upside may be expected as it maintains a strong rising trend line support. Resistance levels can be found at 107.40 with a breakout leading all the way to 108.30, support at 103.40 followed by 101.70

The greenback declined against most of its peers

The greenback declined against most of its peers.

Last night, after a very quiet European trading session, the dollar started to weaken strongly. The dollar index tumbled after Bernanke said the US economy still needs stimulus because the inflation and the unemployment rate are below target.

These words can affect the dollar in the longer term, so today we are going to have a very choppy day. What we see now is that the 20 days dollar strengthening period is over by now.
Technically the EURUSD could make a correction today and get back to test the 1.3000 level, but afterwards it could recover again, I bet on the bullish trend until end of this month.


The fallout from Bernanke’s dovish comments continue. Major levels are being breached with some pairs moving hundreds of pips.

EUR/USD is challenging 1.32, GBP/USD is close to 1.52 and USD/JPY is around 98.50 — updates coming

• EUR/USD is already over 300 pips higher since Bernanke opened his mouth: from around 1.2880 to 1.3192 at the time of writing. Resistance is at 1.32 followed by 1.3250. Support at 1.3160, followed by 1.31.
• GBP/USD is over 250 pips since the comments were made. It traded in the mid 1.49s, and it is now just under 1.52. This line, 1.52, serves as resistance. Support is at 1.5144.
• AUD/USD was temporarily blocked by a double top, but it broke above it and is trading at 0.9264. The next significant level is 0.9344. Support is at 0.9233.
• USD/JPY is trading at 98.60, after falling even lower beforehand. The pair was trading over 100.40 earlier in the day. Moves here are quite violent. The really big support line is at 95.
• USD/CAD dropped as low as 1.0375. It traded above 1.05 beforehand. Support is at 1.0360, followed by 1.03.
•  
  EUR: The ECB monthly report is usually not that interesting, but could be more of an event risk today should the ECB offer more detail on its decision to offer ‘forward guidance’ at this month’s meeting.
  Idea of the Day
  There was a notable turn around in the dollar overnight, thanks to comments from Fed Chairman Bernanke as well as the minutes to the June FOMC meeting.
  The minutes were highlighting the conditionality of the Fed stepping back from bond purchases and the need for more signs of improvement of the labour market.
  Meanwhile, the Fed Chairman stated that “Highly accommodative monetary policy for the foreseeable future is what’s needed in the US economy”. The reaction seen on the dollar reflects the extent of dollar long positions in the market, with stops triggered across the board in response to the two-pronged attack.
  On the majors, it was the euro and Swissie that gained the most vs. the dollar.  For today, it’s a question of whether the market is capable of picking itself off the floor and building a long dollar base once again.
  
  Latest FX News
  
  AUD: Mixed messages from the jobs data, with headline employment rising by a greater than expected 10.3k, whilst the unemployment rate increased from 5.6% to 5.7%. Full-time employment fell, whilst part-time increased.  Aussie propelled to a two week high vs. the dollar, largely owing to dollar weakness from Bernanke and FOMC minutes.
  
  JPY:  No new policy measures after the latest Bank of Japan meeting. As was anticipated yesterday, the ‘recovery’ word was mentioned for the first time since early 2011, although growth forecasts were cut a little.
  
  GBP: Cable propelled back above the 1.50 level by the broad dollar weakness seen overnight.