Last week ended with a bang for the USD as the last line of bullish defence was breached. Market participants fully digested the meaning of the FOMC minute with the realisation that the rate hike would most likely be postponed. USD was already in a sensitive position but what really acted as a catalyst on Friday was the unimpressive Flash Manufacturing PMI results from China which reconfirmed the fears of most in regards to the potential deceleration within the Chinese economy. Chinese factory activity has been the slowest in over 6 years, this vital pieces of information in addition to the other developments coming from China have acted as attributes which have caused the FED to reschedule the rate hike.
USD bulls may be commended for the extended move up. Even with all the not so impressive news from the start of August beginning with unimpressive NFP results, the sentiment still remained bullish with all odds on the September hike. Now the hike is temporarily out of the picture, polarity has changed and USD has weakened across the board. US Dollar index has breached a technical support on the daily timeframe and has turned bearish, whilst the EURUSD has surged aggressively to the upside currently testing the resistance of 2015 which is based around 1.1450.
Sentiment still remains bullish for the US economy but the events globally have slowly chipped away the strong vitality experienced in the previous weeks. This week has yet to begin but next week the new batch of NFP results will be released for the USD. Such will be a very vital game changer because if results do not meet expectations for the second time in a row then the scenario discussed almost 4 weeks ago may become a reality. Speaking of global events, the EUR may be in the spotlight once more as news has circulated Tsipris has resigned from his post. Events with North and South Korea have induced a risk-on environment where investors have started purchasing safe haven instruments such as the JPY and Gold.
Speaking of Gold, the precious metal has surged aggressively to the highs of 1168.0. The daily timeframe suggests that this is in a technical uptrend with the next relevant resistance based around the 1200.0 regions. Whilst Gold trades up, the USDJPY has plummeted as a result of investors flocking to safe-haven denominations. This pair is currently bearish and a break of the resistance based around 121.0 may open a path to 120.0 and lower.
There are a couple of news releases this week which may condition the USD for the NFP next week. CB Consumer confidence has been increasing incrementally in the States and predictions for Tuesday stand at 92.8. Core durable goods on Wednesday and unemployment claims on Thursday should meet expectations. It is important to keep in mind that the main cause of the USD weakness as of now is the aftertaste of disappointment from market participants in regards to the rate hike not materialising in September. A green week for the USD in addition to very strong NFP results next week should renew bullish momentum for the USD.
The EURUSD fundamentally remains neutral due to the uncertainty within the EUR due to the resignation of Tsipris in Greece. The USD still remains fundamentally bullish but has been exposed to a strong level of bearish weakness. Prices have surged to the highs of 1.1497 with the EURUSD making this a technically bullish trend on the daily timeframe. Prices have breached the previous resistance of 1.120 and currently trades not only above the daily 20 SMA but also monthly R1. The current trend defining level remains at 1.100 but if prices enter a correction phase then a new lower high may be created around the 1.12X regions. A strong break above 1.1500 may open a path to the next relevant support based around 1.22X.
A weak week USD and strong JPY have caused the USDJPY to drop to lows of 121.X, prices not seen since June 2015. The USD weakness created on Friday combined with investors purchasing safe haven securities have acted as the perfect environment for USDJPY bears to take control. This is a technically bearish market on the daily timeframe with most leading and lagging indicators pointing to the downside. Prices currently reside below the monthly pivot and the MACD trades to the downside. The best strategy in this scenario can be to either take advantage of any corrections to the 122.X regions of the breakdown. A daily close above 123.0 invalidates this daily bearish outlook.
Whilst the USD weakens across the board, the GBPUSD is almost indifferent. This is truly a tug of war because both single currencies are in fact fundamentally bullish. The strength is derived from not only their economies doing well but the convergence in monetary policies with both central banks aiming to increase interest rates in the foreseeable future. Technically GBPUSD is in a tight range and has been for an extended period of time. Support can be found around 1.5500 and resistance at 1.5700. One can implement the breakout/down strategy for this pair.
Fundamentally the AUDUSD remains bearish. Australia has taken a hit from the plunging prices of Gold and there are talks of a potential interest rate cut by the RBA sometime this year. The USD weakness is not reflected on this pair because prices are still trading to the downside. The Aussie was already technically bearish but a short term range had been formed in the months of July to August. Early this morning prices broke down trading to the 0.7200 supportive regions. This is the last line of defence for the bulls before a further decline to the lows of 0.700X. With prices trading below the monthly pivot and daily MACD about to cross to the downside, it may be just a matter of time before prices break this last line of defence. The daily trend defining level remains around the 0.7350 regions.
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