Analys från DailyFX
AUD/USD Short Term Levels Ahead of China’s CPI Data
Talking Points:
– AUD/USD still supported above 0.76 following Friday’s NFPs
– A quiet economic docket puts the spotlight on the China CPI data later for possible volatility
The AUD/USD is still being supported above the 0.76 handle (at the time of writing) after the pair moved lower following Friday’s blockbuster NFP report.
A quiet economic calendar ahead shifts our focus to China’s July CPI data for possible volatility for the pair given the trading relations between China and Australia.
Taking this into consideration, we look to find short term trading opportunities using the Grid Sight Index (GSI) indicator.
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The AUD/USD surged higher last week after the RBA cut rates to 1.5%, as the market appeared to have interpreted the central bank’s statement as not indicative of further rate cuts at the moment. In this context, the Australian Dollar may still find support as a 1.5% rate is still attractive in the current record low yield environment.
In their policy statement, the RBA said that actions by Chinese policymakers are supporting the near-term growth outlook, but the underlying pace of China’s growth appears to be moderating.
This puts the China Consumer Price Index (CPI) data in focus given the trading relations between the nations.
The headline year-on-year figure is expected to slow to 1.8% from the prior print of 1.9%, far from the PBOC’s target-level for CPI of 3.0%. A miss to expectations could increase the odds of the PBOC adopting a more dovish monetary policy, which could potentially hurt the Yuan and thus imports from Australia.
AUD/USD 3-Min GSI Chart: August 8, 2016
The AUD/USD is approaching a potential resistance area above 0.7637 (see chart below), with GSI calculating higher percentage of past movement to the downside in the short term. The GSI indicator above calculates the distribution of past event outcomes given certain momentum patterns, and can give you a look at the market in a way that’s never been possible before, analyzing millions of historical prices in real time. By matching events in the past, GSI describes how often the price moved in a certain direction.
You can learn more about the GSI here.
AUD/USD Technical Levels:
Click here for the DailyFX Support Resistance tool
We use volatility measures as a way to better fit our strategy to market conditions. The AUD/USD is seeing reduced levels of volatility (on 14-day ATR study). In turn, this could imply that range bound trading plays might be appropriate ahead.
AUD/USD 30-Min Chart: August 8, 2016
(Click to Enlarge)
The AUD/USD is trading below a potential resistance area above 0.7637. Further levels of interest on a move higher may be 0.7674, a zone above the 0.77 handle and 0.7750.
Levels of interest on a move lower could be the area above 0.76 followed by 0.7575, a zone below 0.7550 and the 0.75 handle.
When price reaches those levels, short term traders might use the GSI to view how prices reacted in the past given a certain momentum pattern, and see the distribution of historical outcomes in which the price reversed or continued in the same direction. We generally want to see GSI with the historical patterns significantly shifted in one direction, which could potentially be used with a pre-determined bias as well.
A common way to use GSI is to help you fade tops and bottoms, and trade breakouts. That’s why traders may want to use the GSI indicator when price reaches those specific pre-determined levels, and fit a strategy that can offer a proper way to define risk. We studied over 43 million real trades and found that traders who do that were three times more likely to turn a profit. Read more on the “Traits of Successful Traders” research.
Meanwhile, the DailyFX Speculative Sentiment Index (SSI) is showing that about 40.0% of FXCM’s traders are long the AUD/USD at the time of writing. The SSI is mainly used as a contrarian indicator implying further strength ahead.
You can find more info about the DailyFX SSI indicator here
— Written by Oded Shimoni, Junior Currency Analyst for DailyFX.com
To contact Oded Shimoni, e-mail oshimoni@dailyfx.com
Follow him on Twitter at @OdedShimoni
What’s inside:
- EURUSD broke the ‘neckline’ of a bearish ‘head-and-shoulders’ pattern, April trend-line
- Resistance in vicinity of 11825/80 likely to keep a lid on further strength
- Targeting the low to mid-11600s with more selling
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Coming into last week we pointed out the likelihood of finally seeing a resolution of the range EURUSD had been stuck in for the past few weeks, and one of the outcomes we made note of as a possibility was for the triggering of a ’head-and-shoulders’ pattern. Indeed, we saw a break of the ’neckline’ along with a drop below the April trend-line. This led to decent selling before a minor bounce took shape during the latter part of last week.
Looking ahead to next week the euro is set up for further losses as the path of least resistance has turned lower. Looking to a capper on any further strength there is resistance in the 11825-11880 area (old support becomes new resistance). As long as the euro stays below this area a downward bias will remain firmly intact.
Looking lower towards support eyes will be on the August low at 11662 and the 2016 high of 11616, of which the latter just happens to align almost precisely with the measured move target of the ‘head-and-shoulders’ pattern (determined by subtracting the height of the pattern from the neckline).
Bottom line: Shorts look set to have the upperhand as a fresh month gets underway as long as the euro remains capped by resistance. On weakness, we’ll be watching how the euro responds to a drop into support levels.
For a longer-term outlook on EURUSD, check out the just released Q4 Forecast.
EURUSD: Daily
—Written by Paul Robinson, Market Analyst
You can receive Paul’s analysis directly via email bysigning up here.
You can follow Paul on Twitter at@PaulRobinonFX.
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
EURUSD: Retail trader data shows 37.3% of traders are net-long with the ratio of traders short to long at 1.68 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.07831; price has moved 9.6% higher since then. The number of traders net-long is 15.4% lower than yesterday and 16.4% higher from last week, while the number of traders net-short is 0.4% higher than yesterday and 10.5% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
GBPUSD: Retail trader data shows 38.2% of traders are net-long with the ratio of traders short to long at 1.62 to 1. In fact, traders have remained net-short since Sep 05 when GBPUSD traded near 1.29615; price has moved 3.4% higher since then. The number of traders net-long is 0.1% higher than yesterday and 13.4% higher from last week, while the number of traders net-short is 10.6% lower than yesterday and 18.3% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current GBPUSD price trend may soon reverse lower despite the fact traders remain net-short.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
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