Analys från DailyFX
US Dollar Coils for Big Move – Boom or Bust
INTRADAY PERFORMANCE UPDATE: 09:40 GMT
Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): -0.06% (–0.45%prior 5-days)
ASIA/EUROPE FOREX NEWS WRAP
It’s been a quiet start to the trading week thanks to a barren economic calendar; but with several important data and events due over the next few days, the newswires shouldn’t stay quiet for long. This week is notable in particular given two important Federal Reserve events that should give greater insight as to which way the central bank is leaning towards tapering QE3 in September.
On Wednesday, the first of the two Fed related events, the July FOMC meeting Minutes, could prove to be a bearish catalyst for the US Dollar. The policy statement released after the July meeting showed that policymakers had become wearier of the soft inflation backdrop, with the only dissenter from the June meeting falling back in line thanks to the dovish adjustment in language.
With the FOMC minutes setting a cautious yet hopeful backdrop for US growth prospects, the Jackson Hole Economic Policy Symposium scheduled to take place at the tail end of the week will be viewed purely through the lens of the QE3 taper.
Although Fed Chairman Bernanke won’t be there, that doesn’t mean that clues on QE3 won’t be present. A big focus will be whether or not policymakers feel that the US economy is strong enough to withstand (potentially sharply) higher interest rates at this point in the recovery. Volatility will then be derived from the juxtaposition of tapering QE3 in an improved growth environment versus a stumbling one.
As it stands now, the ’apocalypse’ scenario looks unlikely to play out – that the Fed is looking to taper QE3 irrespective of any incoming data; surely a sign of asset bubbles having formed in global equity markets and US Treasuries.
EURUSD 5-min Chart: Monday, August 19 Intraday
With no news on the calendar today, consolidation is very much afoot, with the US Dollar trading within one-quarter of a percent against all of the majors but for the New Zealand Dollar. This period of relative calmness shouldn’t go beyond a day or two as currency markets have already shown signs of bracing for QE3 taper speculation.
Read more: Euro Fails to Gain Despite Improved GDP – Will PMIs Revive Optimism?
ECONOMIC CALENDAR – UPCOMING NORTH AMERICAN SESSION
There are no events on the calendar for Monday, August 19.
See the DailyFX Economic Calendar for a full list, timetable, and consensus forecasts for upcoming economic indicators. Want the forecasts to appear right on your charts? Download the DailyFX News App.
FX TECHNICAL ANALYSIS – CHART OF THE DAY
USDJPY (H1) – The USDJPY took a hard spill on Thursday and fell out of an ascending channel that guided price from the weekly low on Monday. However, choppy trading that past 48-hours may have produced a bottom, with a Bullish Ascending Triangle appearing and breaking to the upside on the H1 timeframe.
As such, with prior intraweek swing resistance coming in at ¥98.25/40, gains could accelerate on Monday before sellers reenter the picture some 30-50-pips higher. At that point, the H1 RSI and H1 Slow Stochastics (5,3,3), both of which are presently bullish, should be in overbought territory indicating a point to trim back bullish bets (should such a situation play out).
— Written by Christopher Vecchio, Currency Analyst
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
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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