Do We Face Another Day Without Gains?

Wednesday saw a positive German GFK consumer climate help the euro higher although we failed to breach the previous day’s highs before meeting some offers to bring us back down again. A similar story was seen with a fairly on-target second estimate UK GDP with the data not divergent from forecast enough to warrant any significant upside or downside. This only leaves US new home sales as a source of volatility today, but with the forecast quite low we may not again have too much cause for volatility there. A very good print would help the market lower since that is where sentiment is positioned, but home sales in the US are suffering from rising rates and therefore unlikely to be impressive. As such we may face another day with zero progress.

USD% Index

The dollar remains above key support and also a bearish trend line that was previously the top of a bearish channel but is now acting a support for the current attempt higher. Note the use of the word attempt, because this is the most painfully slow dollar rally I’ve seen in a long time. This does not mean that as soon as we get some USD positive new that the build of dollar sentiment wont have traders rushing to buy dollar, but it does mean that they are clearly not as enamoured with buying dollars as they could be right now, so any euro or GBP positive news that comes out in the mean time gradually eats away at bullish dollar optimism. RSI is now below the 100 period moving average and reflects the return to slight bearish momentum for the time being although moving back towards bullishness, but so long as we are above the green support then a bullish dollar outcome is preferable. There is a risk though that not far below this level there will now likely be a batch of stop losses which may be targeted before the eventual move higher so a final spike lower can not be ruled out. Typically when that happens RSI is a very good method of timing entry. I am bullish USD while above the green support line

USD% Index Resistance (EUR/USD support): EUR/USD 1.3726, 1.3700, 1.3675
USD% Index Support (EUR/USD support): EUR/USD 1.3755, 1.3780, 1.3800

EUR% Index

We are still holding up at recent highs which are also the breaking point of the current bearish channel. Traders seem to be in limbo without the decisiveness to break or continue either trend. We could see further attempts higher, although for the time being, the market seems to view the Euro as overbought and in need of a retracement lower. Its not clear how low we will go at this stage, our hunch is perhaps not that far given the return to bullish European data. This makes the trend line support highlighted in blue a potential target for an eventual continuation higher although it is still too early to tell given the fact we’re currently at highs. I am bearish EUR.

EUR% Index Resistance: EUR/USD 1.3774, 1.3800, 1.3850
EUR% Index Support: EUR/USD 1.3700, 1.3634

JPY% Index

The JPY% index remains trapped between two strong levels and is going nowhere fast. We’ve yet to test the bottom of the current bullish channel at about the 102.76 level for USD/JPY although it looks as though we are building up to a confluence of support from the green support line and the white bullish channel support at some point this week. This may find enough bids to break this deadlock and propel us up to the highlighted bearish major trend line (thick white line) currently displaying USD/JPY 100.00 as a suggested level for a major bearish JPY trend continuation. I am bullish JPY until USD/JPY 100.00 is tested.

JPY% Index Resistance (USD/JPY Support): USD/JPY 101.57, 100.00
JPY% Index Support (USD/JPY Resistance): USD/JPY 102.74, 103.44

GBP% Index

Still firmly in limbo, the pound has slightly pushed through the bearish channel although the price action if far from decisive in that respect. The slow pace of dollar buying has hampered the progression lower for the pound so we really have not gone very far. EURGBP is no longer helping the pound lower with a retreat to range-bound conditions once again. The confluence of fib exp support levels for the GBP% index around 1.6550 may prove to be a strong barrier, but likewise, if that breaks then it will take out stops below and really get things going. We will have to wait and see. Below that we have a similar confluence of support which may prove to be more robust due to it’s proximity to the bottom of the current bullish channel meaning that is is more or less in the buy zone for the current trend. I remain bearish GBP within a bull trend.

GBP% Index Resistance: GBP/USD 1.6630, 1.6700,
GBP% Index Support: GBP/USD 1.6550, 1.6500, 1.6383

AUD% Index

Overnight we had the now familiar spike lower on bad data which was gradually filled as the London morning got closer. This time we had a poor Construction Work done number to thank for the volatility. Downside remains expected until we test the bottom of the current bullish channel, although it seems we may just track sideways until the support comes to us. Currently showing 0.8940 to 0.8900 as the buy zone for an Aussie continuation higher. I am bearish AUD until the 0.8900.

AUD% Index Resistance: AUD/USD 0.9048, 0.9081, 0.9150
AUD% Index Support: AUD/USD 0.8936, 0.8900

CHF% Index

Still quite a weak break to the upside for the CHF index although now holding above the broken channel top, we have a cluster of resistance that is capping price action still. We have upwards momentum, but the price action if far from decisive. There is the sense that the market is waiting for a proper data clue as to the medium term direction and will not do anything too dramatic without it. I am neutral / bearish CHF based on my dollar outlook.

CHF% Index Resistance (USD/CHF support): USD/CHF 0.8857, 0.8832 0.8800
CHF% Index Support (USD/CHF resistance): USD/CHF 0.8900, 0.8950, 0.8984