FX Daily: Awaiting USD Reversal Confirmation
TodaySome interesting comments last night about the potential for bad debt on Chinese banks balance sheets in a scenario that could mirror the issues seen in europe and the US. Initial write downs seem relatively large but it had an impact on the Nikkei index as it dumped everything pretty damn quickly overnight.As this played out we saw a couple of interesting themes after the much weaker than expected NFP had put the US dollar much lower the day before. Firstly the pound came off worse and today the MPC minutes didn’t really do much but put a move lower on pause and the euro held relatively steady vs the US dollar.Retail Order books are at incredible levels at the moment, with very little room to maneuver meaning stops need to be cleared to make room for any further moves. US jobless figures are out tomorrow which may be interesting ones to watch as we will start to see the impact of the US shutdown coming through in the US data.Overall it looks to us like we could actually be setting up for some US dollar strength and really now we are waiting patiently for our confirmation signs in the Retail Order Books. The question will be whether this takes the form of a minor correctional move to clear out the order books for further weakness or is it a change in overall trend, if it is in overall trend we are heading into a headwind of expected poor data out of the US due to the shutdown. That said, if expectations have been significantly lowered and the relatively low US dollar recently has had a positive impact we could see the shutdown impact less than initially thought potentially providing a data catalyst.EUR/USDLong: 1.3550RTAS Order Book systems continue to hold longs in this pair as we consolidated today. Retail Order Books remained relatively flat overall after we saw some initial buying give way to selling. 1.3800 now acts as key resistance followed by 1.3850. Support comes in around the 1.3700 mark with 1.3750 interim support.
EUR/USD 240 Min” title=”EUR/USD 240 Min” width=”1024″ height=”920″ />So far the pair mainly consolidated today following the NFP figures in a typical Monday style trade. The pair does look like it is due a bit of a correctional move or chop sideways and the 1.3800 level is at the moment acting as key resistance. If we find some more Retail Buyers then we could see this pair dip lower out of the over bought RSI region.
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GBP/USDLong: 1.5930Order Book systems continue to hold longs in this pair as it pulled back from the major resistance level at 1.6250 today. The pair did manage to find some support again at the 1.6125 mark but it does look relatively heavy. Retail Traders spent most of the day buying the move lower only to sell the minor bounce when it found support. Pair is now in a key range and a break to the downside could open the door to a further move lower.
GBP/USD 240 Min” title=”GBP/USD 240 Min” width=”1024″ height=”920″ />Pair currently looks like it is creating a double top in this pair and we would like to see some confirmation. Retail Traders have started buying in the cross now and this could be the confirmation for a least a minor reversal potentially back to the 1.6000 handle. The RSI pergence is normally a bit of a tell that something is up.
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AUD/USDShort: 0.9645Order book systems held shorts as the pair took the largest beating due to the Chinese bank rumours despite good Aussie data. Retail Trader have been buying the move lower last night but the pair seems to have found some minor support around the 0.9600 level. A break could push us lower, however we could see the pair push higher from here.
AUD/USD 240 Min” title=”AUD/USD 240 Min” width=”1024″ height=”920″ />The pair finally hit the 200 day SMA today and rejected it for a move lower. The blue box marked on our chart is our key resistance zone and we are watching price action very carefully here, if we reject the 200 day SMA and end the correctional move higher we could see this pair push lower back towards the 0.9000 level again. If we can break the 200 day SMA we potentially stand to make a much larger move higher back towards parity.
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EUR/AUDShort: 1.4270The RTAS Order Book systems booked profits on its long positions and jumped short in this pair today. Pair broke the 1.4300 level on the Aussie weakness, however it then struggled to really punch higher, key will be to see whether this pair retraces back below the 1.4300 mark or finds support for a move higher. Retail Traders so far today pretty flat in this cross.
EUR/AUD 240 Min” title=”EUR/AUD 240 Min” width=”1024″ height=”920″ />Despite finding some support the key will be the next move for this pair and whether it starts to push lower again or is on its way back up to highs. Retail Traders still remain generally net short this pair but have been prone to buying dips, if we see further buying on a dip back below 1.4300 there is a good chance this pair will take another run at the 1.4150 mark.
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EUR/GBPLong: 0.8510Order Book systems switched to longs today but this pair has generally struggled on the flat Retail Order Books. The pair broke the 0.8500 mark and pushed to the secondary resistance at 0.8532 today. It now sits just below this level, if it can break through we are likely to see another good push higher a retracement could see us test the 0.8500 support level.
EUR/GBP 240 Min” title=”EUR/GBP 240 Min” width=”1024″ height=”920″ />We highlighted a break of the 0.8500 mark would see us take a run at the 200 day SMA and the pair duly obliged today. Key now will be how this pair reacts to this dynamic resistance. Look for further signs of rejection off of this level or a clean break to confirm the next range this pair will establish.
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