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The battered Dollar licked its wounds after reaching a 15-month low against a basket of global currencies during early trading on Wednesday, as investors repositioned ahead of a multitude of key risk events this week. It has certainly been a rough trading year for the Greenback, with sentiment turning increasingly bearish as political drama in Washington clouds the prospect of another US interest rate hike in the coming months. Waning confidence in Washington over Trump’s ability to move forward with tax reforms, and the fiscal stimulithat markets have been heavily betting on have made the Greenback vulnerable to further losses. As August gets underway, the unsavory combination of political risk and concerns over stubbornly low inflation rates in the US are likely to put more pressure the Greenback and -further weaken its position against other major currencies.

As the Dollar sulks near a 15-month low, investors may direct their attention towards the ADP Employment Report for July that is being released later today and which should offer further insight into the health of the US economy. A figure below the market consensus of 185k is likely to entice bears to attack the vulnerable Dollar further. From a technical standpoint, the Dollar Index is heavily bearish on the Daily charts. Repeated weakness below 93.00 should encourage a further deprecation towards the 92.00 support level.

Sterling marches to 11-month high

Sterling ventured to its highest level in 11 months against the Dollar on Tuesday, after the UK Manufacturing Purchasing Manager’s Index rose to 55.1 in July. With UK manufacturing growth rebounding from a seven-month low in July, some fears have receded over a deceleration in economic momentum and this was reflected in Sterling’s appreciation. Although Sterling has started the trading week on a firm footing, with Tuesday’s positive economic data keeping the currency buoyed, the key driver behind the GBPUSD’s resurgence remains Dollar weakness.

This is a big week for the British Pound, with volatility expected as investors brace for Thursday’s UK Services PMI report, as well as the BoE’s policy decision and the release of its latest quarterly inflation report. A vulnerable Dollar has elevated the GBPUSD to above 1.3200 and further upside is on the cards if bulls secure another daily close above the 1.3200 level.

Commodity Spotlight – Gold

July was a remarkable trading month for Gold, with bulls thrown a lifeline after the Federal Reserve’s cautious outlook on inflation punished the US Dollar and weighed heavily on the prospects for higher US rates. Although the yellow metal edged lower during Wednesday’s trading session as the Dollar attempted to stabilize, buyers still remain in control on the daily charts above $1260. Gold traders will be paying very close attention towards the ADP report later in the day and NFP for Friday which is likely to impact US rate hike expectations consequently affecting Gold’s trajectory. A disappointing ADP Employment Report for July may instill bulls with enough inspiration to attack $1270. From a technical standpoint, the yellow metal remains bullish on the daily charts and a decisive breakout above $1270 should encourage a further appreciation towards $1280.

EURJPY turned bullish on the 4-hour chart after breaking out of a recent range and above the July 11 high of 130.76.

Following a consolidation phase that took place around the key psychological level of 130.00 during July 20 until today, prices jumped into the 131.00 handle to hit as high as 131.17 so far.

EURJPY gained upside momentum after RSI started rising yesterday. The short-term outlook is bullish as the uptrend from the June 15 low of 122.39 remains intact and there are no signs of a reversal in the uptrend yet.

A continued move to the upside would target the next major resistance level at 132.00, a level not seen since early 2016. Such a move would strengthen the bullish bias and open the way towards 134.00.

Only a drop back below 130.76 would bring the bias back to neutral. A further decline below the Ichimoku cloud and below recent support at 129.55 would give scope to target support at 128.57 (July 19 low) and 127.43 (June 30 low).

In the short-term, the risk is to the upside based on the bullish market structure. The Tenkan-sen line is above the Kijun-sen line and the market is above the Ichimoku cloud. Meanwhile, RSI remains above 50 in bullish territory.

As traders in Europe were about to start the day, the dollar managed to retrace some of its losses against Asian currencies. However, the dollar index was moderately down at 93.01 as the euro and sterling strengthened.

A weak labor market drove the New Zealand dollar lower during the Asian session, as the figures curbed the possibility of a shift in the central bank’s neutral guidance on monetary policy. Change in employment fell 0.2% in the second quarter, faring worse than the expected 0.7% expansion and well below 1.2% reported in the prior quarter. Quarterly (0.4%) and annual wage inflation (1.6%) mirrored expectations and prior periods. However, at 1.6% expansion in the second quarter, annual wage inflation stands below consumer price inflation at 1.7%. Kiwi/dollar fell half a percent to last trade at 0.7426 ahead of European trading.

The aussie lost ground against its US counterpart during the first session of the day, with the pair last trading at 0.7963.

With the increasing divergence between the European Central Bank and the Bank of Japan on their monetary policy outlook, the euro surged against the yen hitting an intra-day high of 131.17; a level last seen in February 2016. Traders are placing bets that the ECB will announce monetary policy tightening in autumn, while the probability of Japan’s central bank doing the same has lessened.

The euro continued strengthening against the dollar, with the pair last trading at 1.1830 ahead of the European open. Dollar traders are likely starting to position for key events this week, notably Friday’s US employment report. For potential impact on the dollar, the market is also awaiting the US ADP jobs report and comments by San Francisco Fed President John Williams and Cleveland Fed chief Loretta Mester due later in the session. Dollar/yen was last up a third-of-a-percent at 110.70.

In other forex moves, sterling rose against the greenback to last trade at $1.3211 ahead of the key construction PMI data due at 9:30 GMT and tomorrow’s Bank of England meeting.

Looking at commodities, oil was under pressure during the Asian session with WTI falling further below the $50-mark. The American Petroleum Institute’s (API) reported that US crude stocks rose by 1.8 million barrels in the week ending July 28 to 488.8 million. This has pushed back hopes that the recent inventory pullback was a sign of a tightening US market. WTI was last trading at $48.80 a barrel and Brent was at $51.45 a barrel.

As the greenback strengthened against the yen, gold lost ground with the precious metal under slight pressure today. Gold was last trading at $1,267.14 an ounce.

Contrary to expectations, an announcement of the US Manufacturing PMI caused only an eight basis points market reaction. Thus, due to absence of any sizable fundamental events, the currency exchange rate spent previous trading session in a flat and steady movement along the weekly R1 at 1.1815, crossing it multiple times in both directions. Today the pair is expected to use an upside momentum provided by the approaching 55-hour SMA in conjunction with the lower support line of a rising wedge and try to climb to the weekly R1 located at the 1.1878 level. A number of technical indicators support this scenario, sending signals to buy the pair. On the other hand, SWFX traders continue to remain bearish on the pair even though not as strong as yesterday.

Even though both British and the US Manufacturing PMIs matched with experts' forecasts, the currency exchange rate did not manage to reach the weekly R2 located at the 1.3264 level. On the other hand, a strong support barrier set up by the weekly R1 at 1.3200 also did not let the pair to slip to the bottom. Thus, during the whole previous trading day the currency rate was moving along the above pivot point, basically, forming a head and shoulders pattern. From a technical perspective, the rate should leave the formation downwards and try to target the 1.3128 level. In order to do that, it would have to bypass the rising 55- and 100-hour SMAs. For this reason, the successful slip downstairs is doubtful. Most probably, the pair will continue attempts to climb upstairs.

Contrary to expectations, the weekly S1 located at the 110.11 level proved to be a very strong support barrier. Namely, it managed to neutralize multiple attempts of the currency exchange rate to slide downwards, including the 34-pip fall that happened in the middle of the day, under pressure from the 55-hour SMA. As soon as the pair made a fully-fledged rebound, it started to climb upstairs, crossing the above 55- and 100-hour SMAs. Most likely, the surge will be stopped somewhere between the 111.00 – 111.20 levels, as they represent a location of the combined resistance level formed by the 200-hour SMA and the weekly PP. On gradual decay of the upside momentum also point out certain technical indicators, suggesting that strength of the uptrend is coming to an end.

The first half of previous trading day the yellow metal spent in a confident upward movement, supported by the 55-hour SMA near 1,267.26 as well as the release of a number of disappointing US macroeconomic data. Once an upside momentum was over, the buck started to restore lost positions and dragged the rate to the bottom, passing through the 20-, 55- and 100-hour SMAs. Given that SWFX traders remain slightly bearish on the pair, it might slip a little bit further towards the bottom trend-line of an ascending channel that is backed up by the weekly PP at 1,261.80 and the approaching 200-hour SMA. On the other hand, certain technical indicators send a signal that the bullion is already oversold and, thus, might start the surge without reaching the pattern's boundary.

Weekly




 

•    Last Candlesticks pattern: Long white candlestick


   

•    Time of formation: 22 May 2017


   

•    Trend bias: Up
 


 

Daily




 

•    Last Candlesticks pattern: Hammer


   

•    Time of formation: 14 Mar 2017


 

•    Trend bias: Up


 





NZD/USD – 0.74

25
 

Kiwi has continued heading north in part due to broad-based weakness in the greenback and price just broke above previous resistance at 0.7486 , adding credence to our bullish view medium term erratic upmove from 0.6074 (2015 low) has resumed and upside bias remains for this move to extend gain to 0.7610-20, then towards 0.7690-00 (61.8% projection of 0.6074-0.7486 measuring from 0.6818), however, near term overbought condition should prevent sharp move beyond 0.7750 and reckon 0.7800-10 would hold from here, bring retreat later.

On the downside, whilst initial pullback to the Tenkan-Sen (now at 0.7440) is likely, reckon downside would be limited to 0.7401 support) and the Kijun-Sen (now at 0.7380) would hold, bring another upmove later. A daily close below the Kijun-Sen would defer and suggest a temporary top is possibly formed, bring retracement of recent rise to 0.7330-35, however, still reckon downside would be limited to support at 0.7262 and price should stay well above support at 0.7201, bring another rally.  


Recommendation: Buy at 0.7400 for 0.7600 with stop below 0.7300.



On the weekly chart, kiwi extended recent upmove and has finally penetrated indicated previous resistance at 0.7486, adding credence to our bullish view that medium term erratic upmove from 0.6074 (2015 low) has resumed and may extend gain to 0.7690-00 (61.8% projection of 0.6074-0.7485 measuring from 0.6818) and later towards 0.7780-85 (61.8% Fibonacci retracement of 0.8836-0.6074), however, reckon upside would be limited to 0.7890 and price should falter well below resistance at 0.8035.

On the downside, although initial pullback to 0.7400-10 is likely, reckon the Tenkan-Sen (now at 0.7336) would limit downside and bring another rise later. Below support at 0.7201 would defer and suggest top is possibly formed, risk test of the Kijun-Sen (now at 0.7188) first, however, a weekly close below there is needed to add credence to this view, bring correction of recent rise to the upper Kumo (now at 0.7140), then 0.7090-00 but reckon support at 0.7035 would hold from here. 


Weekly
    •    Last Candlesticks pattern: Long white candlestick
    •    Time of formation: 10 Jul 2017
    •    Trend bias: Up

Daily
    •    Last Candlesticks pattern: Long white candlestick
    •    Time of formation: 18 Jul 2017
    •    Trend bias: Up



Although aussie edged higher to 0.8066 late last week, lack of follow through suggests consolidation would be seen and minor consolidation would be seen with initial downside bias and pullback to support at 0.7878 cannot be ruled out, however, reckon the Kijun-Sen (now at 0.7819) would limit downside and bring another rise later. Above said resistance at 0.8066 would signal upmove has once again resumed and extend the medium term erratic rise from 0.6827 to 0.8163 resistance, then 0.8200, however, loss of near term upward momentum should limit upside and reckon another previous resistance at 0.8295 would hold from here.

On the downside, whilst initial pullback to 0.7935-40 and possibly 0.7878 cannot be ruled out, reckon the Kijun-Sen (now at 0.7819) would limit downside and bring another upmove later. A daily close below the Kijun-Sen would dampen this bullish view and suggest a temporary top is possibly formed, risk test of 0.7785-90 but break of previous resistance at 0.7712 is needed to add credence to this view, bring retracement of recent rise to 0.7650-60 first.



Recommendation: Buy at 0.7840 for 0.8040 with stop below 0.7740.



On the weekly chart, aussie’s upmove has gathered momentum after breaking above previous resistance at 0.7835, adding credence to our bullish view that the erratic rise from 0.6827 low is still in progress and upside bias remains for this move to extend headway to previous resistance at 0.8163, then 0.8250, however, near term overbought condition should limit upside to another previous resistance at 0.8295 and price should falter below 0.8390-00, bring retreat later.

On the downside, although pullback to 0.7900 is likely, reckon downside would be limited to previous resistance at 0.7835 (now support) and bring another rise later. Below 0.7785-90 would bring pullback towards previous resistance at 0.7712, break there would suggest top is possibly formed, bring test of the Kijun-Sen (now at 0.7698) but break there is needed to provide confirmation, bring further fall towards said support at 0.7571 which should remain intact.

USD/CHF - 0.9662

Most recent candlesticks pattern : N/A

Trend                                    : Near term up

Tenkan-Sen level                  : 0.9662

Kijun-Sen level                    : 0.9658

Ichimoku cloud top                 : 0.9682

Ichimoku cloud bottom              : 0.9672

Original strategy :

Buy at 0.9600, Target: 0.9700, Stop: 0.9565

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 0.9600, Target: 0.9700, Stop: 0.9565

Position : -

Target :  -

Stop : -

Dollar has traded narrowly and near term sideways trading is likely to continue, although initial downside risk of another retreat to 0.9620-25 cannot be ruled out, reckon previous resistance at 0.9596 would turn into support and contain downside, bring another rise later, above resistance at 0.9727 would extend recent rise to 0.9750-60, then 0.9780 but reckon 0.9800 would hold from here.
 
In view of this, would not chase this rise here and would be prudent to buy dollar on subsequent pullback as previous resistance at 0.9596 should turn into support and contain dollar’s downside. Below 0.9580 (61.8% Fibonacci retracement of 0.9490-0.9727) would defer and suggest a temporary top is formed instead, bring correction to 0.9540-50 but price should stay well above support at 0.9490, bring another rise later.