AUDUSD downside bias through for .9330 and key .9322

  • A roll back lower to the range and we restate the view that “the threat is back to .9330 and growing risk for a break below key .9322”.
  • The previous setback from .9455 leaves a defensive bias to the narrow .9330-.9410/15 range from last week within the broader .9455-.9322 range.
  • With the recent rebound capped at .9410/15 and given prior support violations through .9360 and .9340, we still see a defensive bias and Head & Shoulders top risk.

WHAT CHANGES THIS?

  • Downside: Below .9322 sees a better top and bearish shift to target at .9258, 9230 and maybe the key .9208/00 area.
  • Upside: Above .9455 aims through the .9505 cycle high to retrace and chart targets at .9525/45.

 

Please see full report with levels and latest screencast here: http://members.marketchartist.com/Daily/AUDUSD.pdf

 

4 Hour AUDUSD Chart

 

 

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AUDUSD downside bias through for .9330 and key .9322

  • A roll back lower to the range and we restate the view that “the threat is back to .9330 and growing risk for a break below key .9322”.
  • The previous setback from .9455 leaves a defensive bias to the narrow .9330-.9410/15 range from last week within the broader .9455-.9322 range.
  • With the recent rebound capped at .9410/15 and given prior support violations through .9360 and .9340, we still see a defensive bias and Head & Shoulders top risk.

WHAT CHANGES THIS?

  • Downside: Below .9322 sees a better top and bearish shift to target at .9258, 9230 and maybe the key .9208/00 area.
  • Upside: Above .9455 aims through the .9505 cycle high to retrace and chart targets at .9525/45.

 

Please see full report with levels and latest screencast here: http://members.marketchartist.com/Daily/AUDUSD.pdf

 

4 Hour AUDUSD Chart

 

 

continue reading »

Key Fundamental Forex Events and Forecasts for the Coming Week

The following table lists the key economic data and other events that are due out during the week of July 21st–July 25th, with release times displayed for the GMT time zone.

The list also includes the current market consensus forecast for each event and indicates what sort of deviation might affect the forex market valuation of the indicated currency positively.

Monday, July 21st

  • All Day JPY Bank Holiday
  • 11:00am EUR German Buba Monthly Report (hawkish = good for currency)

Tuesday, July 22nd

  • 12:25am AUD RBA Assistant Governor Debelle speaks (hawkish = good for currency)
  • 4:00am AUD RBA Governor Stevens speaks (hawkish = good for currency)
  • 7:00am CHF Trade Balance (2.97B expected, > good for currency)
  • 9:30am GBP Public Sector Net Borrowing (10.3B expected, > good for currency)
  • 11:00am GBP CBI Industrial Order Expectations (9 expected, > good for currency)
  • 1:30pm USD Core CPI (0.2% expected, > good for currency)
  • 1:30pm USD CPI (0.3% expected, > good for currency)
  • 3:00pm USD Existing Home Sales (4.98M expected, > good for currency)

Wednesday, July 23rd

  • 2:30am AUD CPI (0.5% expected, > good for currency)
  • 2:30am AUD Trimmed Mean CPI (0.8% expected, > good for currency)
  • 9:30am GBP MPC Asset Purchase Facility (unchanged at 375B, votes 0-0-9 expected, < good for currency)
  • 9:30am GBP MPC Official Bank Rate (unchanged at 0.50%, votes 0-0-9 expected, > good for currency)
  • 9:30am GBP BBA Mortgage Approvals (43.4K expected, > good for currency)
  • 11:00am GBP CBI Realized Sales (18 expected, > good for currency)
  • 12:45pm GBP BOE Governor Carney speaks (hawkish = good for currency)
  • 1:30pm CAD Core Retail Sales (0.3% expected, > good for currency)
  • 1:30pm CAD Retail Sales (0.6% expected, > good for currency)
  • 3:30pm USD Crude Oil Inventories (last -7.5M, > good for currency)
  • 10:00pm NZD Official Cash Rate Decision (25 bp rise to 3.50% expected, > good for currency)
  • 10:00pm NZD RBNZ Rate Statement (hawkish = good for currency)
  • 11:45pm NZD Trade Balance (155M expected, > good for currency)

Thursday, July 24th

  • 12:50am JPY Trade Balance (-1.11T expected, > good for currency)
  • 2:45am CNY HSBC Flash Manufacturing PMI (51.2 expected)
  • 7:00am EUR Spanish Unemployment Rate (25.9% expected, > good for currency)
  • 8:00am EUR French Flash Manufacturing PMI (48.5 expected, > good for currency)
  • 8:00am EUR French Flash Services PMI (48.9 expected, > good for currency)
  • 8:30am EUR German Flash Manufacturing PMI (52.2 expected, > good for currency)
  • 8:30am EUR German Flash Services PMI (54.7 expected, > good for currency)
  • 9:00am EUR Flash Manufacturing PMI (52.0 expected, > good for currency)
  • 9:00am EUR Flash Services PMI (52.7 expected, > good for currency)
  • 9:30am GBP Retail Sales (0.2% expected, > good for currency)
  • 1:30pm USD Weekly Initial Jobless Claims (310K expected, < good for currency)
  • 2:45pm USD Flash Manufacturing PMI (57.5 expected, > good for currency)
  • 3:00pm USD New Home Sales (485K expected, > good for currency)

Friday, July 25th

  • 12:30am JPY Tokyo Core CPI (2.7% expected, > good for currency)
  • 2:00am NZD ANZ Business Confidence survey (42.8 expected, > good for currency)
  • 7:00am EUR GfK German Consumer Climate survey (8.9 expected, > good for currency)
  • 9:00am EUR German Ifo Business Climate survey (109.6 expected, > good for currency)
  • 9:00am EUR EZ M3 Money Supply (1.1% expected, < good for currency)
  • 9:00am EUR Private Loans (-1.8% expected, > good for currency)
  • 9:30am GBP Preliminary GDP (0.8% expected, > good for currency)
  • 1:30pm USD Core Durable Goods Orders (0.6% expected, > good for currency)
  • 1:30pm USD Durable Goods Orders (0.4% expected, > good for currency)

Technical Forecast and Levels to Watch for the Majors This Week

EURUSD: Mildly Lower

Resistance:
Initial: 1.3538, 1.3546/88, 1.3597, 1.3602/15, 1.3621/31, 1.3639/50, 1.3663/76, 1.3682/86, 1.3685/1.3710, 1.3714/16, 1.3731/39, 1.3748, 1.3758/74, 1.3784/98, 1.3807, 1.3810/20, 1.3824, 1.3832/36, 1.3845/54, 1.3864, 1.3875/78, 1.3888/92, 1.3905/14, 1.3937, 1.3947, 1.3966/69, 1.3993/1.4000, 1.4246 and 1.4500/17.
Above: 1.4695 and 1.4939.
Support:
Initial: 1.3489/1.3524, 1.3476/82, 1.3451, 1.3441, 1.3433/34, 1.3416, 1.3398/1.3409, 1.3376/89, 1.3344/53, 1.3318/24, 1.3305/08, 1.3294/99, 1.3222/42, 1.3187/1.3206, 1.3172/77, 1.3161/65, 1.3126, 1.3093/1.3106, 1.3077, 1.3059/66 and 1.3047.
Below: 1.3000, 1.2904/98, 1.2837/79, 1.2821, 1.2795/1.2805, 1.2744/54, 1.2623/92, 1.2588/89, 1.2501/19, 1.2407/96, 1.2381/91, 1.2323/33, 1.2241/55, 1.2162, 1.2143, 1.2133, 1.204132 and 1.1938.

USDJPY: Mildly Lower

Resistance:
Initial: 101.30/32, 101.42/43, 101.52/56, 101.60/83, 101.90/102.04, 102.13/14, 102.26, 102.35/36, 102.49/52, 102.57/82, 102.93/103.01, 103.30, 103.37/43, 103.73/75, 103.82, 103.91, 104.07/19, 104.36, 104.63, 104.83/91, 105.18, 105.33 and 105.41/43.
Above: 107.18, 108.42, 110.39/47 and 111.60.
Support:
Initial: 101.08/27, 100.82/86, 100.75, 100.60/65, 100.38/48, 100.22, 100.00, 99.94, 99.66, 99.40, 99.25, 99.13/14, 99.00, 98.84/92, 98.63/72, 98.48/53, 98.28, 98.20, 98.08, 97.75/83, 97.49/63, 96.90/97.05, 96.81, 96.65/70, 96.55/56, 96.05, 95.79/80, and 95.44.
Below: 94.90/95.07, 94.87, 94.55, 94.19, 94.05, 93.76, 93.78 93.68, 93.50, 93.17, 92.77/95, 92.14/30, 91.19, 90.85, 90.20/32, 89.40/66, 88.05, 87.95/99 and 87.79.

GBPUSD: Mildly Higher

Resistance:
Initial: 1.7084, 1.7099, 1.7107, 1.7130, 1.7167, 1.7176/78 and 1.7190.
Above: 1.7440.
Support:
Initial: 1.7058/62, 1.7042/51, 1.7035, 1.7010, 1.6995, 1.6951, 1.6919/20, 1.6902/09, 1.6874/81, 1.6831/44, 1.6819/22, 1.6812, 1.6802, 1.6785, 1.6777, 1.6768, 1.6755, 1.6745, 1.6730/37, 1.6716/24, 1.6692/98, 1.6683, 1.6665/67, 1.6640/56, 1.6624, 1.6611/17, 1.6592, 1.6576/86, 1.6548, 1.6516, 1.6484, 1.6458/65, 1.6441, 1.6417/18,1.6400, 1.6394, 1.6380/83, 1.6376, 1.6348, 1.6336, 1.6298/1.6309, 1.6290, 1.6251/62, 1.6239/46, 1.6222/24, 1.6215/16, 1.6195/98, 1.6177, 1.6155, 1.6130/36, 1.6109/21, 1.6083/96, 1.6071/77, 1.6051/66, 1.6001/08, 1.5975/91, 1.5956/61, 1.5948, 1.5900/27, 1.5886/93, 1.5874/77, 1.5853, 1.5844, 1.5825, 1.5803/07, 1.5775/81, 1.5750, 1.5714/17, 1.5683/92, 1.5673, 1.5624/56, 1.5601/15, 1.5591, 1.5561/68, 1.5538/45 and 1.5514/16.
Below: 1.5498/99, 1.5476/79, 1.5458, 1.5434, 1.5427, 1.5403/21, 1.5313/92, 1.5304, 1.5293, 1.5260/62, 1.5237/39, 1.5208/23, 1.5198, 1.5173/87, 1.5164, 1.5152/57, 1.5130, 1.5123, 1.5101, 1.5092, 1.5081, 1.5072/75, 1.5026/32, 1.5013, 1.5007. 1.4985, 1.4966/67, 1.4884, 1.4872, 1.4856, 1.4830, 1.4812 and 1.4785, 1.4345 and 1.4232.

AUDUSD: Higher

Resistance:
Initial: 0.9391/98, 0.9404/10, 0.9420/24, 0.9428/33, 0.9440/47, 0.9455/57 and 0.9483/86.
Above: 0.9500, 0.9524/27, 0.9536/42, 0.9571, 0.9585, 0.9592, 0.9620, 0.9640, 0.9664, 0.9676, 0.9689/96, 0.9710, 0.9732, 0.9757, 0.9791/94, 0.9841/96, 0.9900, 0.9925/83, 1.0000/18, 1.0052, 1.0099/1.0100, 1.0114/17, 1.0148/51, 1.0165/77 and 1.0181/82.
Support:
Initial: 0.9360/86, 0.9343/53, 0.9311/28, 0.9304, 0.9291/94, 0.9279/86, 0.9268/72, 0.9251, 0.9232, 0.9214/26, 0.9201/08, 0.9179/89, 0.9162/67, 0.9147, 0.9127/37, 0.9110/19, 0.9102, 0. 9072/79, 0.9061/66, 0.9054/57, 0.9042/48, 0.9041, 0.9035, 0.8994/0.9008, 0.8981/87, 0.8967/69, 0.8951/57, 0.8923/36, 0.8918, 0.8906/12, 0.8887/92, 0.8869, 0.8857/61, 0.8842/47, 0.8819/25, 0.8762/70, 0.8729, 0.8693, 0.8659, 0.8578 and 0.8512.
Below: 0.8066 and 0.7674.

USDCAD: Mildly Lower

Resistance:
Initial: 1.0736, 1.0742/85, 1.0793, 1.0813, 1.0821, 1.0839/40, 1.0849, 1.0852/57, 1.0873/86, 1.0894, 1.0909, 1.0915, 1.0925/28, 1.0934/45, 1.0954/59, 1.0962/66, 1.0982/1.1001, 1.1032/53, 1.1069/70, 1.1089, 1.1099, 1.1102/09, 1.1116/32, 1.1141, 1.1152, 1.1158, 1.1172/73, 1.1194, 1.1223 and 1.1277.
Above: 1.1723, 1.2985, 1.3007/14 and 1.3062.
Support:
Initial: 1.0726, 1.0717, 1.0702/09, 1.0693, 1.0668/79, 1.0646/60, 1.0619/29, 1.0608,1.0580/87, 1.0567/71, 1.0558/59, 1.0546, 1.0519/22, 1.0506, 1.0496/1.0502, 1.0471/87, 1.0459, 1.0441/44, 1.0414/18, 1.0401/04, 1.0390/92, 1.0379, 1.0355/68, 1.0333, 1.0324, 1.0309/12, 1.0283/1.0305, 1.0270/76, 1.0262, 1.0244/55, 1.0233/35, 1.0199/1.0226, 1.0172/82, 1.0165, 1.0151/56, 1.0148, 1.0128/42, 1.0103/05, 1.0081/99, 1.0050/56, 1.0029/34, 1.0018 and 1.0012.
Below: 0.9993/98, 0.9984, 0.9969, 0.9945/60, 0.9931, 0.9922, 0.9902/07, 0.9899, 0.9858, 0.9814/26, 0.9724/99, 0.9686, 0.9645, 0.9631, 0.9525, 0.9445 and 0.9405.

NZDUSD: Higher

Resistance:
Initial: 0.8693/0.8700, 0.8712/16, 0.8734, 0.8744, 0.8764/77, 0.8789, 0.8792, 0.8821 and 0.8834.
Above: 0.8840.
Support:
Initial: 0.8671/74, 0.8660/67, 0.8647/53, 0.8633/41, 0.8602/05, 0.8584/90, 0.8571/78, 0.8560/61, 0.8542/53, 0.8532, 0.8523/25, 0.8504/18, 0.8499, 0.8487/89, 0.8472/79, 0.8423/59, 0.8413, 0.8376/0.8406, 0.8359/66, 0.8322/53, 0.8302/16, 0.8291/95, 0.8285/87, 0.8280, 0.8271, 0.8263, 0.8250/55, 0.8221/41, 0.8204/14, 0.8195/97, 0.8186, 0.8171, 0.8160/63, 0.8147/53, 0.8114/37, 0.8100/09, 0.8078/82, 0.8049/60, 0.8030, 0.7989/0.8013, 0.7967, 0.7932, 0.7903/06, 0.7888, 0.7872, 0.7856/57, 0.7838/46, 0.7829, 0.7819 and 0.7804.
Below: 0.7795, 0.7783, 0.7760, 0.7751/58, 0.7731/34, 0.7705/23, 0.7697, 0.7681/86, 0.7605/76 and 0.7500/85.

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USDJPY bear threat intact for key 100.80/75 supports

  • Despite a bounce, the latter week breakdown through 101.43 and 101.20 maintains negative pressures from the stall back from the 101.85 spike high.
  • This activity reinforces the bear theme from June and leaves risk for a downside extension below 101.08/06 this week.
  • We see modest resistance at 101.46 and 101.53, but look for the 101.81/85 area to cap upside.
  • Through 101.06 support targets the 100.80 (May) and 100.75 (2014) lows.
  • Overshoot threat for late July is to the retrace/ psychological target at 100.00

WHAT CHANGES THIS?

  • Above 101.58 eases bear pressures, through 101.85 signals a neutral tone, only shifting positive above 102.36.

Download our full report with latest screencast & levels here: http://members.marketchartist.com/Daily/USDJPY.pdf

 

4 Hour USDJPY Chart

 Daily USDJPY Chart

 

 

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USDJPY bear threat intact for key 100.80/75 supports

  • Despite a bounce, the latter week breakdown through 101.43 and 101.20 maintains negative pressures from the stall back from the 101.85 spike high.
  • This activity reinforces the bear theme from June and leaves risk for a downside extension below 101.08/06 this week.
  • We see modest resistance at 101.46 and 101.53, but look for the 101.81/85 area to cap upside.
  • Through 101.06 support targets the 100.80 (May) and 100.75 (2014) lows.
  • Overshoot threat for late July is to the retrace/ psychological target at 100.00

WHAT CHANGES THIS?

  • Above 101.58 eases bear pressures, through 101.85 signals a neutral tone, only shifting positive above 102.36.

Download our full report with latest screencast & levels here: http://members.marketchartist.com/Daily/USDJPY.pdf

 

4 Hour USDJPY Chart

 Daily USDJPY Chart

 

 

continue reading »

USDJPY bear threat intact for key 100.80/75 supports

  • Despite a bounce, the latter week breakdown through 101.43 and 101.20 maintains negative pressures from the stall back from the 101.85 spike high.
  • This activity reinforces the bear theme from June and leaves risk for a downside extension below 101.08/06 this week.
  • We see modest resistance at 101.46 and 101.53, but look for the 101.81/85 area to cap upside.
  • Through 101.06 support targets the 100.80 (May) and 100.75 (2014) lows.
  • Overshoot threat for late July is to the retrace/ psychological target at 100.00

WHAT CHANGES THIS?

  • Above 101.58 eases bear pressures, through 101.85 signals a neutral tone, only shifting positive above 102.36.

Download our full report with latest screencast & levels here: http://members.marketchartist.com/Daily/USDJPY.pdf

 

4 Hour USDJPY Chart

 Daily USDJPY Chart

 

 

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Key Fundamental Forex Events for the Week of July 14th through July 18th

The following table lists the key economic data and other events that came out during the week of July 14th through July 18th, with release times displayed for the GMT time zone.

The list also indicates how much each release deviated from the market consensus forecast upon release, as well as what the affected major currency pair or pairs did after each event or set of events.

Monday, July 14th

  • All Day EUR French Bank Holiday
  • 6:00pm EUR ECB President Draghi said that, “Upside and downside risks to the outlook for price developments are both seen as limited and broadly balanced over the medium term. We will monitor the possible repercussions of geopolitical risks and exchange rate developments closely in this context. The exchange rate is not a policy target for the ECB. Nevertheless, the exchange rate remains an important driver of future inflation in the euro area. Certainly, the appreciation that took place since mid-2012 had an impact on price stability. In the present context, an appreciated exchange rate is a risk to the sustainability of the recovery.”  The currency rose.

Tuesday, July 15th

  • 2:30am AUD Monetary Policy Meeting Minutes stated that,“Members noted that riskier asset markets, which had been the recipient of large capital inflows resulting from the accommodative monetary policy settings in the major economies, had been most affected by the shift in expectations about US monetary policy. Currencies and share markets of emerging market economies had fallen sharply, while sovereign bond yields in those countries had increased to their highest levels in around a year.”  The currency fell.
  • 3:58am JPY Monetary Policy Statement noted that, “The weighted average of the overnight call rate has been below the 0.1 percent level, and interest rates on term instruments have declined somewhat. Compared with last month, stock prices have risen. Meanwhile, the value of the yen against the U.S. dollar and long-term interest rates have remained at more or less the same levels as last month.”  The currency fell.
  • 7:30am JPY BOJ Press Conference:  BOJ Governor Haruhiko Kuroda said that, “Inflation will not fall below one percent”.  The currency fell.
  • 9:30am GBP CPI 1.9% versus 1.6% expected.  The currency rose.
  • 10:00am EUR German ZEW Economic Sentiment 27.1 versus 28.9 expected.  The currency fell.
  • 10:00am GBP BOE Governor Carney said that, “If you buy insurance, which is effectively what you are doing by hedging through an interest rate, and if you match the maturity of the hedge, the maturity of the loan, then this is not an issue.If you were speculating, by saying that I took out insurance at a certain interest rate and I wanted to redo it, then yes, there is always a break fee but the stance of monetary policy is determined not by interest rate speculation but by achieving the inflation target.”  The currency rose.
  • 1:30pm USD Core Retail Sales 0.4% versus 0.5% expected.  The currency rose.
  • 1:30pm USD Retail Sales 0.2% versus 0.6% expected.  The currency rose.
  • 3:00pm USD Fed Chair Yellen testified that, “Although the economy continues to improve, the recovery is not yet complete. Even with the recent declines, the unemployment rate remains above Federal Open Market Committee (FOMC) participants’ estimates of its longer-run normal level. Labor force participation appears weaker than one would expect based on the aging of the population and the level of unemployment. These and other indications that significant slack remains in labor markets are corroborated by the continued slow pace of growth in most measures of hourly compensation.”  The currency rose.
  • 11:45pm NZD CPI 0.3% versus 0.4% expected.  The currency fell.

Wednesday, July 16th

  • 3:00am CNY GDP 7.5% versus 7.4% expected)
  • 3:00am CNY Industrial Production 9.2% versus 9.0% expected)
  • 9:30am GBP Claimant Count Change -36.3K versus -27.1K expected.  The currency fell.
  • 9:30am GBP Unemployment Rate 6.5% versus 6.5% expected.  The currency fell.
  • 1:30pm CAD Manufacturing Sales 1.6% versus 1.3% expected.  The currency rose.
  • 1:30pm USD PPI 0.4% versus 0.2% expected.  The currency rose.
  • 3:00pm CAD BOC Monetary Policy Report noted that, “The global economic expansion is modest and uneven. After growing at a healthy pace in the second half of 2013, the world economy experienced a sharp and broad-based slowdown in economic activity and trade in the first quarter of this year. While global growth is expected to gather momentum, the resulting profile is weaker than anticipated at the time of the April Report Global economic growth is expected to be 2.9 per cent in 2014, picking up to 3.6 per cent in 2015 and 3.7 per cent in 2016.”  The currency rose.
  • 3:00pm CAD BOC Rate Statement noted that, “Given the downgrade to the global outlook, economic activity in Canada is now projected to be a little weaker than previously forecast. However, the Bank still expects that the lower Canadian dollar and a projected strengthening in global demand will lead to a pickup in Canadian exports and business investment and, eventually, a more sustainable growth track. Meanwhile, household imbalances continue to evolve constructively and recent data are broadly consistent with a soft landing in Canada’s housing market. Real GDP growth is projected to average around 2 1/4 per cent during 2014–2016. Consequently, the economy is expected to reach full capacity around mid-2016, a little later than anticipated in April.”  The currency rose.
  • 3:00pm CAD Overnight Rate Decision unchanged at 1.00% versus 1.00% expected.  The currency rose.
  • 3:00pm USD Fed Chair Yellen testified that, “I will now turn to monetary policy. The FOMC is committed to policies that promote maximum employment and price stability, consistent with our dual mandate from the Congress. Given the economic situation that I just described, we judge that a high degree of monetary policy accommodation remains appropriate. Consistent with that assessment, we have maintained the target range for the federal funds rate at 0 to 1/4 percent and have continued to rely on large-scale asset purchases and forward guidance about the future path of the federal funds rate to provide the appropriate level of support for the economy.”  The currency rose.
  • 4:15pm CAD BOC Press Conference: BOC Governor Stephen Poloz said that, “We do not have a sustainable growth picture in Canada”.  The currency rose.

Thursday, July 17th

  • 1:30pm USD Building Permits 0.96M versus 1.04M expected.  The currency rose.
  • 1:30pm USD Weekly Initial Jobless Claims 302K versus 310K expected.  The currency rose.
  • 3:00pm USD Philly Fed Manufacturing Index 23.9 versus 15.6 expected.  The currency rose.

Friday, July 18th

  • 1:30pm CAD Core CPI -0.1% versus -0.1% expected.  The currency rose.
  • 1:30pm CAD Wholesale Sales 2.2% versus 0.7% expected.  The currency rose.
  • 2:55pm USD Preliminary University of Michigan Consumer Sentiment survey 81.3 versus 83.5 expected.  The currency rose.

Technical Recap for the Majors This Week

EURUSD:

Forecast: Higher
Actual: Mildly lower from a 1.3605 open to a 1.3515 close.

USDJPY:

Forecast: Mildly Lower
Actual: Unchanged from a 101.33 open to a 101.33 close.

GBPUSD:

Forecast: Higher
Actual: Mildly lower from a 1.7120 open to a 1.7062 close.

AUDUSD:

Forecast: Higher
Actual: Unchanged from a 0.9380 open to a 0.9380 close.

USDCAD:

Forecast: Mildly Lower
Actual: Unchanged from a 1.0730 open to a 1.0730 close.

NZDUSD:

Forecast: Mildly Higher
Actual: Lower from a 0.8809 open to a 0.8672 close.

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EURUSD bigger topping threat

  • The prior break below firm foundations at 1.3575 shifted the short-term outlook into next week to negative within the broader range.
  • We still this range defined by 1.3503 and 1.3700, with mounting risk for a downside breakout (see below).
  • The low level Thursday digestion sees risk for a challenge to the modest 1.3513 lows and maybe the key cycle spike low at 1.3503.

WHAT CHANGES THIS?

  • Downside: Below 1.3503 sets a more bearish theme to target 1.3477 and 1.3400
  • Upside: Above 1.3700 aims for 1.3730/35 and 1.3770/75.

Download our full report with latest screencast & levels here: http://members.marketchartist.com/Daily/EURUSD  .pdf

4 Hour EURUSD   Chart

 

Daily EURUSD   Chart

 

 

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Occasionally the academics get it right, especially when long-term trends support statistical prophecies. One of the most time honored of these widely held principles is something called the “regression to the mean.” Also referred to as “mean reversion”, this theory simply suggests that, “prices and returns eventually move back towards the mean or average.” The trick is to find the relevant mean average. It may be tied to prices, but it could also be the growth in an economy or the average return in a specific industry sector.

Many investors have developed strategies around this basic theme where stocks are the preferred medium, but the effectiveness of the management team can have an unduly influence on the success of these theories. With currencies, however, the regression to a mean over long periods of time is almost a lead-pipe certainty, especially for the major pairings. Why is this subject an important topic for discussion at this point in time? The simple truth is that the U.S. Dollar has been hovering below its long-term mean average for a number of years. Fed tapering may be the fundamental cause for anticipating some appreciation, but technical pressure is also present, a ticking time bomb of sorts.

For anyone that lived through the nineties and witnessed the formation of the Dot-Com “bubble”, the following diagram might bring back the emotions of those crazy times:

The creator of this graphic actually chose to use the terms of that period, as well, to drive home the point of the picot-graph. When the “Mania Phase” arrived, everyone was told that we were in a “New Paradigm”. Companies did not have to have revenue or much else to justify sky-high valuations. Investors at that time were throwing money at any idea that had a “.com” after it.  Technology ventures claimed that things were different this time around, but this irrational exuberance finely came crashing down when the tech bubble burst in March of 2000.

Why are these analogies important now? We are again hearing that the global economy is “different this time around”. Europe and Asia are driving the engine. The United States is not as important as it once was. But sober minds are concerned over asset bubbles forming in many markets due to unusually low interest rate environments fueling excesses that are yet unseen. As for a meaningful regression to a mean, you only have to look to the Trade Weighted Index of the U.S. Dollar to gain a potential insight:

2014 was supposed to be the year of the greenback. Predictions, perhaps driven by analysts observing a similar chart, were only proposing the inevitable strengthening of the USD once the Fed withdrew stimulus and the U.S. economy was back in charge again. These analysts may now be mumbling that timing is everything, but so are long-term statistical trend realities.

Are there other indications of the Dollar appreciation to come? Recent reports reveal that central banks for emerging nations have been stockpiling reserves in 2014, more as a defensive measure to counter the global pursuit of the carry trade by investors. The growth in reserves has been dramatic, driven by widespread intervention. Much was written a year ago about the “taper tantrum” and the unwinding of carry trades. Central banks in emerging countries had to sell Dollars to stem the negative capital flows.

A year later, the reverse is true, as these same banks are building a defensive hedge for the shockwave that will surely come when rising interest rates become a reality. Forex reserves in these developing countries have risen 20% in only four months. As the saying goes, “Forewarned is forearmed!”

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USDJPY bigger topping pressures re-energizing

  • Despite a push higher, a slowed ascent highlights respect for the 101.85 spike high, that we still look to try to cap.
  • Whilst minimally below here, we see downside risks intact later this week and for July after the early month breakdown through the 101.25 low.
  • We see risks this week for a roll back lower to the bounce range to 101.43 and 101.20.
  • Into next week, we see the bearish theme resuming, through 101.06 to support targets at the 100.80 (May) and 100.75 (2014) lows.
  • Overshoot threat for late July is to the retrace/ psychological target at 100.00

WHAT CHANGES THIS?

  • Above 102.00 eases bear pressures, through 102.36 signals a neutral tone, only shifting positive above 102.80.

Download our full report with latest screencast & levels here: http://members.marketchartist.com/Daily/USDJPY.pdf

 

4 Hour USDJPY Chart

 Daily USDJPY Chart

 

 

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