The majors took a ride against the USD last week, starting with a decline from previous high levels that suddenly found its footing mid week which saw price proceed back north retracing earlier losses and ending the week back towards the highs. Much of this was due to strength in domestic data, as well as movements in other markets, however it was the release of weaker than expected US figures particularly towards the last session that prompted the finish across the majors closing the NY session in positive territory. This week includes focus on the Jackson Hole Symposium which could potentially move the markets as discussions regarding US economy and its current challenges.GBPUSD
Continuing on from the last NY session, GU opened the week slightly lower at 154886 from Friday’s close 15501, closing Monday’s trading with very little movement at 155003. Reaching a high of 155209, this level met with intra-day resistance which saw a rejection 2 candle later with formation of a bearish candle (high 155100 and low 154898) leading to a further breakdown to the next day reaching a low of 154468. From here , GU retraced a little higher to 15480 which once again served as level that attracted selling and saw an attempted drop of 53 pips to 154305 from a high of 154836 upon the release of data figures forming a bullish pinbar closing the candle at 154657. The next few hours saw a bit of hesitation as price to follow through from the signal of the inverted hammer however once reaching 154266 was met with buyers who pushed the price back north as high as 155104 closing the candle at 154596. This followed with a slight drop and then consolidation within a range between 154620 – 154359. This consolidation period then led to a bullish breakout in the NY session after the release of US data figures (low of 154219 and a high of 155053) which saw price settle higher around 15747 before ascending in an even incline to a high of 155464.
Retracing slightly from this new high , GU formed a new base above 155 (around 155157) which saw GU range at this level and find support upon a dip to a low of 154949. From here, GU continued to move back towards 155470 (previous intra-day top), settling within this new range until the 15th August where GU broke higher in the form of a bullish marubozu ( low of 155318 and high of 155875). GU then attempted 156 reaching a high of 155936 before sellers poised at 156 stepped in, taking GU back down 68 pips in one candle. However upon the approach of 155, buyers reversed the momentum forming a bullish pinbar (low of 155185 and high of 155669) which became confirmation of a continuation higher in the next two hourly candles. GU then broke out just under DP with an impressive range (low of 155769 and high of 156503) followed with price hovering above 156 supported at 156163 and capped at 156562. Moving to the close of the last NY session, GU kept contained above 156 (supported at 156067) , closing the week with a pinbar at 156304.
In regards to economic data, it was not a positive start to the week which saw GU start with weaker CPI figures which came in at 2.0% vs an expected 2.2% and a weaker PPI Core Output figure 1.1% vs 1.2%. This did very little to inspire movement in GU who upon an initial reaction kept contained followed by further ranging at the lows in anticipation of upcoming data due the next day. The release of the Claimant Count Change figure which exceeded expectations producing a figure of -29.2k vs the forecasted -15k in combination with the outcome of the BOE minutes saw GU respond accordingly. Within the BOE meeting minutes, a unanimous vote in continuing asset purchasing was highlighted in accordance with the unemployment rate still remaining as an indicator for the basis of adjusting future stimulus. The MPC also voted unanimously in favour of keeping interest rates unchanged at 0.5% which also has been mentioned to be dependent upon improvements with the unemployment rate.
The sharp movement seen in mid week trading can be contributed largely to the positive outcome of the Claimant Count Change figure, representing improvements in the employment sector and thus promoting more optimism geared towards the BOE's ability to achieve their target of 7% unemployment rate target from the current 7.8% which current stands. However, this objective is still forecasted as a 2016 outcome. In regards to the "forward guidance" strategy presented by Carney, this will be heavily dependent on inflation figures and will be re-assessed, should inflation move above 2.5% within a 24 month period.
Since the 1st August, GU has been in an uptrend that has taken price from a low of 151009 to a high of 156562 (15th August). The break of 152039 on the 2nd August provided the first signal of the potential move higher to target 153 (low of the previous high range). A break of this top led to the next topping area of 154. Last week represented an extension of this bullish move that was mainly inspired by a positive reaction to of some strong economic data results mid week in support of the Pound. This was further fueled by weaker USD results at the end of the week which assisted in closing the highs.
Currently GU sits at 156304 (WR1) which on the daily still shows GU well within range though following the previous bullish marubozu (low of 154956 and high of 156509), it is possible that GU may look to extend. A move back to 155970 may see GU supported and if this is the case then the next levels to watch for are primarily movements towards 156833(DR1), 157370(DR2) 158405(DR3). Alternatively, a break below 155970 will see 155372(DS1), 154330(DS2) and then 153792(DS3).
EURUSD
EU commenced the week with no change in sentiment, resuming the Asia session from the last NY session. Opening the week at 133189 (around 76%), price rejected at a top of 133434 with a bearish candle (low of 133243 and high of 133396). This paved the way to a continuation of its descent to a low of 132768, forming support at this level which then led to a bounce higher to 133117. Price then stayed around this level wedged between the high and low of range between 132894 and 133109. The next day saw EU break this range continuing the downtrend with determination creating a 5 candle move from 13310 to 132331. Price stayed at current levels with very little effort to refute the drop and remained in consolidation throughout the 14th August finally breaking higher back to 133110 on the 15th August. It remained at current levels until the NY session which saw EU break this range with a surge of selling momentum, taking price from a high of 133006 to a low of 132225 in one candle. Taking this lead, sellers then tried to continue lower reaching 1320 however found support when reaching 132051 in which major support was found, upon the rejection of the low, turning the candle into a bullish pinbar.
This led to a prominent breakout (low of 132598 and a high of 1334552) taking EU back above 133 and ranging at the highs until Friday's trading session. The end of the week saw little effort to break from the highs while EU stayed contained within a range of between the high 133619 and 133255 before breaking out and creating a new high of 133792 which was immediately met with rejection. EU then fell from 133696 to 133103 before closing back at the 133254 (76%) closing around the same level it opened at the start of the week.
In regards to data, it was a positive week for the Euro with the German ZEW survey showing an increased from 36.3 to 43 while CPI figures met with expectations along with Industrial production(YoY). German Q2 GDP figures also came in strong at 0.5% vs an expected -0.3% and 0.9% vs -1.6%.% while GDP for the Euro also showed an improvement at 0.3% vs -0.1% indicating that Europe is out of recession.
When looking at the charts on the shorter time frames, the Euro still shows potential for another attempt higher though it would seem that all efforts will be met with sellers particularly position traders seeing value at the higher spectrum of the trading range. On the longer time frames, the rallies printed within the week still do not point to a strong bullish view of the Euro despite the momentary glee with the improvements in economic data. The start of the week saw EU resume the downtrend from the previous week finding support at 132330(23%). The CPI figures released did very little to inspire an instant reaction but instead saw EU range bound between 132395 - 132759 until the 15th August where EU initially experienced some pressure lower meeting a bottom of 132051 that rejected forming a pinbar. This led to the break higher in response to positive GDP figures that followed. The positive tone with data took EU back above 133 breaking 133255 (76%) and reaching 133622 upon renewed optimism. This extended further to 133793 on the 16th August. The fact that EU has closed the session sustained at 76%, does show that price has the potential to go either way from here depending on its reaction to this level.
In the immediate term, an appeal for the Euro to continue its travel north is still in contention, should the optimism sparked from this week's GDP figures still be in effect. However looking at the situation objectively, it is still too early to be considering a strong bullish move even though the economy now looks to be holding more promise. Also in focus are issues regarding bailouts in Greece as well as political events in Germany that do not work in favour of current stability, therefore also holding some power to instigate a retracement or reversal upon uncertainty should these events evolve. Otherwise, it could work alongside building a case once another catalyst presents itself.
Indeed when reflecting upon the longer timeframes, there is still no indication of a break of the range just yet. In the interim, movement will be dependent on just how much optimism has been fueled by the recent positive turn in the Eurozone given that from a macro perspective, the Eurozone will still need to produce more evidence of a strong recovery to support changes in monetary policy. Therefore, all movements north would more than likely be met with the appropriate reaction once a negative figure is released breaking this positive momentum.
Should EU break the high of 133793 the next level to watch is 134019(DR2). So far recently this level has managed to contain EU however if this breaks then 134583(DR3) is next in line followed by 134881(WR2) and then 135076(MR1). Alternatively, 133022(DP) may be a targeted support level to keep EU within the higher constraints of price movement. A break below this level will then see EU back towards the high 132 region followed by support at 132651(38%), 132470(23%) followed by low 132051. A break of this low will then re-visit 131538(WS2) followed by 131299(MP).
AUDUSD
It was an interesting start for AU opening the week lower at 91867 from Friday's close 92018. Re-testing the highs of the last session at 92204, AU proceeded to retrace from the uptrend that commenced on the 2nd August, breaking lower from the high in two consecutive candles from 92092 to a low of 91513. Price then stayed around 91560 while testing lower at 91340 which rejected forming a pinbar that led to a small move higher back to 91866. Forming a top, a bearish candle formed (top of 81800 and low of 91513) led the way for a continuation to south reaching a bottom of 90996 which immediately saw AU spring back to the 91400 (61% area), where it ranged before falling further to a low of 90729. From here, AU then ranged at current levels between a range of 91143 and 90866 before breaking higher (90874 and high of 91324) while finding new support at these levels which led to another extension to creating a top at 91593.
Retracing back to 91181, AU found support around this area(DP and 50%) which inspired another move north breaking 91582 (76%), reaching a high of 91877. Immediately upon approach of 92, sellers intervened, taking AU from a high of 91855 to a low of 90578 in a bearish 5 candle move. Breaking DS1, yesterday's low of 90578 rejected, forming a prominent pinbar, closing at 90829 (23%), thus setting itself up for the bull rally that followed. On the 15th August, AU also found buyers at this level who stepped in around 90866 and took price back just above 91 (DP). Pausing here momentarily, AU then proceeded to ascend higher back towards yesterday's high reaching a new top of 92145 before falling back to 91676 which then saw price attempt another re-test towards 92, closing the last NY session at 91875.
AUD did not have much in the way of economic data to promote significant movement. However some figures released include NAB Business Confidence which came in negative at -3 vs.0 (previous result), while Westpac Consumer Confidence(Aug) came in at 3.5% vs. -0.1%. However, Consumer Inflation Expectations were slightly under printing 2.3% vs. 2.6 (previous result). Looking at the one hour chart, it shows AU starting the week declining from a high only to finish the week at the same level. Last week saw AUD rise in conjunction with the commodity markets. Iron-ore prices increased by 10% helping to boost AUD and the Westpac Consumer Confidence figure also assisted with the move back north on the 14th August.
The question then would be "does this mean the AUD has turned momentarily bullish?" To date, the overall consensus regarding the AUD still paints a bearish view on the longer time frames. Even though AUD closed the week high, it has not really produced any new moves and is still trading well within range. Therefore, its upcoming movements will be dependent once again on risk appetite as well as movements in the other markets along with any significant figures on the domestic front. However, any non-domestic factors encouraging a move higher would still hold appeal for sellers positioned at higher key levels as the "bearish" picture is already painted.
For now, it is still possible to see AU continue north and re-test 93 region once again. Currently price has settled just under yesterday's high 91892, and the next levels to watch for are 92174(MR1), followed by 92586(DR2), 93268(WR1) and then 93295(DR3). A retracement back to 91582(76%) will be the determining level to set direction for the AUD. Should this level hold as support, then an attempt to reach the high targets will come into view. However a break below will see the next support level at 91266 followed by 91080(38%), 90888(23%) followed by 90658(DS1). A break below 90578(yesterday's low) will open up to AU making its way back towards to 89 and 88 region.
USDJPY
Opening at 92326, UY resumed in consolidation from last week in fairly consistent movement first edging to 96552 and then to 96897 where it settled before retracing slightly back to 96552 in preparation for its next move. Finding support at this level, UJ then commenced a steady climb north from 96515 to 97490 where it took the time to pause before continuing higher closing the 13th Aug higher at 98179. UJ continued to maintain trading above 98 in what was a very uneventful movement over the course of the day which saw UJ contained in a consolidation between 98041 and 98317. Any attempts to slip from this range were brought back in line and was not until the 15th August that a retraction back to the higher region of 97 found support towards the mid 97 area at 97578 inspiring a break back above 98 to a new high of 98644.
This level was immediately met with sellers within the next hour who took UJ back to the high 97 region confirming the high of 98644 as an intra-day top. UJ paused momentarily around these levels before continuing south reaching a low 97038 on the 16th August. From here UJ ranged at the lows before moving back north to a high of 97752 which saw UJ close the week at 97659.
Economic data was rather light for the Yen last week, however the week started the release of Monetary Policy Meeting Notes which mentioned that exports showed improvement as did business fixed investment. Retail spending also showed an increase which indicates an improvement in consumer sentiment. This generally means that Japan is now starting to display signs towards stabilisation. In regards to data results, Industrial Production(YoY) came in at -4.6% vs -1.1%, while Machine Orders(YoY) were positive at 4.9% vs expected 2.4%. Foreign Investment also saw an improvement from ¥690.3B to ¥1614.8B. The US figures released also contributed largely to movements in UJ which saw Business inventories at the start of the week come in positive however retail sales were weaker at 0.2% vs previous 0.6% followed by more weaker numbers throughout the course of the week including the Reuters/Michigan Consumer Sentiment Index(Aug) which came in under expectations at 80 vs 85.5.
Looking at UJ on the higher time frames, the daily shows UJ still contained within a range and 100 still continuing to act as an intermediary top. Only upon a break above this level will we see UJ move higher back towards the 102 -103 region. Currently price sits ranging just under DP at 97490 and break of yesterday’s low 9062 will see the next support level at 96645 followed by 96345(MS1), 96102(DS2) and then 95142(DS3). However a break above 97666(23%) will see UJ 98040(61%) and then 98264 (DR1). A break above this level will the re-visit 99195(DR2) and then 99784(DR3).
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