It was quite an eventful week with the majors ending the last NY session sustained at the opposite spectrum from Monday’s Asia open. The disappointment in the NFP figure at the end of the week provided opportunities of advancement for the majors against the USD, while UJ who made its way back to the 100 level, retreated. In other markets, the US Indexes retraced gains during the last day of trading, contributing to the weakness in the USD, while oil prices rose upon concerns over the Syria crisis. Moving into the second week of September, US tapering will now be brought into focus which may reflect in the charts. However, also sharing the stage is the Syria Crisis as developments continue to be watched carefully .
GBPUSD
GU opened the Asia session higher at 155296, moving north into the mid 155500 range shortly after. From here, price consolidated within a tight range (155433 – 155616), before once again breaking higher to attempt 156. Reaching only 155928, GU was unswayed and continued to linger tightly around 155844 before breaking lower first to 155598 giving way to a bearish marubozo (high of 155645 and low of 155330). Finding its feet around this level, GU then proceeded to march cautiously back north towards 155638 (top of the bearish marubozu) where another attempt to short was rejected. Buyers then stepped in upon a low of 155360 which upon reaching 155660 earlier move lower covered and indicated a change in direction. This was confirmed by the print of a bullish hammer that led GU back north to attempt a break of 156, reaching a high of 156021.
As if on cue, sellers stepped in, transforming the candle into an inverted pinbar, closing at 155752. This was followed by a strong bearish candle (high of 155744 and low of 155420) and an inverted cross doji, that took GU to a low of 155281 with the next candle. The new surge of bearish momentum then led another attempt lower, which saw 155202 hold as support, reversing the direction to a high of 155725 in a quick 3 candle move. Having now found higher support, GU consolidated between 155517 - 155724 into the next day, breaking higher on the 4th Sept, reaching a high of 156304 (61%,) before re-tracing back to 156026 (23%) where it found support. From here, GU broke out higher again with the next candle (low of 155948 and high of 156284) prompting a further move north, only to find resistance upon a breach of 156460 (76%). Contained by this high, GU proceeded to march back down, settling briefly at 156081(38%) and supported at (23%) with a series of pinbars.
This led to a significant breakout candle on the 5th Sept (low of 156096 and high of 156626), which spurred back bullish momentum. However upon reaching 156667, sellers once again intervened, sending price back down to 155719 where it consolidated into the 6th Sept. Moving lower towards DP, GU met with resistance as it consolidated here before promptly breaking down, reaching a new low at 155641. This level saw a surge of bullish momentum taking GU from 155629 to a high of 156801 upon economic data . Now positioned at the higher realm of the price range, GU consolidated around this level until the end of the NY session, closing above 156 at 156252.
This led to a significant breakout candle on the 5th Sept (low of 156096 and high of 156626), which spurred back bullish momentum. However upon reaching 156667, sellers once again intervened, sending price back down to 155719 where it consolidated into the 6th Sept. Moving lower towards DP, GU met with resistance as it consolidated here before promptly breaking down, reaching a new low at 155641. This level saw a surge of bullish momentum taking GU from 155629 to a high of 156801 upon economic data . Now positioned at the higher realm of the price range, GU consolidated around this level until the end of the NY session, closing above 156 at 156252.
Positive economic data over the week supported the bullish momentum which saw Interest Rates remain unchanged at 0.5%, in line with expectations, while the Asset Purchasing Program was also kept unchanged at £375B with a reinvestment of £1.9B worth of cash flow currently held with the facility. Both outcomes were well received by the market, which assisted in stumping a move lower. This was also complimented by a round of positive economic data released earlier in the week which included figures such as : Markit Manufacturing (PMI) showing an improvement from 55 (forecasted) to 57.3, PMI Construction (Aug) at 59.1 vs. 56.8 (forecasted), Markit Services PMI which came in stronger at 60.5 vs. 59, and Manufacturing Production (YoY) (Jul) which was saw an improvement at 0.7% vs -0.8%. Offsetting this however, were some underperforming figures released towards the end of the week such as the Trade Balance (Jul) showing a larger deficit at £-4.528B vs -2.950B and consumer Inflation expectations which were weaker at 3.2% vs. previous 3.6%.
On the domestic front, economic data continues to show signs of economic improvement, and therefore it will be no surprise for the release of positive figures to continue supporting an extended move higher, However, it must be noted that the release of positive figures most likely reflects that the economic recovery is on track rather than supporting the notion of advancing expectations. The BOE still stands by their forecast of meeting their targets between the year 2015 – 2016. Therefore adjustments to monetary policy in the interim will be unlikely.
However, even with a week bolstered by good data, any advancement higher still contributes to the view of a correction rather than a reversal. When looking at the charts, the high of 157507 made on the 17 June still holds as top resistance with GU's most recent effort made on the 6th of September to 156801, having met with strong rejection pushing price down to a close of 156249. This shows that there is still eluctance in pushing forward into the 157 region. However, the fact that GU closed the week consolidating slightly higher around 156300 (61%),lends to the possibility that another attempt higher may be on route as price sits in a position of indecision.
With 157 presenting uncertainty, an initial attempt above this level should see some sellers repeating the same moves from the 156 area, especially without the support of data or economic developments in favour of risk appetite. With the US tapering decision drawing closer into focus, speculation regarding this decision or the affect it will have on the USD cannot be discounted. While movements in the Syria crisis also cannot be ignored, as the situation continues. Any developments in this crisis still provides cause for concern as this situation continues to poses as a problem for financial markets in the near term.
Moving to the charts, the 4 hour currently shows a momentary reversal from the downtrend formed in the last week of August, having completed a retracement back above 100% upon reaching a high of 156801. This level aligns with the resistance area from the previous week. On the daily, this level is represents a potential double top formation should price find resistance around current levels or upon a rejection around 157. When looking at the current chart set up, the more immediate levels that come into focus are a break upon of 156528 (76%) and a re-test of 156147(DP) as this would provide a clear understanding of direction.
In regards to the immediate view of the currency, It would be safer to stay within the wider parameters of price movement as top resistance comes closer into view with 157500 not too far in the distance, while 154264 remains as the recent bottom. So far, the nearest support level is being held by the pinbar (low 154254,) formed on the 28th August which also equates to a level just below DS3. 156 now holds as DP and a break lower will bring 155906 (23%) as the next support level, followed by 155554(DS1), 15411(DS2) and then 154480(DS3). If GU moves north first, the first point of resistance lies at 156524(76%) followed by 156752(DR1), followed by 157346 (DR2) and then 157928(DR3).
EURUSD
Opening slightly lower at 132111, EU started the week contained within a range between 131963 - 132111 before moving to a high of 132266 which saw price try to sustain at this level before finding resistance at 132254. Sellers then stepped in marching EU back down to a low of 131865. Finding support around this level, EU remained consolidated between a tight range of 131963 -131851 before breaking lower in the form of a significant bearish candle (high of 131920 and low of 131686) on the 3rd Sept. From here, price consolidated around the 131725 level in a row of pinbars which saw EU try to support itself just under 132. This was however stumped by the print of a bearish inverted pinbar (high of 131864) which saw EU dip down to 131583 with the next candle, closing higher at 131697 forming yet another pinbar. The effort to sustain at current levels continued for the next couple of hours until price broke through reaching a low of 131436, which extended lower to 131379 in the next candle forming a prominent pinbar closing at 131626.
Having reached just above 131, EU moved back higher within the range initially testing a break in both directions before settling higher around 131759. This then led to a breakout higher, forming a bullish pinbar that took price back towards 131928 and finally to test the 132 area, reaching a high of 132172 . However hesitation set in once more which saw EU retrace slowly back to 131628 finding momentary support at 131663 (50%). From here, EU made a small bullish run back to 132175, pausing around this level before making one last attempt higher. However upon reaching 132226, sellers came on to the scene sending EU down over 100 pips in one candle, where it found support at 23%. However, with strong bearish sentiment in motion, this level broke lower prompting a continuation. Bring 131 now into focus, this saw EU reach a low of 131040 before buyers stepped in taking EU back north to a high of 131882, just above 61%. However upon approach, this was immediately met with rejection, printing a bearish inverted pinbar. EU continued to maintain its strength in this upper region around 131644 before breaking higher to 131695(61%) towards the end of the NY session.
This week the ECB kept interest rates on hold at 0.5% which met with expectation. Other data figures released include: improvements in GDP which beat expectations at -0.5% vs. the forecasted -0.7%, Germany Markit Services PMI (Aug) also came in positive at 52.8 vs. the expected 52.4 while the underperforming figures included Italy’s Markit Services PMI (Aug) which missed expectations 48.8 vs. 49.4 and European Markit Services PMI (Aug) which was also lower at 50.7 vs. 51. Adding to this were European Markit PMI Composite (Aug) 51.5 vs 51.7 and Retail Sales which were down at -1.3% vs. 0.4%.
It can be interpreted that that the mixed results actually contribute to the reflection of the current state of the Eurozone economy which although does show sign of improvement, still clearly has quite a path to travel. This is contributed by fact that strength as a whole is not actually case with some Euro countries still actually in recession and experiencing extremely low levels of economic growth just above 0%. In regards to pollitical uncertainty within the Euro region. It is not just exclusive to Italy, which has been the recent focus, but also extends to Spain and Portugal. While on the other hand, the Greek government faces the possibility of a collapse within 6 months. As it stands, in order to see real signs of financial stability, internal structures need to compliment the data in order to portray a system capable of achieving economic goals. Therefore, though we may not be focused on a series of bailouts as seen in 2012, other issues take precedent and contribute to the view that financial stability is in the preliminary stages and is still goal that is on its way.
EU commenced the start of its bear run on the 27th August which saw EU fall from top consolidation at 133891, when attempts to break 134 exhausted instead leading to a break of range that took EU back down to at low of 131727 on the 30th August. This level turned into support which saw EU retrace back to the bottom of the previous consolidation level before moving lower back to 131 steadily until support was found at 131379 on the 3rd September. This did not instigate a sudden rush of buying but it did hold EU above board as it remained locked in range until a break out on the 4th September. Twice both attempts above 132 were met with rejection which in the second instance saw EU fall drastically back towards 131 reaching a low of 131044. The NFP results which came in weaker at 169k on Friday, became the catalyst in boosting EU back to the higher realm of the 131 region where price currently sits at 61%.
Like GU there is room for this pair to re-test higher before once again meeting with resistance that will see sellers push EU back down. This is especially the case since the retracement made at the end of the NY session was not instigated by positive domestic data but rather the weakness in the USD which in itself can be turbulent. Therefore, if the NFP results came in stronger, it is very possible that EU may have broken the 131 level, which when looking at the bottom consolidation formed after the dramatic fall from a high of 132226 to a bottom of 131099, appeared to be a possibility as the charts show price tried to break lower from this bottom range, only to be bought back up, settling around 61% until the close of the NY session.
In the immediate view, should EU continue higher, 131683 holds as the 76% level and a break above this will bring 132 back into view. A break above this level will need to be cleared in order to see higher targets. The higher targets are 132289(DR1), 132838(DR2) and 133474(DR3). However a break of 131650(DP) will find immediate support at 131239 (23%) and breaking this will expose 131112(DS1) 130490(DS2) and then 129918(DS3).
AUDUSD
AU started the week quite optimistic, opening the Asia session over 40 pips higher from the previous week's NY close. This followed a small drop to 89234, which found support taking AU on a small bullish run, as buyers came onto the scene at 89248 taking AU to a high of 90133. Finding resistance upon testing 90, AU formed another inverted pinbar upon a high of 90111 which saw AU move back to a low of 89634, aligning with the previous consolidation point. From here, AU then proceeded back north above 90 to 90246 before hesitation once again set in taking price back south to 89717 where support was found. This led to a break higher where AU reached 90416 in a bullish breakout candle from a low of 89794.
Settled above 90 (90405), price cautiously moved higher, reaching 90680 before retracting back to 90382. AU then moved into the mid range around 90534 where it consolidated briefly before breaking higher with a bullish breakout candle( low of 90367 and high of 90937). This then fuelled more optimism, sending AU back on its mission which saw price ascended steadily to a high of 91866 before once again finding resistance. However, the bullish tone was now set and AU now maintain wedged in a range between 91781 and 91610 (just above 76% - 61%).However, on the 5th Sept, AU retraced back south, finding support around 91430(38%) which led to a re-test lower towards 91, reaching 91115.
From here, AU edged back to 91325(23%), proceeding to 91430 (38%). Price paused at this level briefly, before resuming higher, taking AU from 91515(50%) to a high of 92160 (just over DR2) in one candle. Finding resistance in familiar territory, a bearish inverted pinbar was shortly formed leading AU back down under 92, closing the week positively with a final price just under 100% at 91806.
This week, the RBA kept rates unchanged which provided fuel for the AUD prompting the continuation of an uptrend until the end of the week. This then found further encouragement upon the late weakness in the USD upon the NFP results on Friday. Economic data for the week were mixed with GDP (Q2) posting 0.6% vs. 0.5%, exceeding expectations, while GDP (YoY) came inhigher at 2.6% vs. 2.5% along with Building Permits (MoM) (Jul) which saw an improvement at 28.3% vs. -11.8%. On the the side, Retail Sales disappointed at 0.1% vs forecasted 0.4% along with AiG Performance 43.7 vs. previous 44.1 and of course the Trade Balance which came in lower at -765M vs. 110M.
In regards to the general outlook, a negative bias has now been shifted to a neutral stance with the Australian economy growing slightly under par. This is in response to a few factors including the changes in the mining sector and slight improvements based upon the effects of the depreciating AUD. However even in light of the dramatic fall which now extends to a low just under 88, the RBA still stands in support of its role in promoting economic growth. Therefore the possibility of another rate cut later in the year cannot be ruled out.
Looking at the charts, it was a very bullish week for the AUD which opened at 894200 from 88997 (previous NY price), reaching a high of 92160 (DR2). When looking at the daily chart, AU still appears contained within range and only a break above 92970 will we see AU correct north to a potential high of the 94 -95 area. However, both the one hour and 4 hour show AU in a possible continuation mode that if 92 is re-visited may have the possibility of extending to 93.
On closer observation with the 4 hour chart, this shows price sitting at a familiar topping area which may once again act as a possible top resistance level in line with the top of 92326 made on the 19th August and 92204 made on the 12th August. Therefore a re-attempt back to this level is highly plausible and should rejection not met at similar levels, a move to extend the move will see sellers poised and ready to take AU down at the higher key levels. So far, AU has demonstrated its determination to protect movement as it edges lower. This can be seen with the rebound from the 90 level which then turned into protecting the 89 level once 90 was breached. Any movement beyond this point has been quickly reject thus far with price moving back to 90. As AU finds itself back towards 92, it will only be a matter of deciding where resistance lies and strength/weakness in the USD may be the contributor to price movement as the US tapering decision draws near.
On closer observation with the 4 hour chart, this shows price sitting at a familiar topping area which may once again act as a possible top resistance level in line with the top of 92326 made on the 19th August and 92204 made on the 12th August. Therefore a re-attempt back to this level is highly plausible and should rejection not met at similar levels, a move to extend the move will see sellers poised and ready to take AU down at the higher key levels. So far, AU has demonstrated its determination to protect movement as it edges lower. This can be seen with the rebound from the 90 level which then turned into protecting the 89 level once 90 was breached. Any movement beyond this point has been quickly reject thus far with price moving back to 90. As AU finds itself back towards 92, it will only be a matter of deciding where resistance lies and strength/weakness in the USD may be the contributor to price movement as the US tapering decision draws near.
Therefore, should AU move forward with its continuation north, we will need a clear break of 92 with 92236(DR1) as the first resistance level, This will be followed by 92691(DR2) and then 93270(DR3). However, upon a break of 91650, this will then see the first point of support at 91389(DP) followed by 91250(DS1), 90663(DS2) and then 90214(DS3).
USDJPY
The week started strong for UJ, opening the week at 98421 from 98147 (previous NY close). There was really only one direction for this pair which saw very little retraction before liftoff as UJ broke higher upon the 4th candle to a high of 98609, finding higher support that led to UJ catapulting to a high of 99373 from a low of 98520 in two bullish candles not long after. Now settled above 99, UJ continued to range around the highs, catching an attempt lower at 99110 that saw buyers bring the price back in line where it consolidated briefly (around 99314), before breaking higher to 99697 in 3 candles. Once at this new high, price then retraced back to the low of 99327, where another attempt north rseulted in reaching 99695, which promptly signaled a sell off, taking UJ from a high of 99663 to a low of 99183 in a bearish marubozu.
However support was found at 99161 which saw price close at 99372 and move back north to 99608, where it ranged before breaking out to a new high of 99854. This level immediately met with sellers as a bearish candle formed from a high of 90804 to a low of 99400 and followed through with the next two candles, taking UJ to a new low of 99233. Once again, support was found which prompted a move back north towards 99800. Upon reaching this level, UJ then fell back lower finding support at 99311 which encouraged a continuation higher with UJ moving back towards 99875. It then ranged around this level moving into the 5th Sept. Finlly ready to make a move, a brief struggle for direction led to a bullish breakout to 100082, breached the psychological 100 level.
Upon reaching 100110, price continued to range around the high 99 level, rejecting an attempted short from a high of 99962 to 99632. This saw UJ continue its trek higher, reaching a top of 100211 (just above MR1). It was here that sellers poised above the 100 level stepped in taking UJ back down to 99684 in three bearish candles, pausing around 9967 (DS1). However UJ remained supported at 99484 which led to another attempt back towards 100 (reaching 99858). However once again, this level met with sresistance which saw price fall from a high of 99858 to a low of 98791 in one candle. This then followed through with an extension lower to 98529 .Supported, UJ moved back north to DS3 where it paused before proceeding higher to DS2 . Rejecting this level, UJ closed the NY session at 999070.
UJ displayed an impressive run from the start of the week which led to a less than strong finish upon the the results of the Non Farm Payroll figure. The US equity markets were also partly responsible for contributing to the weakness, with the US Indexes reversing earlier gains as we moved towards the end of the week. In regards to economic data, the USD was supported by a round of positive figures including: Construction Spending which came in higher at 0.6% vs. 0.3%, ISM Manufacturing showing an improvement in the manufacturing sector at 55.7 vs. 54 , ISM Prices Paid which was higher at 54 vs. 52 and the average hourly earnings which beat expectations at 2.2% vs. 2.0%. This was further complimented by an improvement in the unemployment rate which saw a reduction from 7.4% to 7.3%. However, offsetting the good news, was the big Non Farm Payroll Figure which came in under par at 167k vs. the expected 180k.Meanwhile, the Beige Book, also released during the week, stated that the US economy grew at a fairly moderate pace, which falls in line with previous releases.
For Japan, figures included Foreign Bond Investment which came in at ¥530.9B vs. ¥316.4B, Foreign Investment in Stocks resulting in ¥175.0B vs. ¥88.8B and the Coincident Index (Jul) which missed expectations with 106.4 from the forecasted 106.9. This was joined by the Leading Economic Index (Jul) which was also slightly lower at 107.8 vs. 107.9. According to the latest BOJ monthly report, Japan is still expected to grow at a moderate pace which will include improvements in housing and business investment, as well as an increase in exports. However private consumption which has been subdued due to recent conditions will pick up once there are notable improvements in the areas of employment and industry as well.
Moving to the charts, UJ currently sits around the 23% levell, supported by the pinbar with a low of 98529. It is possible that we may see a continuation of UJ's journey north if bullish momentum overrides the reaction to the Non Farm Payroll figure later in the week particularly with the US tapering decision due soon. This may lend itself as a major catalyst for a bullish USD move or at least contain risk in the meantime. Given the mix of US data figures recently and in light of the weaker NFP figure, the situation does now question whether tapering will commence in September as proposed. It is possible that the improvement in the unemployment rate may lend higher consideration over the latest figure, which will see the US Fed to continue with its plans. This may point to initiation of a "light taper" which includes a reduction of $10B per month once tapering commences.
On the longer time frames, UJ still sits within the range, although a shift in its position now seess UJ sitting towards the top region. This does open the possibility for a re-test back towards 100 if UJ can sustain above 98529 (23%) in the interim. Should this occuur, the 100 price level will be the next target. A break higher from 100 will then bring 100874 into view followed by 101660 and then 101989. However, a fall back towards 99 will then require a break below 98926 . This will expose 98274 followed by 97552 and then 97199. Moving below 97 will bring 96605 into view.
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