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MIG Bank: trading USD/CHF
Analysts at MIG Bank recommend placing buy limit at 0.9630 and targeting 0.9730/0.9980/1.0300 and with stop at 0.9530.
Yesterday USD/CHF breached support line going up from August minimums. However, the specialists believe that support around 0.9660 is strong and able to make the pair recoil upwards: “We view the structure present since 0.8931 as being strongly positive and look for an eventual break back over 0.9972 to target 1.0300 initially and then higher.” The outlook will stop being bullish if the greenback dips below 0.9425 (June minimums).
We’d like to add that 1.0300 (200-week MA) represents a very strong resistance: the last time US dollar traded above it on a sustainable basis was in 2002.
Chart. Daily USD/CHF
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AUD/USD: ready for a further drop
On Monday AUD/USD tested the lower boundary of the upper channel which exists since June after the RBA dovish comments. The pair trades around $1.0435 (the lowest level since July 27) after a slide lower.
As can be seen from the daily chart, AUD/USD is forming a “rounded top” pattern since late July with a neckline at $1.0435. A close below the level will pave the ground for a further decline to $1.0290 (200-day MA).
Chart. Daily AUD/USD
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Merkel: Germany is in line with ECB to save the euro
According to German chancellor Angela Merkel, her country is committed to doing everything it can to preserve the euro and called once more for fiscal discipline. Mrs. Merkel praised the European leaders for making progress, but underlined the time is pressing.
These days Angela Merkel is passing through difficult times. As leader of Europe’s largest economy and the biggest single contributor to euro-region bailouts, Merkel is facing pressure from Italy and Spain to pool debt and to bring down bond yields, from Greece to back an easing of its austerity timetable and from the ECB for politicians to take the lead in fighting the crisis. She also faces domestic pressure from her coalition partners to refuse any more aid for Greece.
Next week Merkel starts a new round of political activity: Germany hosts French President Francois Hollande on August 23, one day before Greek Prime Minister Antonis Samaras visits Berlin for talks.
Source: Bloomberg
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August 20: forex news
The high-yielding currencies strengthen before the European leaders meet this week. The ECB may set limits on yields of euro zone sovereign debt by pledging unlimited bond purchases, what will support investor appetite for riskier assets. However, demand for AUD and NZD is tempered as the Fed meeting minutes on Wednesday may lower expectations for further monetary stimulus. Australia will release the RBA meeting minutes tomorrow. AUD/USD trades around $1.0450 and close to the lower boundary of the upward channel existing since June, while NZD/USD trades above the strong support at $0.8065.
The market’s attention this week is focused on the European politics: Greece’s Prime Minister Antonis Samaras meets Luxembourg’s Prime Minister Jean-Claude Juncker on Wednesday, German Chancellor Angela Merkel on Friday and French President Francois Hollande on Saturday. On Friday there will also be Hollande-Merkel meeting.
Last week EUR/USD was moving sideways in the $1.2260/2385 area. Today the pair is little changed from Friday’s close at $1.2334. The day is quite uneventful. Spanish 10-year yields ended last week at 6.44%, while Italian ones – at 5.78%, below the critical maximums.
USD/JPY was steadily rising last week and managed to rise above 200-day MA, but now stalled around resistance at 79.60 yen (100-day MA). Yen’s weakening is limited by demand for Japanese government bonds as Japan has the highest real interest level after Italy in G7.
GBP/USD is trading sideways around $1.5700. Last week it closed below 200-day MA at $1.5713.
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Key options expiring today
Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (2 p.m. GMT).
Here are the key options expiring today:
EUR/USD: $1.2250, $1.2400, $1.2450;
USD/JPY: 79.00, 79.15, 79.25;
AUD/USD: $1.0300, $1.0350, $1.0570, $1.0600;
NZD/USD: $0.8100, $0.8150;
EUR/JPY: 98.00:
AUD/JPY: 81.00.
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Scotiabank: trading opportunities alert
Analysts at Scotiabank note that while EUR/USD was trading sideways last week, there are many other trading opportunities.
“EUR/CAD at new record lows; USD/JPY finally breaking out of its 16-session 88-point range; AUD/CAD collapsing lower. No time for the sidelines,” the specialists say.
The bank draws particular attention to Canadian dollar: “CAD has strengthened beyond where oil or interest rates would justify. There have been CAD positive flows this week that might have pushed it too far. Watch Canadian political landscape, since upcoming provincial elections could create some event risk.”
Image from theoptionstradingcourse.com
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CFTC traders positioning data
The latest Commitments of Traders (COT) report, released on Friday, August 17, by the Commodity Futures Trading Commission (CFTC), showed that on a week ended August 14:
Non-commercial large futures traders, including hedge funds and large speculators, cut their total US dollar long positions to $8.92 billion on August 14 from a total long position of $11.7 billion on August 7. Speculator sentiment for the euro dipped last week after improving for three consecutive weeks. Net short British pound positions shrank last week and reached a virtually neutral level against the US dollar. Japanese yen net long positions edged up slightly following a dip the previous week. Swiss franc net short speculative positions increased after improving for two consecutive weeks. Loonie, ausie and kiwi net long positions keep on rising.
Take a look at the following table.
It’s necessary to note that the figures cited above are always a week old at the time of their release. Never the less, CFTC data gives a good oversight into how the market is positioned and if/how these positions are being unwound. Although the CME speculators represent a small fraction of trading in the currency markets, their trades are widely seen as typical of hedge fund investors' currency movements.
In the COT report all the market players are divided into three categories: hedgers (commercials), big speculators (non-commercials) and small traders (non-reportable positions). We analyze only non-commercial positions (mainly, these are banks and investment funds).
We recommend you paying attention to:
Extreme Positions: If everyone is already long or short it is a strong indication price may reverse because there is no one left for buyers to buy from and no one left for sellers to sell to.
Changes in Market Positions: When large speculators change their position and go from net long to net short or vice versa, there typically is a good reason they do this.
Changes in Open Interest: Rising or falling open interest may reflect directional commitment or lack thereof and therefore indicate strength or potential reversal of a particular price trend.
Find more at the CFTC website.
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FX majors from top forecasters
Here are the forecasts for EUR/USD, GBP/USD, USD/JPY, USD/CHF and EUR/JPY from top forecasters. Data were submitted on August 17.
Source: FX Week
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Commerzbank: levels for USD/JPY
Technical analysts at Commerzbank think that USD/JPY is targeting 79.64 (May 1 minimum) and 79.92/80.15 (June 11 maximum, July maximums and May 22 maximum). In their view, support for the pair lies at 79.22 (200-day MA), 79.08 (55-day MA) and 78.80 (August 9 maximum). Above the latter, there’s the immediate upside momentum.
Chart. Daily USD/JPY
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AUD/USD extends gains
On Monday AUD/USD trades on the upside above $1.0450 and close to the lower boundary of the upward channel, existing since June. The pair needs to fix above $1.0530 (August 17 maximum) to show the downward correction is over. On the upside strong resistance for AUD/USD lies at $1.0600 and at $1.0660 (resistance line, connecting 2011 and 2012 maximums).
Аnalysts at Westpac expect the pair to slide towards $1.0300 in the near-term on the back of falling iron prices and waning QE3 hopes. On the way towards this levels strong support lies at $1.0410 (August minimum).
Chart. Daily AUD/USD
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