Recap of last week:
There were some brutal reversal moves last week, particularly with USD, all helped by Trump, RISK OFF plays and the small fact that the US 10 year yield wasn’t punching through 2.5%
US CPI and Retail Sales were good but the not so with the mighty USD as it promptly gave it all back. Yellen was a little hawkish and guess what ? USD gave it back. Apparently China stopped dumping UST’s which lowered yields. This increasing pressure to an already shaky yield across the curve wasn’t great by any means. Talking of 10yr it is currently dancing two step with USD. HOWEVER, Fridays USD firmness increased despite yields being down and USD was up on the day. Nasty price action. Yes it was filthy.
Cable took a slap with CPI Core (a miss and BOE’s only focus right now) – then soft Retail Sales. However, it is still yet to properly break the out of the recent range of 1.2400-1.2550
The week ahead:
It’s a quiet week with EU PMI’s, Canadian CPI/Retail Sales, FOMC and AUD Minutes – so I am going to concentrate on levels and trades for 3 majors:
EURUSD: sometimes when we have an up and down kind of week i always take a step back and see the bigger picture. Just take a look at the DAILY CHART on EURUSD. The downward trend is still intact and 1.0777-1.0830 is a formidable area to stay below for bears. Bulls tried to get above it 12 days ago and failed – since then we’ve resumed the trend since mid-November. The 100DMA (White line) is moving lower and in addition a key level to stay below. Play from the short side and areas to sell are 1.0710 adding more at 1.0770 but i would consider a small buy at 1.0520 with a stop below 1.0455 for those who want to play ranges. (chart1 and double click on image to enlarge)
EURUSD: Drilling down to the HOURLY CHART we are just below the 100HMA so slightly bearish however don’t forget the brutal reversals from last week so don’t be a hero. 1.0650/80 are good levels for intraday selling. But many traders got stung last week so stick to DAILY CHART levels for lumping in any kind of size (chart 2)
USDJPY: 113.00 was previous support and served as good resistance on Friday, HOWEVER Trump was out “campaigning without opposition” again this weekend so watch out for a potential gap up in Asia. If it doesn’t materialise look at selling into 113.00 with a stop above 113.30. 112.60 looks nice for a small buy but 112.00 is better.
AUDUSD: .7700 now is close resistance after it failed to hold last week. We made a high of .7731 so all the weak shorts and a few cheeky longs were cleared out. I would expect mean reversion to kick in and .7680 is a nice area to start selling (if we get there) with stop above .7730
Please take a look at the red box below. This shows that most price action and volume was done between .7605 and .7700 within the last 2 weeks. Prices are happy to stay within the box. Think BABY in BATHWATER.
(Image taken from Forex Live)