RECAP LAST WEEK
Trump just couldn’t do it. And then the real boss decided to flex its muscles – Congress. After delaying the vote until Friday leader of the House, Paul Ryan advised Trump “the deal maker” to pull the vote. This was a major set back for Trumpflation trades – particularly USDJPY. The market is not particularly focused on the Obama repeal per se, but if they can’t get this through god help them on fiscal stimulus or de-regulations later in the year.
The rot set in last Wednesday at 115.00 which I’m told is when more Japanese year-end buyers stepped in. Last week we got to a low of 110.60 which is the last major support on the DAILY chart. If this breaks it could get ugly all the way down to 108.00
The broad USD weakness helped an already firm EURUSD to test 1.0830 area. As previously mentioned this area is very sticky but I like buying dips at 1.0770 all the way down to 1.0700 – but more on that later. All this is good news but firm PMI’s on Friday need to realistically lift CORE CPI and as yet I’m not convinced. A turnaround in USD could see this pair give up the goose at 1.0830
Cable broke 1.25 but failed to hold it convincingly and we closed at 1.2475 Trigger 50 awaits.
AUDUSD remains a sell at .7730/60 – in 6 months I’ll be saying the same. Rinse and repeat.
EURUSD should consolidate but look for 1.0770 to hold for another go at breaking 1.0830 BUY all the way down to 1.0700 but please note a lot of business has been done in this area. Therefore I recommend keeping a core position and rebuying/selling at key levels as above.
EURUSD HOURLY CHART
EURUSD DAILY CHART
Be careful shorting Cable because even though net shorts are huge I fancy a squeeze on dumb money. Remember triggering Article 50 is expected, the uncertainty with the deals will come later when EU officials get on their soap boxes. Look for a firm rhetoric from UK PM. Adam Button from Forex Live has a good run down.
Buy into 1.2400 if it holds in Asia. 1.2740 is a good sell and 1.2800 too but as previously mentioned I see a squeeze on dumb money. However this should play out post trigger.
It’s trying to find a base at 110.60 so if this breaks it could get ugly until 108.00
I like 111.60 to sell but the key level to stay below is 112.00 and I remain a rally seller especially as Japanese year-end buying is still in play until Wednesday.
That’s it from AP towers. Enjoy and discuss
Patrick and Adam