AUD/USD and NZD/USD Fundamental Daily Forecast – RBA Minutes to Take Backset to Evergrande Contagion Fears

The Australian Dollar is edging higher against the U.S. Dollar early Tuesday, shortly ahead of the release of the Reserve Bank of Australia’s (RBA) policy meeting minutes at 01:30 GMT. The Aussie was under pressure the previous session as a stronger U.S. Dollar weighed down commodities and commodity-linked currencies. The catalyst behind the selling pressure was a looming catastrophe at indebted property giant China Evergrande.

At 0:55 GMT, the AUD/USD is trading .7254, up 0.0001 or +0.02%.

Aussie traders are extremely nervous because Evergrande is one of the major property owners in Australia. A forced liquidation of those properties to fulfil their debt obligations will put tremendous pressure on property and property-related stocks. It could also hurt the mortgage market and may even force the RBA to delay any tightening of policy. New liquidity from the central bank could become an option if the situation gets worse enough. All of these factors could weigh on the Australian Dollar.

RBA Minutes to Provide Little Help if Focus Remains on Threat of Evergrande Contagion

The RBA will on Tuesday release the minutes from its monetary policy meeting on September 7.  At the meeting, the RBA kept its key interest rate unchanged at a record low 0.10 percent and confirmed to taper its bond purchases.

AUD/USD traders seemed to have been slightly caught off guard by the RBA’s decision to taper its bond purchases at the policy meeting.

Although initially the Aussie Dollar jumped, it reversed course soon after. The Aussie spiked about 0.3 percent after the meeting but went on to trade 0.3 percent lower than before the RBA’s meeting.

After the policy announcement, a high-ranking RBA official said he expects the economy to “bounce back” from virus lockdowns as vaccination rates rise and as governments ease health restrictions, giving the central bank confidence to begin dialing back its $200 billion bond-buying stimulus.

RBA Governor Philip Lowe said after the bank’s monthly board meeting on Tuesday the lockdowns in NSW and Victoria would “delay”, but “not derail”, the economic recovery.

Dr. Lowe admitted there was uncertainty about the timing and pace of the bounce-back, and it was likely to be slower than earlier in the year.

“Much will depend on the health situation and the easing of restrictions on activity.”

Daily Forecast

Everything the RBA has to say in its minutes is expected to be downplayed due to the financial ramifications from the widely expected Evergrande property liquidation in Australia and the lingering impact of the move.

No one is certain how this situation will play out so there is no strong incentive to buy the AUD/USD at this time especially before the start of the Federal Reserve’s two-day meeting on Tuesday.

Traders are bracing for contagion and fallout from the Evergrande problem so rallies are likely to be sold until there is more clarity.

For a look at all of today’s economic events, check out our economic calendar.

Another Quiet Day on the Economic Calendar Leaves the FED and Risk Sentiment in the Driving Seat

Earlier in the Day:

It was a relatively quiet start to the day on the economic calendar this morning, with the China markets closed today. The Kiwi Dollar was in action in the early hours, however.

Later this morning, the RBA meeting minutes will also draw interest as the markets look to assess the impact of the latest lockdown measures on policy.

For the Kiwi Dollar

Consumer sentiment figures were in focus.

In the 3rd quarter, the Westpac Consumer Sentiment Index fell from 107.1 to 102.7.

According to the Westpac survey,

  • Confidence took a hit, with the index falling by 4.4 points as a result of the latest nationwide lockdown.
  • The decline was more modest, however, than the fall seen back in 2020.
  • While households remain secure about their personal financial situation, global supply chain disruption weighed on spending appetites.

The sub-components:

  • The Present Conditions Index fell by 2.7 points to 95.6, with the Expected Conditions Index down 5.5 points to 107.4.
  • 1-year economic outlook tumbled by 10.0 points to -5.6, with the “Good time to buy” sub-index falling by 7.2 points to -5.2.
  • 5-year economic outlook fell by 6.2 points to 11.5, while the current financial situation sub-index rose by 1.8 points to -3.6.
  • Expected financial situation saw a modest 0.6 point decline to 16.1.

The Kiwi Dollar moved from $0.70293 to $0.70260 upon release of the figures. At the time of writing, the Kiwi Dollar was down by 0.26% to $0.7009.

Elsewhere

At the time of writing, the Japanese Yen was up by 0.05% to ¥109.390 against the U.S Dollar, with the Aussie Dollar up by 0.06% to $0.7256.

The Day Ahead

For the EUR

It’s a particularly quiet day ahead on the economic calendar. There are no material stats due out of the Eurozone to provide the EUR with direction.

The lack of stats will leave the EUR in the hands of market risk appetite and sentiment towards FED monetary policy.

At the time of writing, the EUR was flat at $1.1726.

For the Pound

It’s a relatively quiet day ahead on the economic calendar. CBI Industrial Trend Orders for September are due out later today. With little else for the markets to consider, we can expect influence. The impact will be limited, however, with the Pound on the defensive ahead of Thursday’s policy decision.

At the time of writing, the Pound was up by 0.01% to $1.3658.

Across the Pond

It’s also a relatively quiet day ahead. Housing sector numbers for August are due out later in the day. With the markets focused on the FED, however, the stats are unlikely to have an impact on the day.

On Monday, the U.S Dollar Spot Index rose by 0.09% to end the day at $93.276.

For the Loonie

It’s a quiet day ahead for the Loonie. House price figures for August are due out later in the day.

We don’t expect the numbers to provide the Loonie with direction, however. Market risk sentiment will and crude oil prices will remain the key drivers on the day.

At the time of writing, the Loonie was up by 0.05% to C$1.2815 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

September 21st 2021: EUR/USD Eyes H1 Prime Resistance at $1.1767-1.1776 After $1.17 Support

Charts: Trading View

EUR/USD:

(Italics: previous analysis)

Technical studies reveal movement hovering north of prime support at $1.1473-1.1583 on the weekly timeframe. Gleaning additional technical confluence through a 100% Fib projection at $1.1613 and 1.27% Fib extension at $1.1550, this base remains a key watch, long term. With respect to trend on the weekly chart, the market has largely been bullish since the early 2020.

Meanwhile, a closer reading of price on the daily timeframe reveals Monday spiked to within a stone’s throw of Quasimodo support at $1.1689. Albeit sponsoring a late August bid (black arrow), action from $1.1689 failed to find approval north of late July tops at $1.1909; therefore, this ranks $1.1689 as perhaps frail support. Assuming bearish leadership on the daily, the $1.1612 and $1.1602 (September/November 2020) lows signify downside support targets, followed by Fibonacci support between $1.1420 and $1.1522 (glued to the lower side of the weekly timeframe’s prime support at $1.1473-1.1583).

Charted a pip ahead of the daily Quasimodo, the $1.1690-1.1705 decision point put in an appearance on Monday, encouraging H4 sellers to dial back and hand the baton to buyers. Quasimodo support-turned resistance at $1.1742 is now in range on this timeframe, with subsequent bullish interest to perhaps take aim at Quasimodo resistance from $1.1771.

Intraday action on Monday was interesting. The US dollar, in addition to other safe-haven currencies such as the Japanese yen and Swiss franc, gained traction Monday, elevated amidst clear-cut risk-off sentiment. Europe’s single currency, however, reclaimed a large slice of lost ground, aided (technically) not only by the H4 decision point mentioned above at $1.1690-1.1705, but also $1.17 on the H1. At the time of writing, H1 resistance at $1.1728 is active; rupturing the latter paves the way to $1.1742 on the H4, a level shadowed by H1 prime resistance coming in at $1.1767-1.1776, joined by supply at $1.1762-1.1774.

Observed Levels:

Extending recovery gains on short-term charts may have sellers move in on prime resistance at $1.1767-1.1776 on the H1 and supply from $1.1762-1.1774, which dovetails with H4 Quasimodo resistance at $1.1771. However, prior to this, sellers might engage with Quasimodo support-turned resistance at $1.1742 on the H4.

An alternative scenario to be mindful of is a whipsaw south of $1.17 on the H1 to daily Quasimodo support parked at $1.1689. $1.1689 bids feeding off sell-stops below $1.17 could be enough to chalk up a bullish wave.

AUD/USD:

(Italics: previous analysis)

Latest out of the weekly timeframe has AUD/USD touching gloves with prime support at $0.6968-0.7242. Since printing a two-week recovery in late August, the currency pair has been fighting to entice fresh bullish interest. Failure to command position from $0.6968-0.7242 opens up support at $0.6673. Buyers regaining consciousness, nevertheless, has prime resistance at $0.7849-0.7599 to target. Trend studies on the weekly scale show we’ve been higher since early 2020. Consequently, the response from $0.6968-0.7242 could STILL be the beginnings of a dip-buying attempt to merge with the current trend.

The daily timeframe’s technical landscape informs traders bids are perhaps thin within weekly prime support, at least until price shakes hands with Fibonacci support at $0.7057-0.7126. Those who follow the relative strength index (RSI) will note the value journeyed through the 50.00 centreline last week and had Monday dip a toe below 40.00. This highlights a bearish atmosphere until making contact with oversold territory.

Price action on the H4 timeframe came within touching distance of a half-hearted decision point at $0.7200-0.7218 on Monday. To the upside, two resistances are on the radar at $0.7281 and $0.7317.

Lower on the curve, a H1 decision point at $0.7269-0.7259 elbowed into the spotlight, an area formed in the early hours of Monday which saw price tunnel through demand at $0.7248-$0.7259. Continued interest to the downside has $0.72 to target.

Observed Levels:

Each timeframe analysed underlines a bearish energy.

Weekly prime support at $0.6968-0.7242 appears vulnerable due to the daily timeframe exhibiting scope to approach Fibonacci support at $0.7057-0.7126. This, on top of the H1 timeframe’s decision point at $0.7269-0.7259 making a show, implies a short term move to $0.72 (H1) could be in the offing (note $0.72 aligns with the lower band of the H4 decision point at $0.7200-0.7218).

USD/JPY:

(Italics: previous analysis)

Since mid-July, ¥108.40-109.41 demand has failed to stir much bullish energy on the weekly timeframe. Nevertheless, recognising the area derives additional backing from neighbouring descending resistance-turned support, extended from the high ¥118.61, an advance could eventually emerge to familiar supply at ¥113.81-112.22.

The uninspiring vibe out of weekly demand is demonstrated by way of a consolidation on the daily timeframe between prime support at ¥108.96-109.34 and resistance from ¥110.86-110.27. Range support, as you can see, is currently in the frame. In the event price deviates from range extremes, Quasimodo resistance at ¥111.11 is seen, along with a concealed Quasimodo support at ¥108.43. Based on the relative strength index (RSI), the value is confined to a consolidation surrounding the 50.00 centreline, between 40.87 and 56.85.

Broad declines observed in major US equity indexes elevated demand for the safe-haven JPY Monday. USD/JPY downside swings technical curiosity to the H4 double-top pattern’s (¥110.44) profit target around ¥108.71—sharing chart space with a 1.618% Fibonacci projection at ¥108.86 and a 1.272% Fibonacci projection at ¥108.72. However, in order to reach the aforesaid pattern target, the lower edge of the daily range support highlighted above at ¥108.96-109.34 must be taken.

Heading into early US trading on Monday, H1 crossed swords with Quasimodo resistance-turned support at ¥109.45, and clocked a ¥109.65 top before changing gears and heading towards Quasimodo support at ¥109.31. Territory below the latter reveals support at ¥109.11.

Observed Levels:

In keeping with the H4 timeframe, booking additional losses is possibly on the cards until the double-top pattern’s (¥110.44) profit target around ¥108.71. Still, to reach the aforementioned profit target, sellers must marginally defeat the daily timeframe’s range support at ¥108.96-109.34 and take on any bullish interest from weekly demand at ¥108.40-109.41.

Should we nudge through H1 Quasimodo support at ¥109.31, this could be an early sign of bearish muscle making an entrance, and with this, additional selling might take shape.

GBP/USD:

(Italics: previous analysis)

In the shape of a hammer candlestick formation (bullish signal), supply-turned demand at $1.3629-1.3456 on the weekly timeframe stepped forward in July. The aforementioned zone remains active, welcoming an additional test mid-August. Yet, pattern traders will also note August’s move closed south of a double-top pattern’s neckline at $1.3669, broadcasting a bearish vibe. Conservative pattern sellers, however, are likely to pursue a candle close beneath $1.3629-1.3456 before pulling the trigger.

Sterling kicked off the week on the ropes, clocking one-month lows versus the US dollar. GBP/USD remains comfortable beneath the 200-day simple moving average at $1.3831 and is within reach of Quasimodo support at $1.3609. Previous analysis underlined the daily chart has communicated a rangebound environment since late June between a 61.8% Fib retracement at $1.3991 and the noted Quasimodo support. Momentum, according to the relative strength index (RSI) value, extended position below the 50.00 centreline and scraped through 40.00 on Monday. This informs traders that momentum to the downside is increasing in the form of average losses exceeding average gains.

Yesterday’s bearish presence established a decision point at $1.3750-1.3721, an area forming a decision to tunnel through Quasimodo support from $1.3693 (currently serving as resistance). Daily Quasimodo support mentioned above at $1.3609 calls for attention as a downside objective also on the H4 scale.

From the H1 timeframe, mid-way through London on Monday clipped the lower side of $1.37 and also brought in resistance at $1.3689—a previous Quasimodo support level drawn from 26th August. Further softening places Quasimodo support at $1.3618 and the $1.36 figure in sight.

Observed Levels:

Having noted scope for the daily timeframe to test Quasimodo support at $1.3609, retesting either H4 resistance at $1.3693 or the H4 decision point at $1.3750-1.3721 could stir a bearish theme. Adding weight to $1.3693 is H1 resistance coming in at $1.3689 and the $1.37 figure.

The H1 Quasimodo support at $1.3618 forms a reasonable downside target, arranged just north of the noted Quasimodo support on the daily timeframe.

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Analysis: Why the Fed Might Welcome a Bond Market Tantrum

Persistently low yields are a feature of bond markets across the developed world, with central banks mostly in no hurry to raise interest rates and a global savings glut that keeps debt securities in constant demand.

But it is in the United States that the contradiction between economic recovery and bond yields is starkest.

Even with growth tipped to surpass 6% this year and a “taper” in sight for the Fed’s bond-buying programme at the end of this year, 10-year yields are still stuck at just above 1.3%..

The Fed probably rejoiced at low yields in the initial stages of the economic recovery, but now needs bonds to respond to the end of pandemic-linked recession, said Padhraic Garvey, head of research for the Americas at ING Bank.

Current pricing, analysts say, looks more consistent with heightened economic uncertainty, whereas higher yields would align markets more with the signals coming from central banks.

“To facilitate that, we argue that there needs to be a tantrum. If the Fed has a taper announcement … and there is no tantrum at all, that in fact is a problem for the Fed,” ING’s Garvey said.

Analysts say a bond market tantrum would involve yields rising 75-100 basis points (bps) within a couple of months.

The original “taper tantrum” in 2013 boosted U.S. yields just over 100 bps in the four months after then Fed boss Ben Bernanke hinted at an unwinding of stimulus measures.

But that kind of sudden jump in yields looks unlikely right now, given how clearly the Fed has telegraphed its plans to taper its bond-buying. And as 2013 showed, bond market tantrums carry nasty side-effects including equity sell-offs and higher borrowing costs worldwide.

A happy medium, analysts say, might be for benchmark yields to rise 30-40 bps to 1.6-1.8%

FED AND BANKS NEED AMMUNITION

Besides wanting higher yields to better reflect the pace of economic growth, the Fed also needs to recoup some ammunition to counter future economic reversals.

The Fed funds rate – the overnight rate which guides U.S. borrowing costs – is at zero to 0.25%, and U.S. policymakers, unlike the Bank of Japan and the European Central Bank, are disinclined to take interest rates negative.

The Fed won’t want to find itself in the position of the ECB and BOJ, whose stimulus options at the moment are limited to cutting rates further into negative territory or buying more bonds to underwrite government spending.

Jim Leaviss, chief investment officer at M&G Investments for public fixed income, said policymakers would probably like the Fed fund rate to be at 2%, “so, when we end up in the next downturn, the Fed will have some space to cut interest rates without hitting the lower bound of zero quickly”.

Another reason higher yields might be welcomed is because banks would like steeper yield curves to boost the attractiveness of making longer-term loans funded with short-term borrowing from depositors or markets.

Thomas Costerg, senior economist at Pictet Wealth Management, notes that the gap between the Fed funds rate and 10-year yields of about 125 bps now is well below the average 200 bps seen during previous peaks in economic expansion.

He believes the Fed would favour a 200 bps yield slope, “not only because it would validate their view that the economic cycle is fine but also because a slope of 200 bps is healthy for the banking sector’s maturity transformation.”

GRAVITATIONAL FORCE

But even a tantrum might not bring a lasting rise in yields.

First, while the Fed may look with envy at Norway and New Zealand where yields have risen in expectation of rate rises, it has stressed that its own official rates won’t rise for a while.

Structural factors are at play too, not least global demand for the only large AAA-rated bond market with positive yields.

The Fed also, in theory at least, guides rates towards the natural rate of interest, the level where full employment coincides with stable inflation.

But this rate has shrunk steadily. Adjusted for projected inflation, the “longer-run” funds rate – the Fed’s proxy for the natural rate – has fallen to 0.5% from 2.4% in 2007. If correct, it leaves the Fed with little leeway.

Demographics and slower trend growth are cited as reasons for the decline in the natural rate though a paper https://bit.ly/3nVMxMv presented last month at the Jackson Hole symposium also blamed a rise in income inequality since the 1980s.

The paper said the rich, who are more likely to save, were taking a bigger slice of overall income and the resulting savings glut was weighing on the natural rate of interest.

“One lesson from this year is that there is massive gravitational force, a price-insensitive demand which is pressing down on Treasury yields,” Pictet’s Costerg said.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Stefano Rebaudo; Additional reporting by Dhara Ranasinghe in London and Dan Burns in New York; Editing by Sujata Rao and David Clarke)

 

AUD/USD Price Forecast – Australian Dollar Continues Volatility

The Australian dollar continues to be very noisy as we have seen a lot of risk on/risk off type of behavior around the world. The Chinese credit issues are the latest headlines have people paying close attention to, and as a result is not a huge surprise to see that there would be a lot of selling of the Aussie dollar as it is so highly levered to the Chinese economy. After all, Australia has a huge export situation when it comes to China, with hard commodities such as iron, gold, and the like. With this being the case, the market is likely to see a major correlation to what happens on the Chinese mainland and this currency pair.

AUD/USD Video 21.09.21

Furthermore, the US dollar is considered to be a “safety currency”, so it does make a certain amount of sense that we would see the market’s favorite when there are times of uncertainty. To the downside, if we were to break down below the bottom of the candlestick, that probably opens up a bigger move towards the 0.71 level. To the upside, if we turn around and take out the inverted hammer from the Friday session, then we can start to think about the 50 day EMA.

Regardless, this is going to be a very noisy and messy situation, so I think you need to be cautious about your position size, at least not until we get a bit of clarity going forward. Because of this, we need to be very cautious about how much money you put to work right away, but ultimately this is a market that I do think probably will make an impulsive move sooner or later, that we can start following.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD Forex Technical Analysis – Weakens Under .7249, Strengthens Over .7293

The Australian Dollar hit its lowest level since August 27 against the U.S. Dollar on Friday after better-than-expected retail sales numbers in the United States boosted bets on the strength of the U.S. economy and earlier monetary policy tightening by the Federal Reserve. The Aussie was also pressured by a rise in the 10-year U.S. Treasury yield.

On Friday, the AUD/USD settled at .7265, down 0.0029 or -0.40%.

The Federal Reserve meets for two days next week and on Wednesday is expected to give further details as to when it may start to slow its $120 billion in monthly bond purchases that have supported the recovery from the pandemic.

Fed Chief Jerome Powell has said the so-called tapering could occur this year, but investors are waiting for more specifics.

Daily AUD/USD

Daily Swing Chart Technical Analysis

The main trend is up but momentum is trending lower. A trade through .7222 will change the main trend to down. A move through .7478 will signal a resumption of the uptrend.

The minor trend is down. This is controlling the momentum. A trade through .7347 will change the minor trend to up.

The short-term range is .7107 to .7478. The AUD/USD closed inside its retracement zone at .7293 to .7249 on Friday.

The major resistance is the retracement zone at .7499 to .7592.

Daily Swing Chart Technical Forecast

The direction of the AUD/USD early Friday is likely to be determined by trader reaction to the 50% level at .7293.

Bearish Scenario

A sustained move under .7292 will indicate the presence of sellers. The first downside target is the Fibonacci level at .7249, followed by the main bottom at .7222.

Taking out .7222 will change the main trend to down and could trigger an acceleration to the downside.

Bullish Scenario

A sustained move over .7293 will signal the presence of buyers. The first upside target is the minor top at .7347. Taking out this level will change the minor trend to up. This will also shift momentum to the upside with the next minor top at .7410 the next likely target.

For a look at all of today’s economic events, check out our economic calendar.

A Quiet Economic Calendar Leaves the Dollar in the Spotlight

Earlier in the Day:

It was a quiet start to the day on the economic calendar this morning. With the China and Japan markets closed today, there were no material stats for the markets to consider in the early hours.

The lack of stats left the markets to respond to moves through the U.S session on Friday, which had left riskier assets in the red.

For the Majors

At the time of writing, the Japanese Yen was down by 0.05% to ¥109.990 against the U.S Dollar, with the Aussie Dollar down by 0.25% to $0.7261. The Kiwi Dollar was down by 0.17% to $0.7028.

The Day Ahead

For the EUR

It’s a relatively quiet day ahead on the economic calendar. Wholesale inflation figures for Germany are due out later today.

Barring a marked spike, however, we don’t expect the August figures to have a material impact on the EUR.

At the time of writing, the EUR was down by 0.01% to $1.1724.

For the Pound

It’s a particularly quiet day ahead on the economic calendar. There are no material stats due out of the UK to provide the Pound with direction.

The lack of stats will leave the Pound in the hands of market risk sentiment as the markets look ahead to Thursday’s MPC decision.

At the time of writing, the Pound was down by 0.12% to $1.3725.

Across the Pond

It’s also particularly quiet day ahead. There are no material stats due out to provide the Dollar and the broader markets with direction.

The lack of stats will leave the markets to continue to focus on the FOMC and what to expect on Wednesday.

The U.S Dollar Spot Index ended Friday up 0.28% to $93.195.

For the Loonie

It’s a particularly quiet day ahead for the Loonie, however. There are no major stats due out of Canada to provide the Loonie with direction.

The lack of stats will leave the Loonie in the hands of crude oil prices and market risk sentiment.

At the time of writing, the Loonie was down by 0.06% to C$1.2774 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

The Week Ahead – Central Banks back in Focus with the BoE and the FED in Action

On the Macro

It’s a quiet week ahead on the economic calendar, with 37 stats in focus in the week ending 17th September. In the week prior, 62 stats had also been in focus.

For the Dollar:

Prelim private sector PMIs for September will be in focus on Thursday.

Expect the services PMI to be the key stat of the week.

Other stats include housing sector data that will likely have a muted impact on the Dollar and the broader market.

The main event of the week, however, is the FOMC monetary policy decision on Wednesday.

With the markets expecting the FED to stand pat, the economic and interest rate projections and press conference will be pivotal. FED Chair Powell prepped the markets for the tapering to begin this year. The markets are not expecting any hint of a shift in policy on interest rates, however…

In the week ending 17th September, the Dollar Spot Index rose by 0.66% to 93.195.

For the EUR:

It’s a relatively busy week on the economic data front.

Prelim September private sector PMIs for France, Germany, and the Eurozone will draw plenty of interest on Thursday.

While Germany’s manufacturing PMI is key, expect influence from the entire data set. Market concerns over the economic recovery have tested support for riskier assets. Softer PMI numbers would test EUR support on the day.

For the week, the EUR fell by 0.75% to $1.1725.

For the Pound:

It’s a relatively busy week ahead on the economic calendar.

On the economic data front, CBI Industrial Trend Orders and prelim private sector PMIs are due out.

Expect the services PMI for September to be the key stat on Thursday.

While the stats will influence, the BoE’s monetary policy decision on Thursday will be the main event.

Persistent inflationary pressure has raised the prospects of a sooner rather than later move by the BoE. Weak retail sales figures have made things less clear, however.

Expect any dissent to drive the Pound towards $1.40 levels.

The Pound ended the week down by 0.71% to $1.3741.

For the Loonie:

It’s another quiet week ahead on the economic calendar.

Early in the week, house price figures for August are due out. The numbers are not expected to have a material impact on the Loonie, however.

Retail sales figures for July, due out on Thursday, will influence, however. Another sharp increase in spending would deliver the Loonie with much-needed support.

The Loonie ended the week down 0.57% to C$1.2764 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

There are no major stats to provide the Aussie Dollar with direction.

While there are no major stats, the RBA monetary policy meeting minutes on Tuesday will influence. The markets will be looking for forward guidance following the latest lockdown measures.

The Aussie Dollar ended the week down by 1.05% to $0.7279.

For the Kiwi Dollar:

It’s another quiet week ahead.

Early in the week, consumer sentiment figures for the 3rd quarter will be in focus.

Trade data, due out on Friday, will be the key numbers for the week, however.

Away from the economic calendar, however, COVID-19 news updates will also be key.

The Kiwi Dollar ended the week down by 1.03% to $0.7040.

For the Japanese Yen:

It’s a relatively busy week on the economic calendar.

Inflation and prelim private sector PMIs are due out on Friday. We don’t expect the numbers to influence the Yen, however.

On the monetary policy front, the BoJ is in action on Wednesday. We aren’t expecting any surprises, however, as the Delta variant continues to deliver economic uncertainty.

The Japanese Yen rose by 0.01% to ¥109.93 against the U.S Dollar.

Out of China

There are also no major stats due out of China for the markets to consider, with the Chinese markets closed early in the week.

On the monetary policy front, the PBoC is in action. We don’t expect any changes to the Loan Prime Rates, however.

The Chinese Yuan ended the week down by 0.34% to CNY6.4661 against the U.S Dollar.

Geo-Politics

Iran, China, and Russia remain the main areas of interest for the markets. News updates from the Middle East, in particular, will need continued monitoring following recent events in Afghanistan.

Weekly Technical Market Insight: 20th – 24th September 2021

Charts: Trading View

US Dollar Index (Daily Timeframe):

Deprived of resistance, the US dollar pencilled in a second consecutive gain last week, adding 0.7 percent, according to the US dollar index.

Support from 91.78-91.96 has proved persistent since the beginning of July, withstanding three successive downside attempts—the latest being early September.

Dollar bulls, as you can see, entered an offensive phase at the tail end of the week. While it’d be unwise to rule out a retracement at current levels, further buying could emerge as Quasimodo resistance calls for attention at 93.90. Strategically placed north of the 93.73 20th August high, and sharing space with 100% and 1.618% Fibonacci projections at 93.88 and 93.82, respectively, 93.90 delivers reasonably weighty confluence.

With respect to trend, 2020 was disappointing. 2021, nonetheless, has observed a defence off support at 89.69 and, year on year, is 3.7 percent higher.

The relative strength index (RSI), a popular gauge of momentum, retested the 50.00 centreline over the week and is now on the doorstep of trendline resistance (taken from the high 92.41), pinned a short distance below overbought territory.

  • While chart studies, in particular the relative strength index, suggests upside momentum may flatten out this week, Quasimodo resistance at 93.90 delivers technical confluence traders might be drawn to should further buying take shape.

EUR/USD:

(Italics: previous analysis)

Europe’s common currency shed 0.7 percent versus a broadly-bid dollar last week, seating price action within range of prime support on the weekly timeframe at $1.1473-1.1583. Fibonacci enthusiasts will note the 100% Fib projection at $1.1613 and 1.27% Fib extension at $1.1550 circling the upper range of the aforesaid support. Interestingly, long-term stops likely rest south of the $1.1640ish lows, perhaps accommodating enough energy to fill $1.1473-1.1583 bids. With respect to trend on the weekly chart, the market has largely been bullish since the early months of 2020.

The second half of the week witnessed an acceleration to the downside, throwing light on Quasimodo support at $1.1689 from the daily timeframe. Albeit sponsoring a late August bid (black arrow), action from $1.1689 failed to find approval north of late July tops at $1.1909; therefore, this ranks $1.1689 as perhaps frail support this week.

Assuming a bearish leadership on the daily, the $1.1612 and $1.1602 (September/November 2020) lows signify downside support targets, followed by Fibonacci support between $1.1420 and $1.1522 (glued to the lower side of the weekly timeframe’s prime support at $1.1473-1.1583).

Against the backdrop of higher timeframes, price action on the H4 chart passed through Quasimodo support at $1.1742 in strong fashion Friday. With $1.1742 likely to serve as resistance, the $1.1690-1.1705 decision point putting in an appearance should not surprise. Statistically, though, decision points left untested following the immediate move out of the base tend to offer unreliable structure. $1.1690-1.1705 also teams up closely with daily Quasimodo support mentioned above at $1.1689, which you may recall chart studies have labelled fragile.

Through the lens of a simple technical trader, limited support is also evident on the H1 scale until $1.17 (sat within the walls of the H4 timeframe’s decision point at $1.1690-1.1705). Stacked demand is present between $1.1706 and $1.1744 (23rd August), with little inside of this formation revealing that active buyers will show interest. For that reason, $1.17 is a key downside objective this week. However, buyers entertaining the idea of bouncing from August 24th lows around $1.1728 shines the spotlight on a pullback to prime resistance coming in at $1.1767-1.1776, joined by supply at $1.1762-1.1774.

Observed Levels:

Long term:

Weekly prime support at $1.1473-1.1583, coupled with a 100% Fib projection at $1.1613 and 1.27% Fib extension at $1.1550, might welcome price action this week. As underlined above, $1.1473-1.1583 is in a reasonably privileged location: below the $1.1640ish lows. Overturning daily Quasimodo support at $1.1689, therefore, is a possible scenario, targeting daily Fibonacci support at $1.1420-1.1522.

Short term:

In conjunction with the longer-term picture, a bearish energy is present on the lower timeframes this week.

Any pullback, therefore, would be viewed as a sell-on-rally scenario, either from H4 resistance at $1.1742 (previous Quasimodo support) or H1 prime resistance at $1.1767-1.1776 (and supply at $1.1762-1.1774).

The combination of $1.17 on the H1 and its surrounding decision point on the H4 at $1.1690-1.1705 offers a clear downside target.

AUD/USD:

(Italics: previous analysis)

Prime support at $0.6968-0.7242 on the weekly timeframe has been fighting to entice fresh bullish interest since the area powered a two-week recovery in late August. Failure to command position from $0.6968-0.7242 opens up support at $0.6673. Buyers regaining consciousness, nevertheless, has prime resistance at $0.7849-0.7599 to target. Trend studies on the weekly scale show we’ve been higher since early 2020. Consequently, the response from $0.6968-0.7242 could STILL be the beginnings of a dip-buying attempt to merge with the current trend.

The daily timeframe scraping through prime support at $0.7286-0.7355 in the latter part of the week broadcasts weakness. This delivers free rein to Fibonacci support at $0.7057-0.7126, set within the parapets of weekly prime support at $0.6968-0.7242. With the relative strength index (RSI) cementing position below the 50.00 centreline—telling traders that average losses over the 14-day lookback period surpass average gains—this adds weight to a bearish atmosphere.

Although the higher timeframe canvas favours sellers, the H4 timeframe touched gloves with prime support at $0.7236-0.7266 (glued to the upper edge of weekly prime support at $0.6968-0.7242). You may recall this area was made reference to throughout the week—see below from previous writing (italics):

Sellers assuming leadership yesterday hauled the currency pair through stacked demand on the H4 timeframe between $0.7282 and $0.7343, dropping to within a stone’s throw from prime support at $0.7236-0.7266. The latter may interest bullish eyes—a base arranged to receive downside momentum derived from sell-stops below stacked demand.

Recognising $0.7236-0.7266 welcomed price action late Friday, $0.7310 stands in as an initial target early week should buyers stage a recovery.

Meanwhile, out of the H1 chart, early London on Friday responded to trendline resistance, extended from the high $0.7469, hardened by the 61.8% Fibonacci retracement at $0.7319 and a 1.272% Fibonacci projection at similar levels. This led movement under $0.73 heading into US trading hours and concluded within reach of $0.7248-$0.7259 demand (a zone placed within H4 prime support at $0.7236-0.7266).

Observed Levels:

Long term:

Weekly prime support at $0.6968-0.7242 is a key base on the bigger picture, though having noted the daily timeframe’s prime support giving up position at $0.7286-0.7355, a deep dive into the aforementioned weekly zone is a possibility.

Short term:

Focus is on the H4 timeframe’s prime support at $0.7236-0.7266, as buyers potentially gear up to take advantage of selling pressure (sell-stops) below stacked demand. As underlined above, the initial upside goal north of $0.7236-0.7266 sits at $0.7310.

$0.7248-$0.7259 demand on the H1, therefore, could be brought into the fight before a short-term bid arises.

USD/JPY:

(Italics: previous analysis)

Since mid-July, ¥108.40-109.41 demand has failed to stir much bullish energy on the weekly timeframe. Nevertheless, recognising the area derives additional backing from neighbouring descending resistance-turned support, extended from the high ¥118.61, an advance could eventually emerge to familiar supply at ¥113.81-112.22.

The uninspiring vibe out of weekly demand is demonstrated by way of a consolidation on the daily timeframe between prime support at ¥108.96-109.34 and resistance from ¥110.86-110.27. Reluctance to commit outside of these areas toughens the consolidation; range limits, therefore, are likely to remain on the watchlist this week. In the event price deviates from range extremes, Quasimodo resistance at ¥111.11 is seen, along with a concealed Quasimodo support at ¥108.43. Based on the relative strength index (RSI), the value is confined to a consolidation surrounding the 50.00 centreline, between 40.87 and 56.85.

A three-day recovery in the 10-year yield and a muscular USD bid, together with technical support derived from the 1.272% Fibonacci projection on the H4 timeframe at ¥109.14, aided USD/JPY at the tail end of the week. This, as you can see, left the double-top pattern’s (¥110.44) profit target around ¥108.71 (plotted alongside a 1.618% Fibonacci projection at ¥108.86) unchallenged. Continued interest to the upside this week is likely to close in on supply at ¥110.82-110.39 (entertains the noted double-top configuration and shares a connection with daily prime resistance at ¥110.86-110.27).

Price action on the H1 timeframe accommodated ¥110 on Friday, though momentarily explored ground north of the figure ahead of Quasimodo resistance at ¥110.11. Prime support coming in from ¥109.74-109.80 is particularly interesting, stationed beneath intraday lows around ¥109.81.

Observed Levels:

Long term:

Recognising weekly demand is in play at ¥108.40-109.41, joined by the end-of-week rebound from range support on the daily timeframe at ¥108.96-109.34, points to a test of daily range resistance at ¥110.86-110.27 this week.

Short term:

In harmony with the longer-term bullish image, any bearish attempt from ¥110 on the H1 could feed buyer interest from prime support at ¥109.74-109.80. This sets the stage for an initial upside objective at approximately ¥109.90ish.

GBP/USD:

(Italics: previous analysis)

In the shape of a hammer candlestick formation (bullish signal), supply-turned demand at $1.3629-1.3456 on the weekly timeframe stepped forward in July. The aforementioned zone remains active, welcoming an additional test mid-August. Yet, pattern traders will also note August’s move closed south of a double-top pattern’s neckline at $1.3669, broadcasting a bearish vibe. Conservative pattern sellers, however, are likely to pursue a candle close beneath $1.3629-1.3456 before pulling the trigger.

Sterling extended its underperformance against a spirited USD on Friday; the currency pair finished the week lower by 0.7 percent. Despite many desks forecasting an interest rate rise in the UK as early as May, candle action discovered deeper water below the 200-day simple moving average at $1.3829. This raises the possibility of Quasimodo support at $1.3609 presenting itself this week.

It was also aired in recent writing that the daily chart communicates a rangebound environment. Since late June, buyers and sellers have been squaring off between a 61.8% Fib retracement at $1.3991 and the noted Quasimodo support. Momentum, according to the relative strength index (RSI) value, however, is below the 50.00 centreline and on the doorstep of 40.00. This informs traders that momentum to the downside is increasing in the form of average losses exceeding average gains.

Interestingly, H4 prime support at $1.3689-1.3724 was acknowledged heading into Friday’s close. This area may interest those looking at price taking out stops beneath lows around $1.3730 (blue oval), with a primary profit objective set at $1.3765.

For those who read Friday’s technical briefing you may recall the following H1 analysis (italics):

Elsewhere, short-term action based on the H1 chart has the pair circling the lower side of $1.38, as we write. Interestingly, supply at $1.3837-1.3812 lurks directly overhead and could help facilitate what many traders will recognise as a stop-run after the event. Chart space below $1.38 shifts attention to Quasimodo support from $1.3751.

As evident from the H1 timeframe, we can see price did indeed slice through $1.38 and tag supply at $1.3837-1.3812 before plunging lower. Two key Quasimodo supports were taken in the process at $1.3759 and $1.3751 (both now potential resistances), and punctured the $1.3726 8th September low. What’s interesting from a Fibonacci perspective is $1.3726 is accompanied by Fibonacci support between $1.3715 and $1.3732.

Observed Levels:

Long term:

Scope to unearth lower price levels this week is a possibility, both on the weekly and daily timeframes. A reasonable downside target rests with the daily timeframe’s Quasimodo support at $1.3609, which sits within weekly supply-turned demand at $1.3629-1.3456.

Short term:

While higher timeframes eye lower ground, H4 and H1 timeframes imply a pullback could be in the offing early week from H4 prime support at $1.3689-1.3724 and H1 Fibonacci support between $1.3715 and $1.3732. H1 resistances are seen at $1.3759 and $1.3751, though the H4 target resistance is a touch higher at $1.3765.

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The Weekly Wrap – Economic Data and Policy Jitters Delivered a Boost for the Greenback

The Stats

It was a busier week on the economic calendar, in the week ending 17th September.

A total of 61 stats were monitored, which was up from 42 stats in the week prior.

Of the 61 stats, 21 came in ahead forecasts, with 27 economic indicators coming up short of forecasts. There were 13 stats that were in line with forecasts in the week.

Looking at the numbers, 29 of the stats reflected an upward trend from previous figures. Of the remaining 32 stats, 30 reflected a deterioration from previous.

For the Greenback, upbeat economic data and sentiment towards monetary policy delivered support in the week. In the week ending 17th September, the Dollar Spot Index rose by 0.66% to 93.195. In the previous week, the Dollar had risen by 0.59% to 92.582.

Out of the U.S

Early in the week, inflation figures were in focus.

In August, the annual rate of core inflation softened from 4.3% to 4.0% versus a forecasted 4.2%. While softer than expected, 4% continued to sit well above the FED’s 2% target, leaving tapering on the table.

Mid-week, industrial production and NY Empire State manufacturing figures were market positive.

On Thursday, retail sales, Philly FED Manufacturing PMI, and jobless claims figures were of greater interest, however.

In August, retail sales increased by 0.7% versus a forecasted 0.2% decline. Core retail sales jumped by 1.8% versus a 0.1% decline. In July retail sales had fallen by 1.1% and core retail sales by 0.4%.

Manufacturing numbers were also upbeat, with the Philly FED Manufacturing PMI increasing from 19.4 to 30.7 in September.

Jobless claims figures failed to impress, however, with sub-300k remaining elusive. In the week ending 10th September, initial jobless claims rose from 312k to 332k. Economists had forecast an increase to 330k.

At the end of the week, consumer sentiment improved, albeit moderately. In September, the Michigan Consumer Sentiment Index rose from 70.3 to 71.0, falling short of a forecasted 72.0.

Out of the UK

It was also a busy week. Employment, inflation, and retail sales figures were in focus. The stats were skewed to the positive.

In August, claimant counts fell by a further 58.6k after having fallen by 48.9k in July. In July, the unemployment rate fell from 4.7% to 4.6%.

The UK’s annual rate of inflation accelerated from 2.0% to 3.25 in August, also delivering Pound support.

At the end of the week, retail sales disappointed, however. Month-on-month, core retail sales fell by 1.2% in August, following a 3.2% slide in July. Retail sales fell by 0.9% after having fallen by 2.8% in July. Economists had forecast a pickup in spending.

In the week, the Pound fell by 0.71% to end the week at $1.3741. In the week prior, the Pound had fallen by 0.23% to $1.3839.

The FTSE100 ended the week down by 0.93%, following a 1.53% loss from the previous week.

Out of the Eurozone

Economic data included wage growth, industrial production, trade, and finalized inflation figures for the Eurozone.

Finalized inflation figures for Spain, France, and Italy were also out but had a muted impact on the EUR.

In the 2nd quarter, wage fell by 0.4%, year-on-year, partially reversing a 2.1% increase recorded in the previous quarter.

Industrial production and trade data were positive, however.

Production increased by 1.5%, reversing a 0.1% fall from June, with the Eurozone’s trade surplus widening from €17.7bn to €20.7bn.

At the end of the week, finalized inflation figures for the Eurozone were in line with prelim figures. The Eurozone’s annual rate of inflation accelerated from 2.2% to 3.0% in August.

For the week, the EUR fell by 0.75% to $1.1725. In the week prior, the EUR had fallen by 0.56% to $1.1814.

The CAC40 slid by 1.40%, with the DAX30 and the EuroStoxx600 ending the week with losses of 0.77% and 0.96% respectively.

For the Loonie

Economic data included manufacturing sales, inflation, and wholesale sales figures.

The stats were mixed in the week.

In July, both manufacturing sales and wholesale sales disappointed with falls of 1.5% and 2.1% respectively.

Providing support, however, was a pickup in the annual rate of inflation from 3.3% to 3.5%.

The pickup in inflationary pressure and rising oil prices were not enough to support the Loonie against the Greenback.

In the week ending 17th September, the Loonie fell by 0.57% to C$1.2764. In the week prior, the Loonie had fallen by 1.34% to C$1.2692.

Elsewhere

It was another bearish week for the Aussie Dollar and the Kiwi Dollar.

The Aussie Dollar fell by 1.05% to $0.7279, with the Kiwi Dollar ending the week down by 1.03% to $0.7040.

For the Aussie Dollar

Business and consumer confidence figures were in focus in the 1st half of the week.

In spite of the latest lockdown measures, the stats were skewed to the positive.

The NAB Business Confidence Index rose from -8 to -5 in August.

More significantly, the Westpac Consumer Sentiment Index increased by 2.0% in September. The index had fallen by 4.4% in August.

On Thursday, employment figures disappointed, however.

In August, full employment fell by 68k following a 4.2k decline in July. Employment tumbled by 146.3k, however, versus a forecasted 90.0k decline. In July, employment had risen by 2.2k.

According to the ABS,

  • The unemployment rate fell from 4.6% to 4.5%, with the participation rate declining from 66.0% to 65.2%.
  • Year-on-year, the number of unemployed was down by 298,000.

For the Kiwi Dollar

It was also a mixed week on the economic data front.

2nd quarter GDP numbers impressed, with the NZ economy expanding by 2.8%, quarter-on-quarter. The economy had expanded by a more modest 1.4% in the previous quarter.

On the negative, however, was a slide in the Business PMI from 62.6 to 40.1 in August. The figures reflected the impact of the latest lockdown measures on production, justifying the RBNZ’s decision to leave the cash rate unchanged.

For the Japanese Yen

It was a relatively quiet week, with the numbers skewed to the negative.

According to finalized figures, industrial production fell by 1.5% in July. While in line with prelim figures, this was a partial reversal of a 6.5% jump from June.

In August, Japan’s trade balance fell from a ¥439.4bn surplus to a ¥635.4bn deficit. Exports rose by 26.2%, year-on-year, after having been up by 37% in July.

The Japanese Yen rose by 0.01% to ¥109.93 against the U.S Dollar. In the week prior, the Yen had fallen by 0.21% to ¥109.94.

Out of China

Fixed asset investment and industrial production figures were in focus mid-week.

There were yet more disappointing numbers from China for the markets to consider.

In August, fixed asset investment increased by 8.9%, year-on-year. This was softer than a 10.3% increase in July.

More significantly, industrial production was up by 5.3% in August versus 6.4% in July.

In the week ending 17th September, the Chinese Yuan fell by 0.34% to CNY6.4661. In the week prior, the Yuan had ended the week up by 0.18% to CNY6.4443.

The CSI300 and the Hang Seng ended the week down by 3.14% and by 4.90% respectively.

Dollar Touches Three-Week High, Lifted by Recent Data, Fed Taper View

The dollar index, a gauge of the greenback’s value against six major currencies, rose to 93.220, the highest since the third week of August. It was last up 0.4% at 93.207.

For the week, the dollar index gained 0.6%, its largest weekly percentage rise since mid-August.

The Fed holds a two-day monetary policy meeting next week and is expected to open discussions on reducing its monthly bond purchases, while tying any actual change to U.S. job growth in September and beyond.

“While we doubt that the FOMC will set out a plan for tapering its asset purchases, the new economic projections may shed some light on its reaction function given building cyclical inflationary pressures,” wrote Jonathan Petersen, markets economist at Capital Economics, in its latest research note.

“Our view remains that inflation in the U.S. will stay elevated for longer than the FOMC and investors currently anticipate, in turn supporting higher U.S. yields and a stronger dollar,” he added.

Speculation about a Fed taper this year gathered pace after U.S. retail sales unexpectedly increased in August, data showed on Thursday, rising 0.7% from the previous month despite expectations of a 0.8% fall. A business sentiment survey also showed a big improvement.

In afternoon New York trading, the euro slid 0.3% to $1.1729, after hitting a three-week low of $1.1724 earlier in the session.

The University of Michigan consumer sentiment for September inched higher to 71 versus the final August reading of 70.3, but overall analysts said the rise was nowhere near the improvements seen in the Empire States and Philadelphia Fed manufacturing surveys.

The dollar held gains after the Michigan sentiment report.

Currency markets were generally quiet on Friday with traders reluctant to take on new positions ahead of a clutch of important central bank meetings next week including the Fed, the Bank of Japan and the Bank of England.

The dollar was up 0.5% against the Swiss franc at 0.9320 francs, after earlier hitting a five-month high of 0.9324 francs .

The dollar rose 0.2% to 109.92 yen.

The yen has shown limited reaction to the ruling Liberal Democratic Party’s leadership race, which formally kicks off on Friday ahead of a Sept. 29 vote. The LDP’s parliamentary dominance means the party’s new leader will become prime minister.

The dollar also rose to a two-week high against the offshore yuan and was last up 0.3% at 6.4711. The yuan is being pressured by growing worries about China’s real estate sector as investors fear property giant China Evergrande could default on its coupon payment next week.

The British pound fell 0.4% to $1.3738 as UK retail sales undershot expectations. However, with investors bringing forward forecasts for a Bank of England interest rate hike to mid-2022, sterling remains supported.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Muralikumar Anantharaman, Alex Richardson and Sonya Hepinstall)

AUD/USD Weekly Price Forecast – Australian Dollar Drifts Lower for the Week

The Australian dollar has fallen a bit during the course of the trading week to drop below the 200 week EMA. More importantly, we have also pierced the 0.73 level which had been major support. If we continue to drop from here, is very likely that we will go looking towards the 0.71 handle, where we bounced from about a month ago. Because of this, I think there would be a certain amount of interest in that area, extending down to the 0.70 level. That being said, this is a market that has a lot of external influence from China, so pay close attention to what is going on there. There is the possibility that the Chinese mainland is about to suffer a bit of a hit due to the Evergrande default.

AUD/USD Video 20.09.21

At this point, I think that the next week or two will end up being very crucial. If we break down below the bottom of this week, then it is likely that we could go looking towards the 0.71 handle. However, if we turn around a break above the top of the candlestick for the week, then it is likely that we go looking towards the 50 week EMA, even the 0.75 level above which is a large, round, psychologically significant figure.

Keep in mind that this pair is highly sensitive to risk appetite, and therefore the Aussie could be thrown around by a lot of different things, and not just the Chinese real estate issue. That being said, the US dollar is a safety currency, so if we see the US dollar picking up steam, it is very possible that we could be talking about a run towards the US bond market and therefore safety.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD Price Forecast – Australian Dollar Recovers to Close Out Week

The Australian dollar is rallying to close the week out, recovering from a break down below the 0.73 level. The 0.73 level has been important multiple times, so the fact that we breakdown through there was a very negative sign. That being said, now that we have recovered a bit during the day on Friday, it is very likely that sellers will come back into the picture on signs of exhaustion. Because of this, I am looking at this market through the prism of selling the rallies, which is the best way to play a choppy downtrend line.

AUD/USD Video 20.09.21

Above current trading, there is the 50 day EMA, which comes into the picture. The 50 day EMA is an area that I think will continue to attract a lot of attention, currently sitting at roughly the 0.7385 above. Now that we have made that move lower, I suspect that we are going to see this market continue the overall choppy but negative behavior. Looking at this situation, I think that US dollar strength may continue to be the mainstay in this market, especially as Australia is suffering at the hands of massive lockdowns and protests, while the government tries to destroy its own economy.

Furthermore, the Chinese are rattling sabers again when it comes to the Aussies, at the same time they are having issues with the economy itself. Remember, the Chinese are major consumers of hard commodities when it comes to Aussie goods. The 200 day EMA previously had been massive resistance and kicked off this move to the downside. All things been equal, I think we do continue the downtrend, but it is not necessarily going to be a smooth ride.

For a look at all of today’s economic events, check out our economic calendar.

UK Retail Sales Puts the Pound in the Spotlight

Earlier in the Day:

It was a quiet start to the day on the economic calendar this morning. The Kiwi Dollar was back in action this morning.

For the Kiwi Dollar

Business PMI figures were in focus in the early hours.

In August, the Business PMI tumbled from 62.6 to 40.1. The PMI had risen from 60.7 to 62.6 in July.

According to the August survey,

  • Down by 22.1 points from July, the PMI avoided a fall to sub-30 levels seen amidst the level 4 lockdown of 2020.
  • The production sub-index took the biggest hit, slumping from 63.9 to 27.7.
  • New orders fell from 63.7 to 44.4, with deliveries and finished stocks also falling below the 50 mark.
  • By contrast, the employment sub-index saw a more modest fall from 57.9 to 54.5.

The Kiwi Dollar moved from $0.70726 to $0.70715 upon release of the figures. At the time of writing, the Kiwi Dollar was down by 0.01% to $0.7074.

Elsewhere

At the time of writing, the Japanese Yen was flat at ¥109.730 against the U.S Dollar, while the Aussie Dollar was up by 0.04% to $0.7295.

The Day Ahead

For the EUR

It’s a relatively quiet day ahead on the economic calendar. Finalized August inflation figures for the Eurozone are due out later today.

With little else for the markets to consider, expect any upward revisions to influence the EUR.

At the time of writing, the EUR was down by 0.02% to $1.1765.

For the Pound

It’s a busy day ahead on the economic calendar. Retail sales figures for August are due out later this morning.

With the markets looking ahead to next week’s BoE monetary policy decision, we can expect Pound sensitivity to the numbers.

Following a pickup in inflationary pressure and better than expected employment figures, positive numbers would suggest a more hawkish MPC.

At the time of writing, the Pound was up by 0.02% to $1.3798.

Across the Pond

It’s a relatively quiet day ahead. Michigan consumer sentiment and expectation figures are due out later today.

With market sensitivity to consumer sentiment heighted as a result of the Delta variant, expect the numbers to influence market risk sentiment.

The U.S Dollar Spot Index ended Thursday up 0.41% to $92.932.

For the Loonie

It’s a particularly quiet day ahead for the Loonie, however. There are no major stats due out of Canada to provide the Loonie with direction.

The lack of stats will leave the Loonie in the hands of crude oil prices and market risk sentiment.

At the time of writing, the Loonie was up by 0.02% to C$1.2681 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

September 17th 2021: GBP/USD H4 Prime Support at $1.3689-1.3724 Likely Eyed

Charts: Trading View

EUR/USD:

(Italics: previous analysis)

Prime support on the weekly timeframe resides at $1.1473-1.1583—sharing space with a 100% Fib projection at $1.1613 as well as a 1.27% Fib extension at $1.1550. Interestingly, long-term stops likely rest south of the $1.1640ish lows and perhaps accommodate enough energy to fill $1.1473-1.1583 bids. To the upside, the spotlight is on supply at $1.2412-1.2214. With respect to trend, we can see the market has largely been higher since the early months of 2020.

Meanwhile, a closer reading of price movement on the daily timeframe reveals Europe’s single currency fell sharply against a broadly energetic USD on Thursday. The buck clocked a fresh three-week top after US retail sales surprised to the upside, increasing by 0.7 percent in August (vs. minus 0.7 percent forecast). Technically, this seats Quasimodo support at $1.1689 back in the line of fire as a downside objective. Supporting further selling is the relative strength index (RSI) voyaging south of the 50.00 centreline; this informs traders average losses (over the 14-day lookback period) exceed average gains.

Recent hours nudged under support from $1.1764-1.1776, which, as you can see, is currently serving as resistance. Bearish forces confronting Quasimodo support at $1.1742 is not out of the question, which may energise a bullish showing to prime resistance at $1.1829-1.1804, an area potentially housing a healthy defence.

Lower on the curve, shorter-term flow made its way through Quasimodo support at $1.1775 amid early London hours Thursday, setting the stage to address a 1.272% Fibonacci projection at $1.1742 and neighbouring Quasimodo support at $1.1732.

Observed Levels:

The daily timeframe demonstrating some breathing space south until shaking hands with Quasimodo support at $1.1689 brings to light a bearish scene. While a retest of H1 resistance (previous Quasimodo support) at $1.1775 may occur, continuation selling from current levels is an option, targeting the H1 timeframe’s 1.272% Fibonacci projection at $1.1742—aligns with H4 Quasimodo support— and H1 Quasimodo support at $1.1732.

Albeit unlikely to make a show today, prime resistance on the H4 timeframe at $1.1829-1.1804 is a zone traders could have on their watchlists next week, particularly if bulls make an entrance off H4 Quasimodo support.

AUD/USD:

(Italics: previous analysis)

Prime support at $0.6968-0.7242 on the weekly timeframe is fighting to entice fresh bullish interest. Failure to command position opens up support at $0.6673. Should buyers regain consciousness, prime resistance at $0.7849-0.7599 calls for attention. With respect to trend, we’ve been higher since early 2020. Therefore, the response from $0.6968-0.7242 could STILL be a dip-buying attempt.

In the ‘shape’ of a bearish outside reversal, Thursday watched price breach the lower limit of prime support from $0.7286-0.7355. With the relative strength index (RSI) cementing position below the 50.00 centreline—telling traders that average losses over the 14-day lookback period surpass average gains—price action is now centred on Fibonacci support at $0.7057-0.7126.

Sellers assuming leadership yesterday hauled the currency pair through stacked demand on the H4 timeframe between $0.7282 and $0.7343, dropping to within a stone’s throw from prime support at $0.7236-0.7266 (glued to the upper edge of weekly prime support at $0.6968-0.7242). For those who read recent technical reports might recall the following (italics):

Prime support at $0.7236-0.7266 may interest bullish eyes—a base arranged to receive downside momentum derived from sell-stops below stacked demand.

The technical picture from the H1 timeframe reveals the unit slipped below $0.73 heading into US hours, establishing a decision point at $0.7308-0.7299 (structure seen clearer on M15). Also of technical relevance is Quasimodo resistance-turned support at $0.7271. Additional levels to be mindful of on the H1 are trendline resistance, extended from the high $0.7469, and Quasimodo resistance parked at $0.7339.

Observed Levels:

Focus is on the H4 timeframe’s prime support at $0.7236-0.7266, as buyers potentially gear up to take advantage of selling pressure (sell-stops) south of stacked demand.

Before reaching $0.7236-0.7266, nonetheless, traders are urged to pencil in a possible whipsaw above $0.73 into the H1 timeframe’s decision point at $0.7308-0.7299. This may provide enough to fuel moves to H1 Quasimodo resistance-turned support at $0.7271 (falls in just north of H4 prime support).

USD/JPY:

(Italics: previous analysis)

Since mid-July, ¥108.40-109.41 demand has failed to stir much bullish energy on the weekly timeframe. Nevertheless, recognising the area derives additional backing from neighbouring descending resistance-turned support, extended from the high ¥118.61, an advance could eventually emerge to familiar supply at ¥113.81-112.22.

The uninspiring vibe out of weekly demand is demonstrated by way of a clear-cut consolidation on the daily timeframe between prime support at ¥108.96-109.34 and resistance from ¥110.86-110.27. The reluctance to commit outside of these areas toughens the consolidation; range limits, therefore, are likely to remain on the watchlist.

A robust pickup in USD demand elevated USD/JPY on Thursday, pulling back to highs of ¥109.83. Overall, however, chart studies indicate a bearish vibe following the breach of a double-top pattern’s (¥110.44) neckline, drawn from ¥109.59. The pattern’s target sits around ¥108.71, plotted alongside a 1.618% Fibonacci projection at ¥108.86. Continued interest to the upside, nonetheless, is likely to close in on supply at ¥110.82-110.39—the base entertaining the noted double-top configuration.

From the H1 timeframe, a ¥109.84-109.79 decision point elbowed into the spotlight going into US trading on Thursday, prompting a shooting star candlestick pattern (frequently viewed as a bearish signal). Air space above the aforementioned zone channels focus towards the ¥110 figure, closely shadowed by prime resistance at ¥110.15-110.12. To the downside from current levels, Quasimodo resistance-turned support is seen at ¥109.45, followed closely by Quasimodo support at ¥109.31.

Observed Levels:

Recognising weekly demand in play at ¥108.40-109.41, joined by range support on the daily timeframe at ¥108.96-109.34, signals the H1 decision point at ¥109.84-109.79 is perhaps fragile and could lead to ¥110 making a show today.

Another option, of course, prior to reaching for higher levels, is a retracement to bring in buyers off either H1 Quasimodo resistance-turned support at ¥109.45, or Quasimodo support at ¥109.31.

 

GBP/USD:

(Italics: previous analysis)

In the shape of a hammer candlestick formation (bullish signal), supply-turned demand at $1.3629-1.3456 on the weekly timeframe stepped forward in July. The aforementioned zone remains active, welcoming an additional test mid-August. Yet, pattern traders will also note August’s move closed south of a double-top pattern’s neckline at $1.3664, broadcasting a bearish vibe. Conservative pattern sellers, however, are likely to pursue a candle close beneath $1.3629-1.3456 before pulling the trigger.

Britain’s pound journeyed south versus a stronger US dollar Thursday, pressured following August’s optimistic US retail sales figures. This helped reinforce a bearish setting beneath the 200-day simple moving average at $1.3828. This raises the possibility of further underperformance to Quasimodo support at $1.3609.

It was also aired in recent writing that the daily chart communicates a rangebound environment. Since late June, buyers and sellers have been squaring off between a 61.8% Fib retracement at $1.3991 and the noted Quasimodo support. Directly above the consolidation, two tight-knit 100% Fib projections are seen around $1.4017—a double AB=CD bearish configuration for any harmonic traders. Momentum studies, according to the relative strength index (RSI), made its way above the 50.00 centreline early September and retested the barrier (average gains exceed average losses).

H4 prime resistance at $1.3940-1.3888 has proved a stubborn area. Sellers have since strengthened their grip and has price fast approaching prime support at $1.3689-1.3724. This area may interest those looking at price taking out stops beneath lows around $1.3730 (blue oval).

Elsewhere. Short-term action based on the H1 chart has the pair circling the lower side of $1.38, as we write. Interestingly, supply at $1.3837-1.3812 lurks directly overhead and could help facilitate what many traders will recognise as a stop-run after the event. Chart space below $1.38 shifts attention to Quasimodo support from $1.3751.

Observed Levels:

Technical studies from the H4 timeframe suggests bears are likely to remain in the driving seat for the time being, at least until we touch gloves with prime support at $1.3689-1.3724. Prior to any downside move, H1 sellers may welcome a whipsaw north of $1.38 to supply at $1.3837-1.3812. Conservative sellers out of the aforesaid supply will perhaps wait for a DECISIVE H1 close to form beneath $1.38 before committing, targeting H1 Quasimodo support at $1.3751 and the upper edge of H4 prime support from $1.3724.

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Dollar Index Climbs After U.S. Retail Sales Show Surprise Rebound

The dollar index, which measures the U.S. currency against six others, added to gains following the report and was last up 0.5% at 92.866. It hit its highest level since Aug. 27.

Retail sales rose 0.7% last month, boosted in part by back-to-school shopping and child tax credit payments, while data for July was revised down.

A separate report showed U.S. initial claims for state unemployment benefits increased 20,000 to a seasonally adjusted 332,000 for the week ended Sept. 11. Economists had forecast 330,000 applications for the latest week.

“If you look at the retail sales number, it’s quite constructive even with the revisions, so we are seeing the dollar benefit from that, particularly against the funding currencies like the euro, Swiss and the yen,” said Bipan Rai, North American head of FX strategy for CIBC Capital Markets in Toronto.

The news could bolster investor expectations for next week’s Federal Reserve policy meeting and how soon the U.S central bank will start to taper stimulus.

“It feels like whatever lingering concerns there were with the underlying economy … that was kind of washed away a little bit. So as we move towards the Fed next week, the evidence backs up the idea that we’re going to get a taper signal from the Fed at the meeting,” he said.

On Tuesday, the dollar index fell to a one-week low of 92.321 after a softer-than-expected inflation report. Its low for the month was 91.941, on Sept. 3, when payrolls data disappointed.

Investors are looking for clarity on the outlook for both tapering and interest rates at the Fed’s two-day policy meeting that ends next Wednesday.

Tapering typically lifts the dollar as it suggests the Fed is one step closer to tighter monetary policy.

It also means the central bank will be buying fewer debt assets, in effect reducing the amount of dollars in circulation, which in turn lifts the currency’s value.

The dollar also gained 0.3% to 109.70 yen , after sliding to a six-week low of 109.110 in the previous session.

The euro was 0.4% lower at $1.1766.

The Swiss franc also fell against the dollar and was last at 0.9263 franc per dollar.

Elsewhere, the Australian dollar was down 0.5% at $0.7296.

Earlier, data showed the country’s jobless rate unexpectedly fell to 4.5%, but the statistics bureau said the change reflected a drop in the participation rate rather than a strengthening of the labor market.

In cryptocurrencies, moves in bitcoin were relatively subdued. It was last down 0.9% at $47,711. Ether changed hands at $3,589, down 0.7%.

AMC Entertainment Holdings Inc boss Adam Aron said in a tweet this week that the theater chain would accept ether, bitcoin cash and litecoin alongside bitcoin for ticket purchases.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Caroline Valetkevitch; Additional reporting by Ritvik Carvalho in London and Kevin Buckland in Tokyo; Editing by Alexander Smith, Mark Potter and Jonathan Oatis)

 

AUD/USD Price Forecast – Australian Dollar Continues to Slump

The Australian dollar has initially rallied during the course of the trading session on Wednesday but then turned around to break towards the 0.73 level. The 0.73 level is of course a significant area that I have been watching for a while, and at this point if we break down below it, it is likely that the market could go much lower. The 0.71 level is an area that has been important more than once, so it would not surprise me at all to see this market reached towards that handle.

AUD/USD Video 17.09.21

On the other hand, if we turned around to show a certain amount of bullish pressure, I would be looking for signs of exhaustion to start selling again. The 50 day EMA is sloping lower, so I think at this point in time it is likely that we would see a lot of selling pressure. The market of course is moving upon the strengthening US dollar, and the fact that China is in trouble all the sudden, which of course has a major influence on what goes on in Australia due to the fact that Australia since most of its major export commodities to the mainland. As we continue to see a lot of questions when it comes to global growth, that will also weigh upon the Australian dollar.

Adding more fuel to the fire is that the retail sales numbers in America came out much stronger than anticipated. In fact, retail sales were supposed to be negative, but the Core Retail Sales number was 1.8%, while the Retail Sales number came out at 0.7% month over month. Obviously, this is a market that is reflecting the US strength overall.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD and NZD/USD Fundamental Daily Forecast –Aussie Lower Amid Weaker-Than-Expected Employment Change Data

The Australian Dollar is trading lower on Thursday after giving back earlier gains. The previous session, the Aussie touched its lowest level since August 31 before rebounding into the close.

The catalyst behind the price action on Wednesday was the weaker U.S. Dollar. It was pressured by uncertainty as traders looked to next week’s Federal Reserve policy meeting for indications on how soon the U.S. central bank will start to taper stimulus.

At 09:43 GMT, the AUD/USD is trading .7315, down 0.0019 or -0.26%.

Also weighing on the Australian Dollar were lower Dalian iron ore prices, which slumped to a new low for the year.

Traders were also unimpressed by the country’s mixed labor market report for July. The employment change fell more than expected, but the unemployment rate unexpectedly fell sharply. Nonetheless, traders dismissed the drop in the jobless rate after the statistics bureau said the change reflected a drop in the participation rate rather than a strengthening of the labor market.

China Iron Ore Futures Plunge to Over 9-Month Low on Falling Steel Output

Iron ore futures in China hit a nine-month low on Wednesday as steel output in the top producer continued to slide, compounding concerns around demand for the raw material.

China’s monthly crude steel production slipped for the third straight month to 83.24 million tonnes in August, data from the National Bureau of Statistics showed, sending average daily output to the lowest since March 2020.

The drop in iron ore prices may be capping gains in the Australian Dollar.

Australian Employment Slides in August as lockdowns Slash Workers’ Hours

Australian employment dived in August as coronavirus lockdowns in Sydney and Melbourne forced businesses to lay off workers and slash hours, while the jobless rate was nudged lower by a sharp fall in the number of people looking for work, Reuters reported.

Thursday’s data from the Australian Bureau of Statistics (ABS) showed employment fell by 146,000 in August, compared to median forecasts of a drop of 90,000.

The unemployment rate dipped to 4.5%, having already fallen to 4.6% in July when lockdowns also distorted data.

The ABS cautioned that the dip in the jobless rate was due to people dropping out of the labor force given how difficult it was to look while in lockdown. Only people actively looking for work are counted as unemployed, Reuters reported.

“The fall in the unemployment rate reflects a large fall in participation during the recent lockdowns, rather than a strengthening in labor market conditions,” said Bjorn Jarvis, head of labor statistics at the ABS.

“Hours worked data continues to provide the best indicator of the extent of labor market impacts and recovery from lockdowns,” he added.

Hours worked in August slip 3.7% nationally, and by 6.5% in New South Wales where Sydney was closed for the entire month.

Likewise, the participation rate fell a steep 0.8 percentage points to 65.2%, while underemployment jumped a full point to 9.3% as workers’ hours were restricted.

For a look at all of today’s economic events, check out our economic calendar.

Jobless Claims and Retail Sales Put the Greenback and the U.S Economy in the Spotlight

Earlier in the Day:

It was another busy start to the day on the economic calendar this morning. The Aussie Dollar, Kiwi Dollar, and the Japanese Yen were in action this morning.

For the Kiwi Dollar

GDP numbers were in focus in the early hours.

In the 2nd quarter, the New Zealand economy expanded by 2.8% versus a forecasted 1.3%. The economy had expanded by 1.4% in the previous quarter.

According to NZ Stats,

  • Services industries led the way, with retail trade and accommodation the largest contributor to growth.
  • Air transport and transport support services also delivered support.
  • Household consumption expenditure fell by 1.4%, however, due to a 1.9% decline in household spending on services.

The Kiwi Dollar moved from $0.71253 to $0.71334 upon release of the figures. At the time of writing, the Kiwi Dollar was up by 0.23% to $0.7122.

For the Aussie Dollar

Employment figures were key this morning.

In August, full employment fell by 68k following a 4.2k decline in July. Employment tumbled by 146.3k, however, versus a forecasted 90.0k decline. In July, employment had risen by 2.2k.

According to the ABS,

  • The unemployment rate fell from 4.6% to 4.5%, with the participation rate declining from 66.0% to 65.2%.
  • Year-on-year, the number of unemployed was down by 298,000.

The Aussie Dollar moved from $0.73431 to $0.73365 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.10% to $0.73367.

For the Japanese Yen

In August, Japan’s trade balance fell from a ¥439.4bn surplus to a ¥635.4bn deficit. Economists had forecast a deficit of ¥47.7bn

According to figures released by the  Ministry of Finance,

  • Exports increased by 26.2%, year-on-year, while imports were up 44.7%.
  • To China, exports rose by 12.6%, with exports to the U.S up 22.8%.
  • Exports to Western Europe increased by 14.1%.
  • Imports from China rose by 23.2%, with imports from the U.S up 33.5%.
  • From Western Europe, imports rose by 48.4%.

The Japanese Yen moved from ¥109.359 to ¥109.424 upon release of the figures. At the time of writing, the Japanese Yen was up by 0.04% to ¥109.340 against the U.S Dollar.

The Day Ahead

For the EUR

It’s a quieter day ahead on the economic calendar. Trade data for the Eurozone will be in focus later today. Barring dire numbers, however, the numbers are unlikely to have a material impact on the EUR.

On the monetary policy front, ECB President Lagarde is due to speak later today. Any chatter on policy or the economic outlook would move the dial.

At the time of writing, the EUR was flat at $1.1817.

For the Pound

It’s a particularly quiet day ahead on the economic calendar. There are no material stats due out of the UK ahead of tomorrow’s retail sales figures.

With the lack of stats, we can expect further market reaction to the employment and inflation figures from earlier in the week.

At the time of writing, the Pound was up by 0.02% to $1.3843.

Across the Pond

It’s a busy day ahead. Retail sales, jobless claims, and the Philly FED Manufacturing PMI for September are due out.

Expect the jobless claims and retail sales figures to have a greater impact on the Dollar and market risk sentiment

At the time of writing, the U.S Dollar Spot Index was flat at 92.475.

For the Loonie

It’s a quiet day ahead for the Loonie.

Wholesale sales figures for July are due out later today. Barring particularly dire numbers, however, the numbers should have a muted impact on the majors.

Market risk sentiment will be the key driver on the day.

At the time of writing, the Loonie was down by 0.02% to C$1.2632 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

AUD/USD Price Forecast – Australian Dollar Pressuring Support Level

The Australian dollar has gone back and forth during the course of the trading session on Wednesday, as we continue to threaten the 0.73 level. That is an area that has been significant support for quite some time, and as you can see, we have seen a little bit of a push to the upside after initially dipping. The question now is whether or not we can continue to go lower? At this point, it certainly looks as if we can, and therefore I am waiting for a nice opportunity to get short of this market, which I defined as breaking the 0.73 level significantly.

AUD/USD Video 16.09.21

The Australian dollar is highly levered to the Chinese economy, and it should be noted that there were a lot of disappointing data coming out of China overnight. This could have a bit of a negative effect on this market, which would be expected in that scenario. Furthermore, we need to pay close attention to what is going on with the US dollar, and whether or not people are buying into it.

On a breakdown below that 0.73 level, I would fully anticipate a move towards the 0.71 level, an area that has been important previously. On the other hand, if we were to turn around a break above the 50 day EMA, we could go looking towards the two hundred day EMA next, which currently sits near the 0.7450 level. That is an area that of course will attract a lot of attention, and it begins significant resistance up to the 0.75 handle as it is a large, round, psychologically significant figure. Breaking above that would obviously be very bullish sign, but I do not necessarily think that happens in the short term. All things been equal, this is a market that looks as if it has some fundamental questions to ask of itself.

For a look at all of today’s economic events, check out our economic calendar.