Today’s Forex Guide

Weekend Summary & The Week Ahead


Aug.04.2014

Friday's trading revolved around non-farm payrolls, with traders gearing up for what they thought would be a strong performance by the US labor market, rounding off a strong week of data for the US economy. European stocks were lower leading up to the announcement, as were US stock futures. The Dollar also held firm in the run up.

The number though was found to be lacking. At 209,000 jobs created last month, there was barely enough momentum in the jobs market to breakeven with the number of people coming of age to join the work force. The news should have been enough to turn the tide on the strong Dollar, but it wasn't. Ms. USA remains the currency of choice, even though the poor data underscores Janet Yellen's line that there won't be a rate rise sooner than the Fed are projecting there to be.

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The news was of little comfort to American equities traders, who by this point had had their worst weekly performance for almost two years and were in no mood to start rebuilding their positions on the first day of August, with the 'good news' that the Fed aren't yet in a position to start hiking rates.

Other news weighing on risk appetite is that of Argentina, who still haven't managed to negotiate their way out of default with the so called "vulture funds" that are holding bonds that they refuse to take write downs on. Technically they have defaulted, but there is still an outside chance that they will make the payments to the vulture funds (which they can afford) and not have to pay everyone that accepted the original write down, the full amount of money (which they can't afford). On Friday it was announced by ISDA that the situation constituted a "credit event" and as such credit default swaps will be forced to payout.

If last week ended with an aversion to risk, the start to this week is looking even worse... Last night Portgual's Central Bank said it would break Banco Espirito Santo into a 'good bank and 'bad bank' and pump almost 5bn euros into the good bank to keep it a going concern. Shareholders will lose all of their investment when the bank ceases trading on the stock market today, as will junior bond holders, though depositors in the bank will be completely protected. the bailout funds are coming from unused bailout monies that were granted to the country by the IMF and EU back in 2011. Whether this puts them back in a hole that they have spent three years trying to dig themselves out of remains to be seen.

The risk aversion as a result of Portugal, Argentina and Russia/Ukraine may well kick the ECB into gear this week, which is what a lot of the market is calling for. Data readings since the bank cut the interest rate in June haven't shown any signs of improvement and with flagging global risk appetite, it is down to Mario Draghi to try and avoid Europe hitting the skids in light of it all.

Data due out that might influence Super Mario includes industrial production numbers from Germany, France and Italy, which will likely show further declines, well also see how the European consumer is doing with retail sales due outtomorrow. This week also sees the Bank of England meeting, though no change is expected and the market won't try and get inside Mark Carney's head until the meeting minutes are published.

The US calendar is very light this week, which could provide little distraction from the broader concerns the market has. A number of analysts have said that this week could see an extension of last week's stock market moves and could even be the start of a bear market.

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Intraday Forex Technical Levels

EUR/USD Intraday: the upside prevails.

Invest Diva likes: Long positions above 1.34 with targets @ 1.3445 & 1.3455 in extension.

If pair goes nuts: Below 1.34 look for further downside with 1.3375 & 1.336 as targets.

What’s up on the forex dance floor: The pair is rebounding above its support and is shaping a bullish flag.

Supports and resistances:
1.3475
1.3455
1.3445
1.3419 Last
1.34
1.3375
1.336

EUR-USD-30-min-forex-chart

GBP/USD Intraday: capped by a negative trend line

Invest Diva likes: Short positions below 1.6865 with targets @ 1.681 & 1.678 in extension.

If pair goes nuts: Above 1.6865 look for further upside with 1.6895 & 1.6925 as targets.

What’s up on the forex dance floor: The pair remains capped by a declining trend line and is challenging its support.

Supports and resistances:
1.6925
1.6895
1.6865
1.6829 Last
1.681
1.678
1.6755

 

USD/JPY Intraday: under pressure.

Invest Diva likes: Short positions below 102.75 with targets @ 102.3 & 102.15 in extension.

If pair goes nuts: Above 102.75 look for further upside with 103 & 103.4 as targets.

What’s up on the forex dance floor: The pair has struck against its resistance as the RSI is capped by a declining trend line.

Supports and resistances:
103.4
103
102.75
102.645 Last
102.3
102.15
101.95

USD-JPY-30分足-FX-チャート

USD/CHF Intraday: under pressure

 

Invest Diva likes: Short positions below 0.908 with targets @ 0.9035 & 0.9025 in extension.

If pair goes nuts: Above 0.908 look for further upside with 0.9095 & 0.911 as targets.

What’s up on the forex dance floor: The RSI lacks upward momentum.

Supports and resistances:
0.911
0.9095
0.908
0.9067 Last
0.9035
0.9025
0.901

NZD/USD Intraday: continuation of the rebound.

Invest Diva likes: Long positions above 0.846 with targets @ 0.856 & 0.8585 in extension.

If pair goes nuts: Below 0.846 look for further downside with 0.843 & 0.84 as targets.

What’s up on the forex dance floor: The RSI is mixed with a bullish bias. Prices broke above a declining trend line.

Supports and resistances:
0.8625
0.8585
0.856
0.8506 Last
0.846
0.843
0.84

AUD/USD Intraday: continuation of the rebound.

Invest Diva likes: Long positions above 0.927 with targets @ 0.934 & 0.937 in extension.

If pair goes nuts: Below 0.927 look for further downside with 0.923 & 0.9205 as targets.

What’s up on the forex dance floor: The RSI is supported by a rising trend line. Prices broke above a declining trend line.

Supports and resistances:
0.939
0.937
0.934
0.9316 Last
0.927
0.923
0.9205

 

USD/CAD Intraday: consolidation in place.

Invest Diva likes: Short positions below 1.0945 with targets @ 1.0875 & 1.084 in extension.

If pair goes nuts: Above 1.0945 look for further upside with 1.099 & 1.101 as targets.

What’s up on the forex dance floor: As long as the resistance at 1.0945 is not surpassed, the risk of the break below 1.0875 remains high. The RSI is capped by a declining trend line.

Supports and resistances:
1.101
1.099
1.0945
1.0921 Last
1.0875
1.084
1.079

US Index Outlook

S&P500

Short positions below 1957 with targets @ 1902 & 1892 in extension.

Alternative scenario: Above 1957 look for further upside with 1979 & 1986 as targets.

Dow Jones 

Short positions below 16750 with targets @ 16330 & 16255 in extension.

Alternative scenario: Above 16750 look for further upside with 16870 & 17005 as targets.

Nasdaq 100

Short positions below 3949 with targets @ 3831 & 3807 in extension.

Alternative scenario: Above 3949 look for further upside with 3992 & 4017 as targets.

Russell 2000

Short positions below 1149 with targets @ 1102 & 1091 in extension.

Alternative scenario: Above 1149 look for further upside with 1162 & 1176 as targets.
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