Despite the growing list of economic and political uncertainties impacting financial markets, it’s likely that currency flows will tail off over the next 48 hours for the Christmas and Boxing day holidays.
The USD finished last week with a stronger tone. We believe that the combination of “risk off” buying and further reconciliation of the FED’s tightening US rate bias has underpinned the Greenback against all the major G-7 pairs.
With no first-tier economic data scheduled until Thursday’s US Consumer Confidence report, Forex traders can look at recent technical levels for trade ideas over the next few days.
Last Thursday the EUR/USD was capped at 1.1485, which sets up a “double top” chart pattern dating back to November 7th. That area also coincides with the 100-day moving average; a key resistance level since late October.
Over the last six months, the single currency has had a tendency to drift higher into resistance levels and then break quickly lower when the upside momentum fails. With the slower holiday flow, we could see the pair confined to a 1.1360 to 1.1410 range. Our trade suggestion to sell at 1.1450 was filled. We suggest adding to short positions at 1.1410 with an initial target of 1.1215 and a 1.1560 stop.
After trading in a 300 point trading range last week, the USD/JPY has been thinly traded today’s Asian session. Even with the downside momentum indicators in oversold territory, the pairs still looks vulnerable on a break of the 110.80 level. A break of 110.80 could open up the 109.70 chart point last seen in mid-August.
We see initial resistance near 111.60. At this point, only a trade up through 112.25 would turn the technical outlook higher. We are currently flat the pair and suggest short-term traders can look to buy USD/JPY at 110.10 with an initial target of 112.10 and a 109.40 stop.
The AUD/USD fell close to 2% last week and is now within range of the two-year low of .7020 posted on October 26th. With the daily RSI at 34.00, the near-term outlook is approaching oversold conditions. However, with the US FED Funds now a full 100 basis points higher than the RBA benchmark overnight rate, we expect to see the Aussie with a .6900 handle early in the New Year.
We are currently short the AUD/USD from .7310. Our trade suggestion to sell at .7180 was not filled. We suggest adding to short positions at .7090 with an initial target of .6960 and a .7260 stop.
The GBP/USD has not posted a NY close above its 30-day moving average since November 8th. Most of the steady, downside pressure on the Sterling is a direct result of the aimless political mess called Brexit. Technical indicators are showing intraday support in the 1.2600 area and the lack of new Brexit chatter over the holiday will likely relieve some of the selling pressure.
We are currently short GBP/USD from 1.2680. We suggest adding to short positions at 1.2720 with an initial target of 1.2525 and a 1.2830 stop.
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