AUD/USD closes in on key near-term resistance region as risk trades sniff out some optimism

AUD/USD at session highs just under the 0.6800 handle

AUD/USD H1 17-10


The barrage of positive remarks from China has helped risk trades gain some light ground in the European morning, with the aussie and kiwi pushing higher on the session.

Equities and bond yields have also inched a little higher but nothing too major as of yet as markets feed off some optimism from the above remarks. US futures are now up by 0.1% after having been weaker by 0.3% earlier in the day.

For AUD/USD, price is now moving towards a test of the key near-term resistance region around 0.6800-09 with large expiries between 0.6800-15 also to play a role in limiting price gains on the day.

If we start to see price chase a move above those levels, there could be significant upside for buyers from a technical perspective as we look towards the end of the week.



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CAD/JPY: There may be a pattern

Is there a technical pattern to eye in CAD/JPY?

FBS 1

CAD/JPY has risen to 82.50 but met the resistance of the 50-day MA. The price action seen on the daily and weekly chart since the middle of July is so far corresponding to a bearish harmonic "Butterfly" pattern.

The completion of the pattern implies the advance at least to the 84.00 area before the reversal to the downside. The recent advance above the September high, the 200-day MA in the 82.05 area as well as this year's resistance line is in line with this scenario.

In the near term, consolidation may take place. The pattern will be valid as long as CAD/JPY is trading above 81.30 (100-day MA). The bullish scenario will get the ultimate confirmation on the break above 82.50. The first bullish target will be at 83.25 (July highs), while the next target will lie at 84.00.

FBS 2

This post is written and submitted by FBS Markets for informational purposes only. In no way shall it be interpreted or construed to create any warranties of any kind, including an offer to buy or sell any currencies or other instruments.

The views and ideas shared in this article are deemed reliable and based on the most up-to-date and trustworthy sources. However, the company does not take any responsibility for accuracy and completeness of the information, and the views expressed in the article may be subject to change without prior notice.




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EUR/USD buoyed by German stimulus hopes but upside break still found wanting

EUR/USD holds higher after talk of potential German stimulus earlier

EUR/USD H1 16-10

On the one hand, talk of fiscal stimulus is a good thing - especially from Germany - however, it will only come if there is further significant deterioration in economic conditions. So, is that really a good thing? Will it be too late to act if that is the case?

That is the question that traders will have to gauge over the next few quarters when looking at the euro. In the mean time, I would dismiss such hopes as being fluff as it still falls under the category of "all talk but no action".

But what is the price action saying in EUR/USD?

As it stands, price is trying to combat near-term resistance around 1.1055 with the swing region around 1.1070-75 the next level to eye for buyers. There are also large options sitting at 1.1075 so that may yet play a part in limiting gains on the day.

As for any downside move, sellers will have to break through the key hourly moving averages in order to establish some form of near-term control in search of a break below 1.1000.

Yesterday, the lows failed to breach the 200-hour MA (blue line) near the 1.1000 handle and that remains the key line in the sand for any move lower from hereon.



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EU's Barnier said to see three Brexit scenarios ahead

According to Reuters, citing EU diplomats on the matter

Says that Barnier sees either a deal tonight, an extension or a breakdown in Brexit talks. I think that's pretty much a no-brainer as I don't see what other outcomes can be achieved.



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Fed's Bullard: Zero rates, forward guidance, QE still in the play book for "ordinary recession&

Bullard Q&A session after his earlier speech

Suddenly, he's back to a bit of a more dovish stance following his earlier comments about possible rate hikes if the economy improves again. That said, he's hardly pushing the issue for a 25 bps rate cut this month and I think that's the key takeaway in all of this.



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Is EUR/USD headed towards 1.08 next?

Nomura FX strategist, Jordan Rochester, argues that the 1.08 level would be his first target in EUR/USD


  • Eurozone still needs a weaker currency to help it out

  • Growth is pretty poor

  • The data continues to get worse

  • 1.08 is the initial target, 1.05 is when we do talk about recession risks next year

  • We're not there yet but it's building up to that story

He only talks about this in the last 35-40 seconds of the video but it is a short and simple take on where the currency pair might be headed over the next few months.

The caveat to the view above though is that he says that the ECB stimulus package may help with some improvement in economic data, but he argues that it is unlikely given the efficacy of QE at zero interest rates level.

The rest of the video covers more on US-China trade talks and you get the sense that he isn't overly optimistic about the trade truce either. He notes that the next potential key focal point for risk is whether or not the December tariffs on China will be lifted as well.

Back to the EUR/USD debate, I would argue that a lot of the negativity has already been priced in at this point. However, the key thing to watch out for now is if the ECB stimulus package can bolster economic sentiment.

Should economic data continue to deteriorate in spite of the efforts by the ECB - there's a good chance of this happening - then we will go back to talks about inflation expectations de-anchoring and a possibility of a recession.

That should produce the next significant big push in EUR/USD in my view. Otherwise, with trade talks out of the way and the ECB and Fed possibly hinting at pauses towards the year-end, there may not be a significant push factor on either side for the currency pair.



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Cable breakout continues as pound surges higher

GBP/USD breaks above 1.2600 and runs away

GBP/USD D1 11-10

There's no stopping the breakout in the pound at the moment as cable surges to fresh highs in over three months, breaking above the 1.2600 handle to a high of 1.2663.

Price is now closing in on further resistance at 1.2670 before the 200-day MA (blue line) @ 1.2714 comes into play.

If this keeps up, the pair looks set for its best two-day gain since June 2016. At this stage, it isn't wise to even try to pick a top here because it's all about sentiment.

Even though a Brexit deal may not yet be in the offing and there are still hurdles to pass through, the market isn't keeping their hopes down. This is just about the most optimistic the market has ever been about a Brexit deal and it is clearly showing.

I still reserve some skepticism surrounding a deal but if we end up with an extension, I can see cable holding around 1.25 to 1.27 on hopes that it will lead to something good.

And if we are near some semblance of a Brexit deal, even at these levels, I would view cable as being cheap. If Johnson pulls off a miracle as such, I reckon 1.30 would easily be the first target before 1.35 in cable.

But let's take one step at a time, shall we?



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USD/JPY pushes to highs for the day as trade optimism continues to build

USD/JPY touches 108.17 as equities continue to move higher on the session

USD/JPY D1 11-10

Equity investors continue to price in further optimism surrounding US-China trade talks as European equities climb higher while US futures are holding solid gains on the session.

The DAX is now up by 2% while S&P 500 futures are up by 1% and that is starting to see some spillover to the Japanese yen and Swiss franc. Both currencies are weaker on the session with USD/JPY now at highs for the day around 108.15-17.

It's all about trade optimism here as investors are "feeling" that a partial trade deal is in the works. They may yet be vindicated at the end of the day but the risk here is that talks don't go as smoothly and everything we're seeing so far falls apart in a blink of an eye.

The bond market remains more composed and less enthusiastic as Treasury yields sit near flat levels on the day currently. 10-year yields are up by just 0.2 bps to 1.67%, showing little change relative to the optimism in stocks.



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Dollar continues to soften as US-China trade talks loom

EUR/USD remains a key pressure point as it holds a break above 1.10

EUR/USD H1 10-10

The dollar is getting no reprieve on the session as it continues to fall across the board against the rest of the major currencies bloc today. EUR/USD has now pushed to a high of 1.1034 while cable is running into key near-term resistance near 1.2260.

Meanwhile, the likes of the aussie and kiwi are also pushing solid gains against the greenback with AUD/USD and NZD/USD hitting session highs of 0.6767 and 0.6334 respectively.

US-China trade talks remain the key focal point in markets right now and currency traders aren't really siding with a massive breakdown in talks - as evident by yen flows as well.

I reckon the dollar flows we're seeing this morning could be in part related to the significant strengthening in the yuan earlier on - after the Bloomberg report of a possible currency pact in the partial US-China trade deal.

Couple that with a near-term technical break in EUR/USD and you have a bit of a potential breakout in dollar pairs across the board.

Looking at the chart above, there isn't really much stopping EUR/uSD from a potential run towards the swing region of 1.1050-55 and swing highs of around 1.1070-75.

However, fundamentally, any sustained run now will depend on trade talks in Washington so until we have more clarity on that, it's hard to get too excited just yet about a major breakout towards the upside in the pair.



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EUR/USD climbs above 1.10 to post fresh two-week high

EUR/USD buyers look to contest an upside breakout

EUR/USD buyers look to contest an upside breakout

The dollar is weaker across the board again today and after holding a break above the 100-hour MA (red line) yesterday, EUR/USD buyers are looking for a more meaningful break now.

Price is currently contesting a break above the 50.0 retracement level as well as swing region resistance around the 1.1000 handle and if buyers can hold above these levels, the near-term momentum will turn even more bullish.

That said, the caveat in all of this is once again US-China trade talks. If things go awry, we could see some safety flows play out and that may aid the dollar a little. However, that must be balanced against escalating tensions between the two countries that could affect the US economy and US firms further down the road.



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