Daily Forex Technical Strategy (Wed 07 Aug)

AUD/USD remains weak reinforced by NZD/USD via an ultra dovish RBNZ while further corrective bounce cannot be ruled out in USD/JPY.

EUR/USD – Mix elements; watch 1.1160 support


click to enlarge chart

  • Since its post FOMC low of 1.1025 printed on 01 Aug 2019, the pair has staged a squeeze up by 220 pips to print a high of 1.1250 yesterday, 06 Aug before it pulled-back right at the descending resistance from 10 Jan 2019.
  • Mix elements and ended yesterday U.S. session with a daily ‘Spinning Top” candlestick pattern. Prefer to turn neutral now between 1.1250 and 1.1160. Only an hourly close below 1.1160 reignites the bearish tone for a push down to retest 1.1025. On the flipside, an hourly close above 1.1250 sees an extended corrective rebound towards the next resistance at 1.1320/1340.

GBP/USD – 1.2250 remains the key resistance to watch


click to enlarge chart

  • Pair has traded sideways below the 1.2250 key short-term pivotal resistance since our last report. Maintain bearish bias and added 1.2135 as the downside trigger level. An hourly close below 1.2135 reinforces a potential downleg to target the next near-term support at 1.2000/1950 (Fibonacci projection cluster & Oct 2016 low).
  • However, a clearance with an hourly close above 1.2250 negates the bearish tone for an extension of the corrective rebound towards the 1.2430 resistance.

USD/JPY – Further minor corrective bounce cannot be ruled out


click to enlarge chart

  • The pair has staged the expected bearish reaction right below the 109.20 key medium-term resistance and plummeted beyond the short-term downside target/support of 106.80 as per highlighted in our previous report. It printed a low of 105.50 yesterday, 06 Aug on the back of rising risk aversion since the start of this week.
  • Right now, short-term elements are advocating for a minor corrective rebound to retrace the recent steep slide from 01 Aug 2019 high. Flip to a bullish bias for another potential leg of corrective bounce towards the 107.30 intermediate resistance (former minor ascending support from 25 Jun 2019 low & Fibonacci retracement/projection cluster).
  • However, a break with an hourly close below 105.50 opens up scope for the continuation of the impulsive down move towards 104.65 (close to 03 Jan 2019 flash crash low & 23 Mar 2018 swing low)

AUD/USD – Bears remain in control


click to enlarge chart

  • The pair has continued its expected downward drift and broke below the 0.6770/6740 downside target/support as per highlighted in our previous report. It has broken below the 03 Jan 2019 flash crash low of 0.6740 in today’s Asian session reinforced by a bigger than expected interest rate cut of 50 bps from RBNZ to take the official cash rate to a record low of 1.00%.
  • Maintain bearish bias with a tightened key short-term pivotal resistance now 0.6755 for a further potential push down to target the next near-term supports at 0.6675 and 0.6645.
  • However, a clearance above 0.6755 negates the bearish tone for a squeeze up to retest the minor range top at 0.6805 (also the descending trendline from 18 Jul 2019 high).

Charts are from eSignal


Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.