- Joe Biden was officially nominated by the Democratic party to run for President in the 2020 election. So not a major surprise, but nice to know.
- The USD continues to unravel overnight with the USD Index (DXY) falling to its lowest level in 2yrs and 3 months. Whilst the bias remains bearish, traders may want to stay nimble as the move lacks any real pullback, so is vulnerable to profit taking.
- Strong earnings from Wall Street and firmer economic data helped boost sentient overnight, with Asian equities hitting a 7-month high. Whilst Japan’s exports ‘sank’ at -19.2% YoY, it was not as bad as expected with gave AUD and NZD another lift early in the Asian session.
- FX ranges have remained contained so far, which leaves plenty of room for range expansion in the European and US sessions. EUR/USD is the strongest performer and USD/CHF is the weakest.
Up next: Calendar Highlights:
- UK inflation (GBP pairs, UK100)
- OPEC meeting (WTI, BRENT)
- Canada inflation (CAD pairs)
- FOMC minutes (USD pairs, US indices)
Dow Jones (US30) long bias (D1):
US indices continue to outperform, the Nasdaq 100 has risen to record highs and the S&P500 is on the cusp of following suit. However the Dow Jones is consolidating above support and could be lifted higher if the Nasdaq and S&P500 march higher. That said, be on the guard for a break lower if S&P50 fails to break to new highs.
US30 is consolidating on the daily chart within an uptrend, and has found support above the June high and 10-day eMA, making 27,650 is a pivotal level. The bias remains bullish above this level, whilst a break beneath it warns of a deeper retracement, with the next level of support sitting around 27,180.
NZD/USD near-term bullish bias (D1):
The Kiwi dollar is strengthening across the board and we see potential for some follow through on NZD/USD.
After retracing from the July high, NZD/USD may have formed a corrective on Monday with a bullish outside candle holding above the 50-day eMA. Tuesday’s price action saw it break out with range expansion and today’s price action is hovering near this week’s highs.
Whilst we see potential for this to dip lower initially, Monday’s high may provide support. Alternatively, ‘dip buyers’ could seek bullish setups on lower timeframes within Monday’s range (blue zone).
Bias remains bullish above Monday’s low, with potential for it to revisit July’s highs around 0.6700.
GBP/AUD long bias (D1):
A potential bull flag is forming on the daily chart, and yesterday closed with a bullish engulfing candle at the 38.2% Fibonacci level to suggest a swing low is in place.
If successful, the bullish flag projects an approximate target around 1.8850, whilst a break beneath yesterday’s low 1.8132 invalidates the near-term bullish bias.
Whilst the cross has been in a downtrend since March, the break higher in July invalidated a swing high to warn of a change in trend. Now prices have retraced and formed the potential bull flag, we’re waiting for bullish momentum to return to signal a break to new highs.
Whilst the Australian dollar has been on a bullish rampage of late (and tracks the S&P500 higher), it’s not impossible to expect the Aussie to correct at some stage, which could give GBP/AUD a help in breaking higher. Keep a close eye on the S&P500 as it sits near record highs as it could be pivotal to the success of this bull flag.
Technicals of interest:
- NZD pairs showing signs of strength on the daily charts.
- AUD/NZD: Bearish hammer on D1 suggest exhaustion at the highs, showing potential for a retracement.
- NZD/CHF and NZD/CAD lifting from their lows on the daily chart. The trends remain bearish so we’re waiting to look for short opportunities at higher prices.
- Potential double top on EUR/NZD daily chart at their highs.
- AUD/SGD: Sideways range near multi-month highs on the daily chart. Needs to break above 0.9914 to assume trend continuation.