- ECB President Christine Lagarde refrained from talking the euro lower, saying they’ll not target the exchange rate for monetary policy although they will be watching it. They also held interest rates as widely expected. EUR/USD touched a 6-day high around 1.1900 but later pared gains to close effectively flat for the session.
- BOC Governor Tiff Mackelm said their exchange rate against the USD will be taken into account when assessing how much more stimulus is needed.
- The British Pound remained under selling pressure on fears UK-EU Brexit talks will stall, falling to a 6-month low against the euro and a 6-week low against the dollar. GBP/USD was the widest range relative to ATR, suggesting volatility may subside throughout Asia.
- Equities gave back gains from the prior session, suggesting Wednesday’s mild rebound was nothing more than that.
- Brexit headlines and sentiment will remain a key driver for GBP pairs. Although GDP and industrial output may warrant a look incase they somehow beat expectations. GBP is unlikely to gain much bullish traction though.
- US CPI data also warrants a look in light of the Fed’s new AIT (average inflation targeting). That said, traders don’t really know how to interpret the Fed’s approach to inflation since the Fed threw out their own rule book. So, whether today’s CPI will instil volatility or just more confusion remains to be seen.
USD/CHF: One for Range Traders
- Yesterday’s bullish hammer found support at the sloping trendline and closed above the monthly pivot point.
- A break above the hammer high brings the monthly R1 into focus around 0.9185 as a potential target.
- The near-term bullish bias is invalidated if prices break below the monthly pivot after breaking above the hammer high.
- Given the messy price action, this is not a market to outstay ones’ welcome, so being nimble is preferred.
AUD/NZD: Momentum Slowly Turns Higher
- The correction from the 1.1042 high found support at a longer-term trendline and bullish momentum is slowly returning.
- A flag formation formed around the correction line, and prices have since broken out of the flag and above the prior cycle high to confirm a change in trend.
- A bullish outside candle is forming on H4 to show demand in the Asian session, although the candle is yet to close.
- Bias remains bullish above the 1.0875 low, with the 1.0960 and 1.1000 highs in focus for potential targets.
CHF/JPY: Is the Tide Finally Turning?
- On the 24th August we noted that 118 has been a tough level of resistance for CHF/JPY, and that reversal patterns around this key level have resulted in large declines.
- We have continued to monitor the daily chart for evidence that prices are forming a top.
- In recent days, the bullish trendline and prior swing low have been broken, and a bearish hammer suggests a lower high may be forming.
- The bias remains bearish below 118 with an initial target around 110 (round number).
- Bears could either wait for a break of the 115.13 low to assume bearish continuation, or fade into (sell into) minor rallies.
- A break above 118 invalidates the short bias.
Brent: Consolidating Nears Its Lows
- The breakout from the bearish wedge projects a target near the 37.15 lows. After an almost straight decline, oil prices have stabilised above Wednesday’s low and prices are now consolidating.
- A break below 39.50 suggests bearish continuation and brings the 37.15 low into focus, whilst a break above 41.43 assumes a deeper correction.
- Usually we’d prefer more consolidation after a strong move – and perhaps today will be quiet to allow for another inside day. So, it could a trade to consider on Monday if prices do not break lower today.
EUR/JPY: Prices spiked higher and tested the 126.33 resistance zone. Whilst the trend remains bullish above 124.30, the bearish pinbar on the daily chart means we are now neutral, so have removed it from the watchlist until further notice.
GBP/JPY: The bearish momentum has been epic but now looks overextended and offers an unattractive reward to risk. We have removed from the watchlist until we see a retracement or consolidation. This can be said for all GBP pairs.
Gold (XAU/USD): For intraday traders, the bias remains bullish above 1940 or bearish below it. For EOD (end of day traders) we have removed it from the watchlist after yesterday’s bearish hammer at the breakout point.
Silver (XAG/USD): Removed from watchlist as bullish momentum was not sustained after the breakout.