- The ISM manufacturing index expanded at its fastest rate since November 2018 at 56 vs 54.5 expected. New orders were their highest in over 16 years although, unsurprisingly, unemployment remained the drag on the headline number.
- It was a risk-on session with S&P500 and Nasdaq 100 hitting fresh all-time highs, with gold and silver retreating back below resistance.
- The US dollar began to strengthen just after US open and continued to own the session and has left potential reversal patterns across some pairs on the daily charts.
- Commodity FX lead the pack and made notable gains against the Swiss franc in a risk-on session.
- The Swiss franc was broadly weakened when SNB’s Maechler stated that negative interest rates were still important for Switzerland. EUR/CHF spiked to a 3-month high and its daily range was twice its usual volatility.
AU GDP is the main calendar event in Asia today. At -6% forecast for Q2 GDP, its really not that bad by international standards. Data overall has also been okay, so do not discount an potential upside surprise. If so, AUD/NZD is worth a look as it resides around 1.0900 support highlighted yesterday.
EUR/USD Shows Potential to Mean Revert
If nothing else, this chart at least serves as a warning to USD bears over the near-term. Since the end of July, EUR/USD has oscillated in a slightly upwards sloping range, although the highs around 1.20 have so far held. Yesterday’s reversal for the US dollar has left a shooting star reversal on daily chart and the firm close back below 1.20 warns of a bull-trap.
At current levels the weekly chart is on track for a bearish pinbar but this will change to a bearish hammer if prices close lower.
- The bias is bearish (over the near-term) whilst prices remain below 1.2000
- A break beneath 1.1826 warns of a deeper retracement
- However, as trend remains bullish we’d then look for a potential higher low to form above support
EUR/NZD Closed with a Bearish Outside Day:
The initial target on H4 was met yesterday, and the daily chart closed beneath the prior swing low to warn of trend continuation.
A bearish outside day has formed which opens this up for a potential short for EOD (end of day) traders.
- Bias remain bearish below 1.7750
- Bears could look to fade into minor rallied within yesterday’s range
- Target is the cluster of support around 1.7500 (Weekly S1, Monthly S1, pivotal S/R)
- If bears are feeling lucky, there is another zone of support to target around 1.7270
AUD/CAD is Forming a Potential Bull-Flag:
For this to work quickly we’d need a firmer-than-expected GDP print for Australia today. Obviously, a downside surprise would not bode well for a bullish breakout.
A potential bull flag is forming below resistance which, if successful would project a target way above the 0.9695 highs.
- A break above 0.9650 confirms a breakout from the flag, and the initial target becomes the 0.9695 high
- A break beneath 0.9592 assumes a bearish breakdown from the highs
- Unless a divergent theme appears between AU and CA, range traders could consider shorts below 0.9650 and bulls could consider setups above 0.9592
GBP/NZD Considers A Break Lower
The H4 chart remains under pressure although price action is trapped between the 50 and 200-period eMA. However, a prominent bearish engulfing candle suggests a corrective high is in place at 1.9930.
A break beneath the 1.9746 low assumes bearish trend continuation and targets the 1.9630 and 1.9515 lows.
EUR/NZD: Initial target has been met around the 1.7644 lows with a daily close around this level. H4 trend remains bearish beneath the 1.7750 high with 1.7572 now in focus for the bears.
AUD/NZD: Bias remains bullish above the 1.09 support zone (38.2% Fibonacci, prior highs) but bullish momentum is yet to return. The RBA meeting failed to produce a divergent theme between the Antipodeans, although perhaps AU GDP later today could make or break this setup.
USD/SGD: Following an initial burst lower, support was found at 1.5360 and momentum took it higher towards the resistance zone outlined yesterday. Bears could reconsider shorts if a lower high forms below the 1.3630/55 range.
Gold (XAU/USD): Its initial breakout yesterday succumbed to USD strength in the US session. Now back below the original breakout level of 1977.92, we’ll keep a close eye to see if it can form a higher low before bullish momentum returns.
AUD/JPY: Bias remains firmly bullish. Prices are consolidating (H4) ahead of AU GDP. Take note of the 200-week eMA near this week’s highs which is currently capping as resistance.