- The USD surged overnight as the FOMC minutes revealed “several members” suggested additional easing would be required to get the economy back on track. Bond yields were higher on disappointment that the Fed are veering away from YCC (yield curve control) for now.
- US equities rolled over from their highs which weighed on the Asian market, with the ASX 200 trading -0.76% lower and the Nikkei -0.43% lower. The question now is whether markets will follow through with less appetite for risk, or whether this is just another blip before equities break to new highs once more.
- FX markets remain quietly within narrow ranges following a volatile session from Wall Street. With a quiet calendar through Asia and one key event in US (jobless claims) we may be in for a relatively quiet European session to.
Up next: Calendar Highlights
US jobless claims: This has been more exciting than NFP throughout the pandemic, so traders will be closely watching this number for a negative surprise. If we see it go back above 1 million jobless claims, expect volatility to make it presence known with a risk-off tone. When claims were above 1 million in June it sent US indices lower and gold higher.
Keep an eye on: USD, gold, US indices
EUR/JPY (H4) bullish bias:
The daily chart remains in a firm uptrend although prices are currently correcting from their highs.
We can see on the four-hour chart that the correction has stalled near a bullish trendline, the 50-period eMA and a 50% retracement level. Two doji’s have also formed to suggest a base could be forming.
From here we’d need to see bullish momentum push higher form current levels before assuming the correction is complete. A more conservative approach is to wait for a break of the 126.10 high to confirm the trend is bullish, although bullish traders could also consider entering if they see clear evidence of bullish range expansion from current levels.
- A clear break of 125.34 low invalidates the bullish bias
- A break above 126.10 assumes bullish trend continuation
JP225 (D1) potential bull flag:
The Nikkei 225 sits on a fine line between being bullish or bearish near its 2020 highs.
Since late May the Nikkei has mostly traded between 21,600 – 23,300. Bullish momentum has dominated since the 2-bar reversal early August and a potential bull-flag is forming just below resistance.
Whilst the flag favours a break higher, the reward/risk at current levels may not adequate, being so close to resistance. Therefore, we’d prefer to see a clear break above 23,312 before assuming the bullish breakout has been confirmed.
- Break above 23,312 assumes bullish trend continuation
- A break beneath this week’s lows invalidates the setup and warns of a deeper correction, or a larger move lower back within range
CAD/JPY (H4) bullish bias:
The daily chart ha formed a bullish engulfing and bullish outside day to suggest an interim low is in place.
The four-hour chart shows two higher lows have formed which suggests a bullish trend is forming, Previous resistance at 79.87 has now turned into support and marks yesterday’s bullish engulfing low. Given the 50-period eMA is supporting and prices are back above the weekly pivot, the near-term bias remains bullish on this timeframe.
- Bias remains bullish above 79.86
- Initial target is the 80.99 high (also note the weekly pivot R1 is just above here for added resistance)
- Setup invalidated with break below 79.86
NZD/USD: Whilst prices initially moved higher, a bearish key reversal has formed to take prices back within Monday’s range. This makes the setup less appealing even though Monday’s low (the invalidation point) remains untested. Volatility needs to subside and then show evidence of bullish momentum must return before we would reconsider being bullish, so prefer to step aside for now.
GBP/AUD: The bullish flag remains intact although we’re yet to see a break higher.
US30: Price action rifted lower and tested the June high, as the S&P500 and Nasdaq rolled over from their highs. If the June highs break convincingly, it will be removed from the watchlist.