Currency Analyst since 2010

Forex trading plan for August 16

On Monday US dollar continued feeling the negative consequences of disappointing US macroeconomic data released on Friday. Although US dollar index managed to recover from the day’s lows on Friday, it started the new week under pressure. America will release inflation figures at 12:30 GMT on Tuesday: economists think that weak July retails sales reading may affect the nation’s CPI. Lower inflation means that the Fed will be in no hurry to raise rates – bearish factor for the greenback. The expectations of the Federal Reserve’s rate hike in December declined from 45% to 41%. As a result, we get an environment, in which dollar is weaker against both safe haven and commodity currencies. Other events in the US economic calendar on Tuesday include building permits, housing starts and industrial production.

EUR/USD is supported and has some limited potential for growth (20-day MA went above the 200-day MA, though longer-term moving averages remain almost horizontal that means the lack of directional pulls for the pair). Despite the euro area’s weak economic data, there’s demand for the euro’s because of the region’s current account surplus. Resistance is at 1.1190 and 1.1225 (100-day MA). Support is at 1.1135 and 1.1100. German and the euro area’s ZEW economic sentiment indexes will be released on Tuesday at 09:00 GMT.

USD/JPY is testing lower levels. The picture is negative, although the bearish momentum isn’t strong. Support is at 100.50 ahead of 100.00 and 99.77. Resistance lies at 101.60. Japan’s economy showed annual growth of 0.2% in Q2, well below expectations for 0.7 % growth. Yet, the news didn’t have any significant impact on the market – it seems that traders would be surprised if the nation’s economic growth accelerated. The key thing is that for now traders don’t expect much from the Bank of Japan, so the yen remains in demand.

GBP/USD fell below 1.30 last week and is vulnerable for decline to 1.2847 in the coming days. Pound started the new week consolidating in 1.2905/40 area. There are some rumors that Brexit may be delayed, but this may bring not a relief, but uncertainty to sterling. On Tuesday the UK will release a block of inflation figures at 08:30 GMT. In addition, the Bank of England will conduct another bond purchase auction. Last Tuesday the auction didn’t attract enough sellers, and the pound declined. This time volatility will likely increase as well.   

Riskier assets were supported by big gains in Chinese stocks which rose to 8-month highs on the expectations that the nation’s authorities will increase stimulus because of weaker economic data. In addition, oil prices remained supported by comments about potential OPEC agreement, though production remains high and growing.

AUD/USD went a bit up on Monday after Friday’s selloff. Increase above 0.7676 (July 15 high) is needed to open the way up to the next resistance at 0.7740. Below 0.7650 Aussie will slide to 0.7600. The Reserve Bank of Australia will release monetary policy meeting minutes at 01:30 GMT.  

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