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Trading plan for July 17

By FX BAZOOKA analytical team

Main events to watch on July 17:

EUR: Core CPI (09:00 GMT)

USD: Building Permits, Housing Starts, Unemployment Claims (12:30 GMT); Philly Fed Manufacturing Index (14:00 GMT)

JPY: Monetary Policy Meeting Minutes (23:50 GMT)

AUD: CB Leading Index (00:00 GMT), NAB Quarterly Business Confidence (01:30 GMT), RBA Assist Gov Edey Speaks (01:55 GMT).

Trade ideas

EUR/USD has finally breached its narrow trading range around $1.3600 and weakened to $1.3525. In this area there’s currently a support line connecting 2012 and July 2013 lows. In the short-term the pair’s oversold, but we expect selling pressure to mount again in case of recovery to $1.3550, $1.3575 and $1.3600. On the downside euro has scope for easing down to $1.3500 and $1.3476 (2014 low). The situation in the euro area is now characterized by poor economic indicators and bank problems in Portugal. As for the US the bears have finally managed to find a shadow of a rate hike comment in the Fed Yellen’s speech. We don’t expect any changes from the euro zone’s inflation data and it will probably have low market impact as the data are now flash. The attention will be on the US housing market and Philadelphia manufacturing PMI. According to the forecasts, data will remain mixed.    

GBP/USD remains supported by Tuesday inflation figures and strong employment market data. UK unemployment lowered from 6.6% to 6.5%, while claimant count contracted by 36K (forecast: -27K). However, wage growth slowed, limiting the rally of the cable by the $1.7190/7200 resistance area. Until UK wages begin to rise, the UK central bank won’t announce timing of rate hikes and could cap GBP growth by moderate verbal interventions. During the second half of the week dynamics of the pair will be defined by the US releases. Strong US figures could deepen the GBP/USD bearish correction. Support is seen at $1.7100, $1.7060 and $1.7000. Break of the GBP/USD above $1.7190 would pave the ground for a test of $1.7330. However, we see some signs of the buyers’ weakness on the weekly chart.

USD/JPY extends the recovery from the 101.00 mark – this is the 55-week MA and the top of the weekly Ichimoku Cloud. There will be no data releases in Japan this week except for the BOJ monetary policy minutes on Friday. We are trading in the same flat range, favoring some growth in the coming days. Resistance lies at 102.00, 102.30 and 102.80.

AUD/USD slid to $0.9330 before recovering to $0.9350. Aussie was sold-off as data from China, Australia’s main trading partner, slightly better-than-expected as they were, made traders worry about the global economic prospects. Perhaps, if Chinese figures were worse, the markets would cheer up on the possibility of additional stimulus coming, but the actual data don’t encourage such expectations. The RBA’s Edwards said yesterday that Aussie is overvalued. Tomorrow we’ll get more comments from the regulator. The price action on the daily chart since the middle of June looks like the pair’s topping, though a close below $0.9340 is needed for confirmation. In the next sessions pay attention to resistance at $0.9360 and $0.9375. Support is at $0.9320, $0.9300 and $0.9280.

NZD/USD made the biggest daily slump in 7 weeks. New Zealand’s dollar weakened as the nation’s CPI was below forecast decreasing pressure on the Reserve Bank of New Zealand to tighten policy. A close below $0.8730 will make the pair extend its slide towards $0.8620 (50% Fibo).

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