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Trading plan for July 23

By FX BAZOOKA analytical team

Main events to watch on July 23 (Wednesday):

AUD: CPI (01:30 GMT)
GBP: Bank of England’s meeting minutes (08:30 GMT), BOE Gov Carney Speaks (11:45 GMT)
CAD: Core Retail Sales (12:30 GMT)
NZD: RBNZ meeting (21:00 GMT), Trade Balance (22:45 GMT)

Trade ideas

EUR/USD fell below $1.3500 and renewed this year’s minimum below $1.3460. Euro buyers were clearly in the minority as traders await EU decision on the sanctions against Russia. The single currency is now vulnerable for a decline to $1.3423 (200-week MA). Still, on the H4 chart isn’t confirmed by MACD, while RSI shows oversold. In addition, US inflation wasn’t as high as expected. This may mean that the pair could try to return to $1.3500. Tomorrow there will be nothing of importance in the economic calendar of both the euro area and the US – investors may start making predictions about the euro zone’s PMIs and German IFO on Thursday and Friday. As France and Germany have strong economic ties with Russian companies, they may be reluctant to proceed with strong sanctions aimed at the whole sectors of Russian economy. Still, the EU will surely take some steps.

GBP/USD extends the pullback from the $1.7190 area, consolidating at the $1.7060 support as we write. The markets have been disappointed as UK public sector has once again showed a large deficit, while CBI industrial order expectations declined more than expected. All together the data dampen market optimism over the country's economic outlook and the terms of interest rate hikes. Massive sell-off of the cable was, however, contained buy not very impressive US inflation data released in the American session.

Market attention is now turning to the BoE meeting minutes release at 8:30 GMT on Wednesday. The overall positive economic background of the recent months keeps investors watchful about a change in the MPC votes. However, Tuesday releases have cooled the investor’s optimism down. BoE Governor Carney holds a speech at 11:45 GMT on Wednesday. Keep an eye on these UK releases – they will hopefully clarify the GBP/USD trading prospects. Support for the cable is seen at $1.7000 and $1.6950, while resistance lies at $1.7100, $1.7120 and $1.7150. If the BoE signals no readiness to hike before Q2 2015, GBP/USD could extend the bearish move.

USD/JPY keeps consolidating above the major 101.00 support with the upside capped at 101.60 so far. Neither Japan, nor US has any potentially market-moving events on the schedule. It is the risk sentiment that matters these days: further escalation of the Russia-Ukraine crisis will likely pull the pair below the 101 support. It this case we advice to sell the pair with targets at 100.60 and 100.00. Resistance lies at 101.70, 102.00 and 102.30.

The Reserve Bank of Australia’s Governor Stevens didn’t stress the overvalued nature of Australian currency and that gave AUD/USD a boost from $0.9370 to the levels above $0.9400. Still, the levels we’ve mentioned before stand: the bulls need to push the prices above $0.9412 (daily Kijun-sen) to ease the bearish pressure and the break above $0.9450 is required to cancel the diamond top scenario. Obviously the RBA wants weaker Aussie. Does Governor Stevens know about tomorrow’s inflations something we don’t? He might. Perhaps he knows that he doesn’t have to weaken Aussie – the market will do on its own.

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