Trading plan for July 24
Main events to watch on July 24 (Thursday):
AUD: China’s HSBC Flash Manufacturing PMI
EUR: French, German and the euro area’s PMIs (07:00, 07:30 and 08:00 GMT).
GBP: Retail Sales (08:30 GMT)
USD: Unemployment Claims (12:30 GMT), New Home Sales (14:00 GMT).
EUR/USD is in control of the bears as it remained close to the 8-month minimum at $1.3454. Euro has been consolidating today after Tuesday’s sell-off which made it finish the day at the lowest level since the end of January and breach a support line from 2012. Today there was no important economic news from the euro area or the US. Although daily RSI is close to 30, corrections to the upside will likely remain shallow. Resistance lies at $1.3500, $1.3525, $1.3550 and $1.3575. Support is at $1.3450, $1.3423/15 and $1.3400. The outlook for EUR will remain negative as long as it’s trading below the downtrend resistance line at $1.3585. The market players are waiting for the euro zone’s PMIs. The EU officials haven’t so far agreed on the new sanctions against Russia.
GBP/USD had a bad day, breaking the $1.7060 support and hitting $1.7020 at the beginning of the US session. Nor the MPC meeting minutes, neither the BOE Carney’s speech contained any hawkish hints. Minutes showed all the 9 Committee members were unanimous in leaving rates at record lows in July. Investors look forward to the UK retail sales release (+0.2% exp vs. prior -0.5%) on Thursday and Q2 GDP on Friday (+0.8% exp). Optimistic data expectations render temporary support for the pair, but we maintain a bearish view with an initial target of $1.7010. Major support lies at $1.7000 and $1.6950, while resistance – at $1.7060, $1.7100 and $1.7130. We hold a short position on
USD/JPY maintains the narrow 101.30/55 range. Watch Japanese trade balance and flash manufacturing PMI on Thursday. What’s more, late on Thursday Japan is scheduled to release inflation data (at 23:30 GMT). July forecasts are slightly below the June readings, so USD/JPY could get some support from increased stimulus expectations. Despite that, we forecast USD/JPY to stay in the 101.00/101.80 range by the end of the current week. 101.00 mark remains a hard nut to crack for the sellers. Break above the short-term uptrend line at 102.00 is needed to resume growth.
AUD/USD has reached important resistance at $0.9450 as Australian inflation data turned out to be high which made traders reduce bets on the Reserve Bank of Australia’s rate cuts. It will be now much more difficult for the RBA to talk down the currency with dovish comments. Risks of the negative scenario are now lower. During the Asian session the sentiment will depend on how good the data from China are. Resistance lies at $0.9470 (upper daily Bollinger band) and $0.9500. Support is at $0.9412, $0.9380 and $0.9358.