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FBS: trading plan for August 6

Main events to watch on August 6 (Wednesday)

NZD:  Employment Change & Unemployment Rate (22:45 GMT on Tuesday, August 5)

EUR: German Factory Orders (06:00 GMT), Italian Prelim GDP (09:00 GMT)

GBP: Manufacturing and Industrial Production (8:30 GMT), NIESR GDP Estimate (14:00 GMT)

CAD: Trade Balance (12:30 GMT)

USD: Trade Balance (12:30 GMT), Crude Oil Inventories (14:00 GMT)

Trade ideas

The euro area released some mixed services PMI data today and rather good retail sales. However, EUR/USD slid to support in the $1.3380 area. It happened on the broad strengthening of the USD and as EUR/GBP fell on much better than expected UK services PMI. There’s also support at $1.3370/60 (50% Fibo of the 2013-2014 advance; recent lows). As euro is oversold, we won’t risk shorts at the current levels, only below the support mentioned earlier. In this case target will be at $1.3295 (November 2013 low) and $1.3328 (lower daily Bollinger band). We can’t rule out a recovery to $1.3420/50. The downtrend from May would ideally require correction up to $1.3485/3500, though the market doesn’t always follow the rules. The talk about the ECB’s policy meeting is going to intensify tomorrow: no changes in policy, but a dovish tine are expected.

AUD/USD keeps trading around the 100-day MA in the $0.9325 area. Close below this line won’t be a good sign. Daily indicators are neutral, but on H4 we see potential slide to the lower Bollinger band at $0.9280. Further support is at $0.9260. On the upside resistance lies at $0.9358, $0.9379 and $0.9390. The RBA meeting was generally non-event: the regulator plans to keep policy unchanged for a time being. The market will be focused on the US data in the coming sessions.

GBP/USD extended the recovery from the $1.6800 low on Tuesday, inspired by the upbeat UK Services PMI (59.1 in July). Upside remains capped by the $1.6890 area as of writing. Watch the UK manufacturing production on Wednesday – the forecast is positive, so we don’t exclude a larger bullish GBP correction tomorrow. However, the BoE meeting on Thursday will likely be a disappointing non-event as usual, so we advise selling the cable on highs. Resistance is seen at $1.6950 and $1.6990/7000, while support lies at $1.6800, $1.6750/40 and $1.6700/6990.

USD/JPY failed to break above the 103.00 mark last week, but has found a decent support around 102.30. The pair is now consolidating slightly above the former 2014 trend resistance. Note that last week the market formed a strong bullish candle, but with a long upper shadow. It means that the market doesn’t really feel strong enough to push higher these days. Break above 103.00 would open the way to 104.00/15, while a decline below 102.30 - return the price into the long-term triangle with a potential for a decline to 101.00. There is not much to watch on the Japanese calendar on Wednesday and Thursday, so the pair will mostly depend on the US data until Friday (day of the BOJ statement announcement). 

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