Trading plan for August 26
Key market drivers for August 26 (Tuesday):
GBP: BBA Mortgage Approvals
USD: Core Durable Goods Orders, Durable Goods Orders, S&P/CS Composite-20 HPI, CB Consumer Confidence
EUR/USD is trading in the $1.3200 area. Weaker German IFO figures are making it harder for the bulls to try to close the opening gap. Still, the pair’s declined too much in the recent days and the bears failed to pull the prices much lower on the data. Last week euro breached several important support levels. Further support is at $1.3170 and $1.3105. The medium term target is at $1.3020 (50% of the advance in 2012-2014). There will be no data from the euro area tomorrow, but the forecasts for the European releases scheduled later this week are grim. Euro is a sell preferably at $1.3250 or if there’s a strong break below $1.3200.
AUD/USD keeps trading uncertainly in the $0.9300 area. The pair’s trading below the resistance line connecting August highs. In the absence of news from Australia the pair will be driven by the risk sentiment and the American data. The lines of the daily indicator are horizontal, while intraday provides mixed signals. This allows us to expect more sideways trading in the $0.9340/$0.9280 area.
GBP/USD opened the week with a gap down and hit a fresh low of $1.6535, but to the $1.6600 resistance during the day. Take a look at the daily RSI: the pair remains badly oversold. Market clearly needs to correct higher after 7 consecutive weeks of losses, but we expect the $1.6700 resistance to cap the upside. We maintain a bearish view and target $1.6460 this week. On Tuesday Great Britain will release BBA Mortgage Approvals data (44.2K expected versus 43.3K prior). Given the upbeat forecast, data could render some moderate support to the cable.
USD/JPY hit a 104.20 high on Monday, supported by the overall USD-demand. There are no important releases in Japan till Friday (inflation data), so all heads will be turned to US. We believe that the USD-euphoria will take the pair above 104.20 and bring to our target of 105.40 this week. Our outlook remains clearly bullish as the price holds above 103.00.