Currency Analyst since 2010

Trading plan for August 28

Key market drivers for August 28 (Thursday):

AUD: Private Capital Expenditure (01:30 GMT)

EUR: German Prelim CPI (time of the release isn’t known yet), Spanish Flash CPI (7:00 GMT), German Unemployment Change (7:55 GMT)

USD: Prelim GDP & Unemployment Claims (12:30 GMT), Pending Home Sales (14:00 GMT)

JPY: Inflation data, Household Spending, Prelim Industrial Production, Retail Sales (23:30-23:50 GMT)

Trade ideas

The US dollar paused its rally versus the major currencies after a strong bullish move on the previous week. DXY index edged back slightly after having hit a 13-month peak of 82.7 in the Asian session. Markets are now looking forward to the US Q2 second estimate on Thursday. According to the market consensus, US economic growth from April to June could be revised a bit down from 4.0%to 3.9%. However, this is still a solid growth – especially after a sharp dip in Q1.

EUR/USD descended to $1.3150 where it found some support. We’re clearly in a rather strong downtrend: so far the bears didn’t care that euro’s oversold. Tomorrow Germany will release inflation data, and it is unlikely to bring comfort. The expectations about the ECB and more easing in the euro area are quite strong, and although later a disappointment will come, in the coming days euro might stay under pressure. The target is at $1.3105. Resistance is at $1.3205, $1.3220 and $1.3245.

Cable recovered from $1.6530 back to the $1.6600 mark on a wave of USD weakness. UK CBI realized sales could have increased from 21 to 27 in August, so the pair could get some additional support tomorrow. However, we expect the current GBP recovery to be short-lived. The $1.6690/7000 area will likely cap the upside. Our bearish target remains unchanged at $1.64460.

The 104 yen area remains a hard nut to crack for the USD/JPY buyers: the pair bounced back to 103.80 on Wednesday. Our medium term target stays at 105.40, so we wait until the bulls have a rest and resume the attack. Major support for the pair is now seen at 103.00 yen. Don’t miss the Japan inflation data late on Thursday – the figures may clarify whether the economy needs additional QE or not.

With great difficulties AUD/USD has finally reached $0.9350. Resistance at $0.9355/60 (low of the daily Ichimoku Cloud and 55-day MA) is rather strong. Australia will release a very important indicator tomorrow – private capital expenditure for Q2. Economists say that there are signs of improvement in Australian economy. A break of $0.9355 has the potential to drive the pair up to $0.9400/20. If so, this will be a good area to sell the pair. Still, the pair’s current dynamics looks like a wedge and a slide to $0.9300 on positive data from the US is possible. Support is at $0.9325, $0.9300 and $0.9280.

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