Currency Analyst since 2010

Trading plan for August 29

Key market drivers for August 29 (Friday):

NZD: ANZ Business Confidence (01:00 GMT)

EUR: CPI Flash Estimate, Unemployment Rate (09:00 GMT)

GBP: Nationwide HPI, Preliminary Business Investment (6:00 GMT)

CAD: GDP (12:30 GMT)

USD: Core PCE Price Index, Personal Spending (12:30 GMT), Chicago PMI (14:00 GMT)

Trade ideas

EUR/USD remains range bound. The pair tested Friday’s low at $1.3220, but then returned to $1.3170. The combination of weaker data from the euro area (German inflation has slowed down, Spanish CPI fell more than expected) and better figures from the US (GDP growth in Q2 was upgraded from 4.0% to 4.2%) pulled the pair down. The data which is due in the euro area tomorrow (German retail sales & euro zone’s inflation) might bring no good. Euro will remain a sell on the attempts to recover to $1.3220/50. Still we don’t expect any rapid decline in the pair as bad news are mostly priced in.

GBP/USD attempted to push higher, but failed to fix above the $1.6600 resistance on Thursday.  Take a look at the H4 chart - this is the 55-period MA and the bottom of the bearish Cloud. We don’t expect the current bullish correction to be long-lived. Break below the $1.6530 support will open the way to our next target of$ 1.6460. Great Britain is scheduled to release Nationwide HPI and Preliminary Business Investment data on Friday – not much, but any negative surprises will increase pressure on the cable.

USD/JPY remains in a short-term descending channel since Tuesday. Bulls attempted to push higher on US GDP, but were capped by the 103.80 mark. The bigger part of the US optimism was already been priced in by the markets. In a medium-term we remain bullish with an initial target of 105.40. However, USD buyers may remain indecisive before the next week’s US NFP release. Don’t miss the Japan data late on Thursday: National Core CPI is expected to stay unchanged at +3.3% in August, while Tokyo Core CPI – to have slowed from 2.8% to 2.7%. July industrial production could have added 1.4% in July following a 3.4% contraction in June, while retail sales drop to reduce from 0.6% to 0.1%. Any upbeat news will diminish the expectations for additional BOJ easing and pressure USD/JPY.  

AUD/USD tested levels above $0.9370, but the bulls are to weaken to settle there and more higher. Australian capital expenditure data was positive on the outside, but soar inside as the spending on equipment, plant and machinery disappointed, which is bad news for Australian GDP. The US, on the other hand, shines with its robust economic growth. A close below $0.9350 will be a signal to enter shorts targeting firstly $0.9300 and then $0.9250.

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