Currency Analyst since 2010

Forex trading plan for August 12

By Elizabeth Belugina

US dollar was supported on Tuesday by the decision of the People’s Bank of China to devalue the yuan. Chinese central bank has given a new boost to the global currency wars. The news is most negative for the commodity currencies – AUD, NZD, and CAD.  

American currency should feel well after good NFP data, but as it has already strengthened a lot, there’s a risk that large short positions will get partially covered making USD lose some of its strength.

Comments from the Federal Reserve don’t bring much clarity about the central bank’s plans for September. In addition, Atlanta Fed President Dennis Lockhart said on Monday the Fed is close to raising short-term interest rates, possibly as soon as September, noting the economy is “approaching an acceptable normal.” Fed Vice Chairman Stanley Fischer said the central bank won’t raise interest rates until inflation has returned to normal. On Wednesday FOMC member Dudley will speak at 12:30 GMT. Earlier Dudley used to cite various risks for the US economy. In the meantime, Unit labor costs rose by 0.5% vs. 0.0% expected. That’s a positive thing for American inflation and USD.

EUR/USD tested levels above 1.1050. Greek government said that it had reached an agreement with its international creditors on the terms of the third bailout program, although there are some details still to be resolved. Although the creditor nations didn’t confirm this, traders seem quite optimistic about the temporary resolution of the Greek crisis. As a result, euro may spike to 1.1100 and 1.1130/40. Support lies at 1.0990, 0.0950 and 1.0900.

GBP/USD is held by 1.5615. Above this level another leg higher towards 1.5700 is possible. The UK will release labor market data at 08:30 GMT on Wednesday. Still, according to the forecasts, the figures won’t be very exciting. On the downside the key levels are at 1.5500 and 1.5465.

USD/JPY is once again testing 125.00. For now, it looks like US currency doesn’t have enough drivers to fix above this point, so we expect further consolidation. Support is at 124.50, 124.00 and 123.65.

AUD/USD fell affected by the news from China. A close below 0.7315 will be bearish. On Wednesday watch Westpac consumer sentiment index at 00:30 GMT, Australian wage price index at 01:30 GMT and, most importantly, Chinese industrial production at 05:30 GMT. 

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