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Currency Analyst since 2010

Forex trading plan for August 20

US CPI data came in at 0.1% for headline and core, below the 0.2% estimates, but real average earnings rose from 1.8% to 2.2% helping US dollar recover after the initial sip. Traders are also positioning for the release of the Federal Reserve’s meeting minutes at 18:00 GMT on Wednesday – the market is probably pricing in a more hawkish statement. Traders will be looking for the indication of how many central bank members lean towards September rate hike. Comments about the labor market and inflation will be also important. On Thursday there will be another bunch of American economic statistics: unemployment claims at 12:30 GMT and existing home sales and Philadelphia Fed manufacturing index (positive forecast) at 14:00 GMT.

EUR/USD continued its way below the 100-day MA at 1.1048. The German Bundestag has voted in favor of the third bailout for Greece. Greece is scheduled to repay 3.5 billion euro to the European Central Bank (ECB). Support is at 1.1015/1.1000 and 1.0950. Resistance is at 1.1050, 1.1090/1.1100 and 1.1130. The pair has topped last week, but the euro still has underlying strength, so the bearish bias may soften.

GBP/USD jumped on Tuesday, but failed to close above 1.5700 mark. Only a close above this point will bring the pair to 1.5785/1.5815. UK will release retail sales data at 08:30 GMT (positive forecast). Support is at 1.5590 (55-day MA). 

USD/JPY made a spike down towards 124.00, but then recovered to 124.40. Resistance is at 124.50 (50% of the decline after Chinese yuan devaluation) and then at 124.70 and 124.90/125.00. The instability in China supports demand for the yen as a safe haven and limits the pair’s advance. The Bank of Japan meeting will take place on Thursday. In its recent comments, the regulator hinted that it was no planning to increase monetary stimulus as the yen has already weakened much. If the Bank of Japan sticks to this position, the advance of USD/JPY will remain limited. Long USD positions here seem risky.    

AUD/USD is getting ready for a break of either 0.7315 or 0.7375. Support will likely come under pressure. 

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