Currency Analyst since 2010

Forex trading plan for July 14

US dollar index rose to June highs this week, but so far hasn’t managed to overcome resistance at 97.00. The Fed’s Cleveland head Loretta Mester said that gradual rate hikes are still appropriate in the US. On Thursday America will release two key events– PPI and unemployment claims.

EUR/USD stays below the key level of 1.1100 (200-day MA). The euro is under pressure as traders expect dovishness form the European Central Bank’s meeting next week. Data from the euro area are weak: the region’s industrial production contracted by 1.2% in May. The 50-day MA went below 100-day MA – a bearish signal. Yet, the euro is still holding ground as traders don’t expect an interest rate hike in the US anytime soon. In the near term the picture looks neutral: the pair is consolidating in 1.1155/1.0970 range.

GBP/USD rose to nearly a 2-week high at 1.3336 as political uncertainty in the UK was set to decrease somewhat with Theresa May set to become prime minister on Wednesday. Note, however, that future of the relationship between the UK and the European Union is still uncertain. The market is pricing a rate cut by the Bank of England on Thursday. It will be Important how dovish the BOE Governor and how much monetary stimulus he will hint on besides the rate cut. Next resistance is at 1.3500/20, while support is at 1.3120/00.

USD/JPY recovered to 105.00. Prime Minister Shinzo Abe ordered a new round of fiscal stimulus spending. On Tuesday Abe met with former Fed’s Chairman Ben Bernanke. This meeting fueled expectations that the Bank of Japan will take part in Abe’s stimulus plan and further ease its monetary policy. Above 105.00 the pair will have chance to rise to 106.00/50. Support is at 103.50.

AUD/USD breached resistance line connecting April and June highs and is trading above 0.7600. Aussie was helped by the decreased political uncertainty in Australia: Australia's ruling conservatives finally secured a parliamentary majority following a protracted election vote count. Yet, many experts still expect the Reserve Bank of Australia to cut rate in August: the higher Aussie goes, the stronger will be such expectations. Resistance is at 0.7680, support is at 0.7570. 

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