Trading plan for EUR/USD and GBP/USD for August 15, 2017

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Technical outlook:

The story in EURUSD continues to be bearish as we have been trading the entire last week. The pair has just remained shy of hitting fresh lows today and hence we are presenting an alternate scenario on the short-term hourly chart. The entire drop from 1.1910 levels through 1.1687 levels is labelled as wave (1), which is an impulse. The rally hence forth could be wave (2) or it could be taking a more complex shape and wave (2) can go and hit higher as labelled here. That would complete a complex corrective wave structure A-B-C and also terminate wave (2). Keeping this view in mind it is recommended to exit short positions now and remain watchful, counter trend rallies might be taking shape as complex structures here. The immediate support is seen at 1.1687 levels, while the resistance lies at 1.1770/80 levels.

Trading plan:

Please exit full or partial short positions taken last week. Again look to go short at higher levels.

GBP/USD chart setups:

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Technical outlook:

The GBP/USD pair is still lagging behind EUR/USD and has not produced a counter trend rally till now. It is seen to be trading at 1.2860 levels at this moment and is expected to resume the counter trend at any moment. As depicted on the short-term chart here, the wave counts are more prominently suggesting that an impulse drop is complete with 5 waves, labelled as wave (1) here. A probability remains for a counter trend pullback rally towards 1.3050 and 1.3100 levels respectively. Lets us be watchful now, and wait for the much awaited counter trend move. The support is strong near 1.2800 levels while the immediate resistance is offered through 1.3050/60 levels as depicted here. The long-term picture presented at the beginning of August, still remains intact and a huge wave lower is expected after the counter trend is over.

Trading plan:

Please remain flat for now and prepare to sell on rallies.

Fundamental outlook:

No major events are lined up for the remaining hours today.

Good luck!

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NZD/USD Intraday technical levels and trading recommendations for August 15, 2017

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Daily Outlook

The NZD/USD pair has been trending up within the depicted bullish channel since January 2016.

In November 2016, early signs of bullish weakness were expressed on the chart when the pair failed to record a new high above 0.7400.

A bearish breakout of the lower limit of the channel took place in December 2016.

In February 2017, the depicted short-term downtrend was initiated in the depicted supply zone (0.7310-0.7380).

However, a recent bullish breakout above the downtrend line took place on May 22. Since then, the market has been bullish as depicted on the chart.

The price zone of 0.7150-0.7230 (Key-Zone) stood as a temporary resistance zone until a bullish breakout was expressed above 0.7230.

This resulted in a quick bullish advance towards the next supply zone around 0.7310-0.7380 which was temporarily breached to the upside.

The recent bearish pullback was executed towards the price zone of 0.7310-0.7380 (newly-established demand-zone) which failed to offer enough bullish support for the NZD/USD pair.

Re-consolidation below the price level of 0.7300 enhances the bearish side of the market. This brings the EUR/USD pair again towards 0.7230-0.7150 (Key-Zone) where price action should be watched for a possible BUY entry.

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Intraday technical levels and trading recommendations for EUR/USD for August 15, 2017

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Monthly Outlook

In January 2015, the EUR/USD pair moved below the major demand levels near 1.2100 (multiple previous bottoms set in July 2012 and June 2010). Hence, a long-term bearish target was projected toward 0.9450.

In March 2015, EUR/USD bears challenged the monthly demand level around 1.0500, which had been previously reached in August 1997.

In the longer term, the level of 0.9450 remains a projected target if any monthly candlestick achieves bearish closure below the depicted monthly demand level of 1.0500.

However, the EUR/USD pair was trapped within the depicted consolidation range (1.0500-1.1450) until the current bullish breakout was executed above 1.1450.

The current bullish breakout above 1.1450 allows a quick bullish advance towards 1.1850 and 1.2000-1.2100 where price action should be watched for evident bearish rejection and a valid SELL Entry.

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Daily Outlook

In January 2017, the previous downtrend reversed when the Head and Shoulders pattern was established around 1.0500. Since then, evident bullish momentum has been expressed on the chart.

As anticipated, the ongoing bullish momentum allowed the EUR/USD pair to pursue further bullish advance towards 1.1415-1.1520 (Daily Supply-Zone).

The daily supply zone failed to pause the ongoing bullish momentum. Instead, an evident bullish breakout is being witnessed on the chart. The nearest supply level to meet the pair is located around 1.2080 (Level of previous multiple bottoms) where bearish rejection can be anticipated.

On the other hand, the price zone of 1.1415-1.1520 stands as a prominent DEMAND zone to be watched during the current bearish pullback.

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Analysis of Gold for August 15, 2017

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Recently, the Gold has been trading downwards. As like I expected, the price tested the level of $1,272.45. My first downward target from yesterday at the price of $1,274.00 has been met. According to the Daily time frame, I found evening star formation in the background, which is a sign that we got changing in trend dynamic from bullish to bearish. My advice is to watch for a potential breakout of support ($1,274.00) for the further lower price. The next downward target is set at the price of $1,254.00. Stochastic Oscillator is in an overbought condition, which is another sign of weakness.

Resistance levels:

R1: $1,296.45

R2: $1,302.50

R3: $1,308.65

Support levels:

S1: $1,284.30

S2: $1,278.10

S3: $1,272.00

Trading recommendations for today: watch for potential selling opportunities.

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Analysis of EUR/USD for August 15, 2017

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Recently, the EUR/USD pair has been trading downwards. The price tested the level of 1.1720. According to the 4H time frame, I found a broken upward channel in the background and most recently a breakout of bearish flag has occured, which is a sign that buying looks risky. I added Stochastic oscilator on the chart and found overbought condition, which is another sign of weakness. My advice is to watch for potetnial selling opportunities. The first downward targets are set at the price of 1.1693 and 1.1620.

Resistance levels:

R1: 1.1825

R2: 1.1870

R3: 1.1900

Support levels:

S1: 1.1750

S2: 1.1725

S3: 1.1680

Trading recommendations for today: watch for potential selling opportunities.

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Daily analysis of major pairs for August 15, 2017

EUR/USD: The EUR/USD was forced to move lower as a result of an ongoing bullish effort on the USD/CHF (which was brought about by weakness in CHF). A movement above the resistance line at 1.1850 and below the support line at 1.1700 would create a directional bias. EUR could be seen going upwards versus AUD and NZD this week.

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USD/CHF: There is a "buy" signal on the USD/CHF, which has been brought about by a 120-pip movement we have seen so far this week. Further upwards movement is expected, and so, the resistance level at 0.9750 would be tested and breached to the upside, after which the resistance level at 0.9800 would be reached.

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GBP/USD: This is a bear market, and if the extant positive correlation with the EUR/USD is anything to go buy, the latter would be forced to go southwards. Cable has moved below the distribution territory at 1.2950, and it would go on to target the accumulation territory at 1.2900 (which may even be exceeded later).

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USD/JPY: The USD/JPY has moved upwards by 130 pips this week, thereby creating a threat to the recent bearish outlook on the market. A movement above the supply level at 111.00 would result in a Bullish Confirmation Pattern, while a significant drop from here would help lay emphasis on the recent bearish outlook on the market.

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EUR/JPY: This cross pair is also making a bullish effort, but the condition surrounding EUR is taking its toll. There is a need for price to gain additional 200 pips so as to restore a bullish signal, but a drop in price would make this expectation invalid. There are demand zones at 129.00 and 128.50. There are also supply zones at 130.00 and 130.50.

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Global macro overview for 15/08/2017

Global macro overview for 15/08/2017:

The Reserve Bank of Australia Monetary released the policy meeting minutes overnight, warning about the overheating house market in Australia. Housing market conditions "warrant careful monitoring" were the exact words used by the policymakers in the statement. Despite the fact that the house prices are slowly stabilizing in Australia's biggest cities like Sydney, Melbourne, and Canberra, the prices are still rising apparently. Moreover, the statement said: "The established housing markets in Sydney and Melbourne had remained the strongest in the country, although conditions had eased since late 2016. Housing prices in Perth had declined a little further, while apartment price growth in Brisbane had been weak".

It is worth to mention, that the RBA decided to keep the interest rate unchanged at the level of 1.5% at the last meeting, where it remained since August 2016. Nevertheless, in contrast to other central banks, the Reserve Bank of Australia hasn't given explicit forward guidance regarding the future of the monetary policy. Unlike some other central banks, the RBA openly admits that it does not know what it will do with its policy rate in six, twelve or twenty-four months' time. The question remains whether the hot house market will trigger any change regarding the future interest rate levels. Most global investors are anticipating such a move at the beginning of 2018. In that case, the Australian dollar will continue to appreciate against other currencies across the board.

Let's now take a look at the AUD/USD technical picture on the H4 time frame. The market is slowly moving downward and the price is currently testing the technical support at the level of 0.7838. Any breakout lower will open the road towards the next technical support at the level of 0.7777. Nevertheless, the slight bullish divergence between the price and the momentum oscillator indicates a possible bounce to the technical resistance at the level of 0.7920 before the move down will resume.

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Burning outlook: US retail sales at 13.30 London time

Burning outlook: US retail sales at 13.30 London time.

Retail sales for July: Forecast + 0.3%, previous value was -0.2%.

The forecast range is +0.2 + 0.5%.

Sales without cars + 0.3%.

Sales without cars and gasoline + 0.4%.

As you can see, the data is expected to be strong, in support of the US and dollar markets.

In general, sales data are not the first order of importance, and not often "move the market." However, everything depends on the context:

1. The market is "stagnant" - two weeks without important news. Formed ranges.

2. There are several news at once at 13.30 London time. In addition to the report on sales, the index of business activity in New York and the price of imports / exports increases the chance for a strong move.

The situation for EUR/USD: The range with the boundaries of 1.1685 from below and the 1.1850 from the top appeared. We are waiting for the exit.

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Global macro overview for 15/08/2017

Global macro overview for 15/08/2017:

The Consumer Price Index data from the UK are scheduled for release at 08:30 am GMT and market participants expect no change in inflationary pressures on a monthly basis (0.0% vs. 0.0% prior) and a little change to the upside on a yearly basis ( 2.7% vs. 2.6% prior).

After trending higher in last eight months, the inflation eased a little in June this year. Nevertheless, the overall trend still looks positive and still points to the upside. The recent CPI reading of 2.9% in May is higher than anticipated 2.7% figure, but a firmer number will refocus attention on this year's rebound in inflation. Moreover, it is worth to notice that a year ago, in August 2016, CPI posted a weak 0.6% rise. The key for a hotter inflation reading in the UK is in the food prices which came to a fairly abrupt end in the aftermath of the Brexit vote. The Bank of England recently increased the inflation target for this year up to the level of 3.0%, which is well above the 2.0% target from the beginning of the year. Nevertheless, it is still unclear whether the rising inflationary pressures will trigger the interest rate hike cycle due to the fact that the main reason for the recent jump in inflationary pressures is attributed to weaker currency levels after the last year's Brexit referendum vote. The pressure on the pound sterling is still high and any disappointing numbers from today's data might cause the pound sell-off across the board.

Let's now take a look at the GBP/USD technical picture on the H4 time frame. The market is already trading close to the consolidation area at the technical support level of 1.2932, so worse than expected data might extend the move lower towards the next technical support at the level of 1.2861. The inability of the momentum indicator to move above the fifty level supports the short-term bearish bias.

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Trading plan for 15/08/2017

Trading plan for 15/08/2017:

On Tuesday 15th of August, the economic calendar is busy with the important news releases. Market participants will pay attention to the German GDP data, the Producer and Import Prices data from Switzerland and CPI data from the UK. During the US session the Retail Sales data, the Empire State Manufacturing Index data, the Import Price Index and the Business Inventories data from the US will be released.

EUR/USD analysis for 15/08/2017:

The German GDP data for the second quarter were released at the level of 0.6% which was worse than the market consensus of 0.7% and worse than a 0.7% advance from a month ago. The German statistics office said that positive impulses in the second quarter came from domestic demand, state spending and private consumption. Investment in construction and equipment also supported overall GDP growth, but foreign trade dampened growth in the second quarter as imports rose more strongly than exports. After the yesterday's worse than expected data for industrial production from Germany, today's data are the second set of numbers that did not meet market participants' expectations. Nevertheless, the miss is not big enough to trigger any panic behavior on the financial markets and the positive sentiment will likely to continue in the future giving the euro a sustained boost across the board.

Let's now take a look at the EUR/USD technical picture on the H4 timeframe. After a fake breakout above the golden trend line around the level of 1.1829 and a clear rejection at the level of 1.1846, the price reversed south. Currently, the market is trading just above the local support at the level of 1.1721 and it is still possible the lower levels to be tested as well (1.1686 and even 1.1614). The momentum indicator points to the downside, which supports the bearish bias.

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Market Snapshot: Gold at the technical support

Gold is trading at the technical support at the level of $1,274 after a clear failure to break out above the recent top at the level of $1,296. This technical support is the key level for bulls, any break out lower would indicate a possible further corrective extension towards the level of $1,261.

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Market Snapshot: USD/CAD just below the resistance

After the bounce from the long-term technical support at the level of 1.2456, the price of USD/CAD broke above the technical resistance at the level of 1.2653 and now is challenging the level of 1.2764. If the breakout will be a success, then the next technical resistance is seen at the level of 1.2858. The momentum indicator looks strong and points to more gains, just as the stochastic oscillator. Short-term bias is to the upside.

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Daily analysis of USDX for August 15, 2017

Forex analysis review
Daily analysis of USDX for August 15, 2017

Elliott wave analysis of EUR/NZD for August 15, 2017

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Wave summary:

There really is not much to add here. We continue to look for minor support near 1.6040 to be able to protect the downside for a break above 1.6236 confirming continuation higher towards 1.6969 as the next upside target.

A break below 1.6040 could extend the correction from 1.6236 closer to 1.5921 and maybe even 1.5830 (less likely), but it should just be a matter of time before the next impulsive rally is seen.

R3: 1.6470

R2: 1.6300

R1: 1.6236

Pivot: 1.6200

S1: 1.6100

S2: 1.6040

S3: 1.5921

Trading recommendation:

We are long EUR from 1.5510 with stop placed at 1.5910. If you are not long EUR yet, then buy near 1.6040 and use the same stop at 1.5910.

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Technical analysis of EUR/USD for Aug 15, 2017

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When the European market opens, some Economic Data will be released, such as German Prelim GDP q/q. The US will release the Economic Data, too, such as TIC Long-Term Purchases, NAHB Housing Market Index, Business Inventories m/m, Import Prices m/m, Empire State Manufacturing Index, Retail Sales m/m, and Core Retail Sales m/m, so, amid the reports, EUR/USD will move in a low to medium volatility during this day.

TODAY'S TECHNICAL LEVEL:

Breakout BUY Level: 1.1832.

Strong Resistance:1.1825.

Original Resistance: 1.1813.

Inner Sell Area: 1.1801.

Target Inner Area: 1.1774.

Inner Buy Area: 1.1746.

Original Support: 1.1734.

Strong Support: 1.1722.

Breakout SELL Level: 1.1715.

Disclaimer: Trading Forex (foreign exchange) on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

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Technical analysis of USD/JPY for Aug 15, 2017

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In Asia, Japan will release the Revised Industrial Production m/m data, and the US will release some Economic Data, such as TIC Long-Term Purchases, NAHB Housing Market Index, Business Inventories m/m, Import Prices m/m, Empire State Manufacturing Index, Retail Sales m/m, and Core Retail Sales m/m. So, there is a probability the USD/JPY will move with ... volatility during this day.

TODAY'S TECHNICAL LEVEL:

Resistance. 3: 110.74.

Resistance. 2: 110.52.

Resistance. 1: 110.31.

Support. 1: 110.04.

Support. 2: 109.83.

Support. 3: 109.61.

Disclaimer: Trading Forex (foreign exchange) on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

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USD/JPY profit target reached perfectly, prepare to sell

The price has bounced up perfectly from our selling area and has reached our profit target perfectly. We prepare to sell on major resistance at 110.14 (Fibonacci retracement, horizontal overlap resistance) for a push down to at least 108.75 support (Fibonacci extension, horizontal swing low support).

Stochastic (34,5,3) is seeing major resistance below 97% where we expect to see a strong reaction under.

Correlation analysis: We're seeing JPY strength with drops on AUD/JPY, EUR/JPY, and USD/JPY.

Sell below 110.14. Stop loss is at 110.67. Take profit is at 108.75.

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AUD/USD approaching major support, prepare to buy

The price has continued to drop strongly since yesterday. We prepare to buy above major support at 0.7842 (Fibonacci retracement, horizontal pullback support, Fibonacci extension) for a push up to at least 0.7917 resistance (Fibonacci retracement, horizontal swing high resistance).

Stochastic (34,5,3) is seeing strong support above 12% where we expect to see a corresponding bounce from.

Correlation analysis: We're seeing commodity strength vs USD today with bounces expected on AUD/USD and NZD/USD.

Buy above 0.7842. Stop loss is at 0.7814. Take profit is at 0.7917.

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NZD/USD dropping perfectly towards profit target, prepare to buy for a bounce

The price has dropped perfectly from our selling area yesterday and is fast approaching our profit target. We prepare to buy above major support at 0.7256 (Fibonacci extension, horizontal swing low support) for a push up to at least 0.7326 resistance (Fibonacci retracement, horizontal swing high resistance). However, we have to be cautious about the descending channel resistance too.

Stochastic (34,5,3) is seeing support above 4.9% where we expect to see a corresponding bounce off.

Correlation analysis: We're seeing commodity strength vs USD today with bounces expected on AUD/USD and NZD/USD.

Buy above 0.7256. Stop loss is at 0.72299. Take profit is at 0.7326.

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EUR/JPY approaching profit target, prepare to sell

The price has reacted very nicely off our selling area yesterday. We remain bearish looking to sell on major resistance at 129.60 (Fibonacci retracement, horizontal overlap resistance) for a push down to at least 128.11 support (Fibonacci extension, horizontal swing low support) once again.

Stochastic (34,5,3) is seeing major resistance below 94% and we expect a reaction off this level.

Correlation analysis: We're seeing JPY strength with drops on AUD/JPY, EUR/JPY, and USD/JPY.

Sell below 129.60. Stop loss is at 130.17. Take profit is at 128.11.

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AUD/JPY reversing nicely below our selling area, remain bearish

The price dropped really nicely from our selling area yesterday. We remain bearish looking to sell below strong resistance at 86.57 (Fibonacci retracement, Fibonacci extension) for a corrective drop towards 85.42 support (Fibonacci extension, horizontal swing low support).

Stochastic (34,5,3) is seeing major resistance at 91% and also intermediate resistance at 64%.

Correlation analysis: We're seeing JPY strength with drops on AUD/JPY, EUR/JPY, and USD/JPY.

Sell below 86.57. Stop loss is at 85.42. Take profit is at 87.17.

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EUR/USD reversing below major resistance, prepare to sell

The price is now testing major resistance at 1.1824 (Fibonacci retracement, horizontal overlap resistance, pullback resistance) and we expect to see a drop from this level to at least 1.1615 support (Fibonacci retracement, horizontal swing low support, Fibonacci extension).

RSI (34) sees intermediate resistance at 56% which is holding the price down really well. As long as RSI remains below 56%, we will maintain our bearish bias.

Sell below 1.1824. Stop loss is at 1.1928. Take profit is at 1.1615.

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Technical analysis of USD/CHF for August 15, 2017

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Overview:

  • The USD/CHF pair continues moving upwards from the of area 0.9693, 0.9639 and 0.9600 since last week. The bias remains bullish in nearest term testing 0.9763 or 9800. The market has been trading around the area of 0.9693/0.9600 this week. The pair rose from the levels of 0.9693 and 0.9600 (the level of 0.9693 and 0.9600 coincide with the ratios of 78.6% Fibonacci retracement and 50%) to a top around 0.9733. The first support level is seen at 0.9639 followed by 0.9600, while daily resistance 1 is seen at 0.9763. According to the previous events, the USD/CHF pair is still moving between the levels of 0.9693 and 0.9763 in coming hours. On the one-hour chart, immediate resistance is seen at 0.9763 which coincides with the double top. Currently, the price is moving in a bullish channel. This is confirmed by the RSI indicator signaling that we are still in a bullish trending market. The price is still above the moving average (100). Therefore, if the trend is able to break out through the first resistance level of 0.9763, we should see the pair climbing towards the second daily resistance at 0.9800 to test it. However, it would also be wise to consider where to place stop loss; this should be set below the last support 0.9600. Overall, the trend is still calling for a strong bullish market as long as the trend is still above the spot of 0.9693 or 0.9639.
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Technical analysis of NZD/USD for August 15, 2017

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Overview:

  • The NZD/USD pair continues to move downwards strongly from the price of 0.7337 last week. The pair fell from the level of 0.7337 to the price of 0.7285, and it keeps moving in a downtrend to set around the spot of 0.7270 - 0.7337. Moreover, we expect a range between the levels of 0.7337 and 0.7201 (the double bottom).
  • Right now, there are no changes in my technical outlook. The bias remains bearish in nearest term testing 0.7201 or lower. Today, the first resistance level is seen at 0.7337 followed by 0.7337, while daily support 1 is seen at 0.7285.
  • According to the previous events, the NZD/USD pair is still moving between the levels of 0.7201 and 0.7285. If the NZD/USD pair fails to break through the resistance level of 0.7337, the market will decline further to 0.7285. This would suggest a bearish market because the RSI indicator is still in a positive area and does not show any trend-reversal signs.
  • The pair is expected to drop lower towards at least 0.7201 with a view to testing the weekly bottom. If the trend is able to break the double bottom at the point of 0.7201, then it will continue to next target at the weekly support 2 of 0.7109. On the contrary, if a breakout takes place at the resistance level of 0.7421 (major resistance), then this scenario may become invalidated.
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Fundamental Analysis of USD/JPY for August 14, 2017

USD/JPY has been quite bearish after breaking below the 110.20-60 support area recently which is expected to continue but with certain retracement along the way. JPY has been quite stronger in comparison to USD despite the positive USD economic reports published recently. Today USD showed a good amount of strength over JPY because of the rising US Treasury Yields and Higher Equity Markets which is expected to be good for the retracement towards 110 level again. Today JPY Prelim GDP showed a positive rise to 1.0% from the previous value of 0.3% and Prelim GDP Price Index showed less deficit at -0.4% from the previous value of -0.8%. These positive economic reports did not quite help the JPY to gain today in absence of USD economic reports today which does signal that USD is expected to be quite stronger this week against JPY. On the USD side, tomorrow Core Retail Sales report is going to be published which is expected to be quite positive at 0.3% from the previous negative value of -0.2% and Retail Sales report is expected to have a positive rise as well to 0.4% from the previous negative value of -0.2%. If USD manages to publish positive economic reports tomorrow we might see a further gain on USD against JPY in the coming days.

Now let us look at the technical view, the price is currently showing some bullish gaining after the indecisive daily close on Friday. The price is expected to reach 110.20-60 resistance area before proceeding lower with a target towards 108.40-50 area. As the price reaches 110.20-60 resistance area the dynamic level is also expected to work as resistance along the way to resist the price to move higher and bearish bias is expected to continue further as well.

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Daily analysis of USDX for August 15, 2017

The index had limited price action during Monday's session, as thin liquidity dominated the markets, despite some sharp movements early in the American session. The greenback is now being capped by the dynamic resistance offered by the 200 SMA at H1 chart and one could expect further pullbacks. However, if it manages to consolidate above that moving average, the next target should be the 93.75 level.

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H1 chart's resistance levels: 93.23 / 93.75

H1 chart's support levels: 92.80 / 92.48

Trading recommendations for today: Based on the H1 chart, place buy (long) orders only if the USD Index breaks with a bullish candlestick; the resistance level is at 93.23, take profit is at 93.75 and stop loss is at 92.72.

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Daily analysis of GBP/USD for August 15, 2017

No major action was seen in the GBP/USD pair, which continues to be trapped in a narrow range established between the 1.3021 and 1.2955 levels. The 200 SMA at H1 chart still provides dynamic resistance and that could favor for more downside in the Cable. However, if the pair manages to break above 1.3021, we can expect a continuation towards 1.3080.

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H1 chart's resistance levels: 1.3021 / 1.3080

H1 chart's support levels: 1.2955 / 1.2897

Trading recommendations for today: Based on the H1 chart, sell (short) orders only if the GBP/USD pair breaks a bearish candlestick; the support level is at 1.2955, take profit is at 1.2867 and stop loss is at 1.3011.

The material has been provided by InstaForex Company - www.instaforex.com

The pound was prescribed a tablet of volatility

A busy economic calendar makes the British pound the main candidate for the role of the most interesting currency of the week. Releases of data on inflation, the labor market and retail sales will clarify the prospects for raising the repo rate and will diagnose the economy of Foggy Albion. At the same time, the risks of increased volatility are increasing, which, perhaps, will help the sterling break the sad tradition. Recently, the latitude of the weekly trading range paired with the US dollar tends to the minimum since 2014.

Weekly dynamics of GBP / USD

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Source: Bloomberg.

Despite the fact that Bloomberg experts are optimistic about inflation (forecast + 2.7% y / y), wages (+ 2% y / y) and retail sales (+0.2 m / m), Nomura believes that they will not change the whole negative picture for the British pound. ING does argue that important statistics will be the last nail in his coffin, as it will finally scare the Bank of England. The GBP / USD rally in June-July was made possible due to the growth of expectations for an increase in the REPO rate, but after the last meeting of MPC in August, the chances of a monetary restriction in 2017 fell from 50% to 24%, and further deterioration of the health of the economy of the Foggy Albion would minimize them.

Morgan Stanley predicts the achievement of parity in the pair EUR / GBP in early 2018. Among the weak points of sterling, the bank calls the fall in real rates of the UK debt market, political risks and the weakness of the economy. Recent success in retail sales is associated with an increase in unsecured lending, while an increase in the share of household spending on debt repayment and a decline in real wages can lead to a recession.

According to BNP Paribas, one can hardly expect a positive reaction of the pound to the news of a political nature. Negotiations on Brexit are sluggish, Chancellor Philip Hammond and Commerce Minister Liam Fox talk about the length of the transition period. Subjects of the United Kingdom will have to endure uncertainty long enough, however, judging by the investment flows, non-residents are not ready to do this. They withdraw money from the country, political risks in which leave much to be desired, creating problems with financing the current account deficit. At the same time, devaluation does not solve the problem of exporters. Imported raw materials are becoming more expensive, which limits the growth of competitiveness.

Under the circumstances, a weak dollar is almost the only factor that limits the potential for corrective movement in GBP / USD. The release of data on the July inflation in the US lowered the probability of an increase in the rate for federal funds in December to 36%, although a week ago it was about 47%. Nevertheless, the data came out not the worst, so that the "American" is soon able to go into a counter-attack.

Technically, the GBP / USD pair entered the consolidation in the range of 1.2945-1.303. The breakthrough of its upper limit will strengthen the risks of recovery of the uptrend, a successful assault on support at 1.2940-1.295 will create prerequisites for the development of correction.

GBP / USD, daily chart

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The material has been provided by InstaForex Company - www.instaforex.com