US dollar dragged lower by weak housing data, how does it look this week?

August 26, 2013

Recap

  • Stocks and bonds ended the week stronger after the weaker than expected new home sales in the US which fell 13.4% versus a 1.4% drop that was expected. Clearly this sort of thing takes the pressure off the Talk of Taper and both sectors benefitted.
  • At the close US stocks were higher across the board with the Dow up 0.32%, the Nasdaq up 0.53% while the S&P 500 rose back to 1664 up 7 points or 0.42%. in Europe the FTSE was 0.70% higher, the DAX rose 0.23%, CAC 0.24% while Milan and Madrid were up 0.19% and 0.66% respectively.
  • US 10 year rates closed at 2.81% while 10 year Gilts were 2.71% and Bunds 1.94%.
  • On Global FX markets the weak housing data knocked the US dollar for six against the Euro (1.3380) which spiked but then drifted over over subsequent hours. Sterling (1.5573) did likewise but got hammered into the close and the Yen (USDJPY, 98.67) gained as well before the US dollar strengthened into the end of the week. For the Aussie Dollar it was a 40 point bounce into resistance at 0.9030/40 before it drifted off to close at 0.9025 where it is this morning.
  • On Commodity markets Gold spiked as well on the broad US dollar weakness after the housing data closing at $1396 up 1.84%. Silver’s spectacular move continued up another 3% while Oil also rose on the weaker USD up 1.32% to $106.32. The Ags were at it again with volatility the order of the day – Corn rose 1.64%, Wheat 0.63% and Soybeans were 3.2% higher. I’m guessing margin calls have increased on these futures.

On the data front there is some important things this week non more so than the Ifo data in Germany tomorrow night and US GDP data on Thursday. Today however sees the release of Trade data in New Zealand, Singaporean industrial production, a Bank Holiday in the UK and Durable Goods and Dallas Fed manufacturing in the US.

Each Monday from now on I am going to have a look at the technicalset up for the AUDUSD, EURUSD, USDJPY, GBPUSD and Gold which are the major markets I cover. I keep the rhetorical stuff for the rest of the week. Also my bigger picture views are summarised in Saturday’s Newsletter which you can find here – once you subscribe I will send you the password

A look at Currencies this week

GBP looks the best trade given it has reversed off the top of the channel and broken down through 1.56 as you can see in the chart below. The weekly failed just under the 200 week moving average which reinforces this reversal.

The 200 day moving average at 1.5500/10 is key support – a break is decisive if it happens.

Euro pulled up last week just above the recent highs but bang on the down trend line that marks the top of the wedge EURUSD might be in as you can see in the chart below.

Combine the weekly and daily charts together and I’ll be playing Euro from the short side this week unless or until last week’s highs break. On the down side is 1.3311 gives way watch out on the week.

For Aussie traders the battler tried hard to break higher on the week but couldn’t yet. 0.9030/50 remains close but decisive in the context of the outlook and then 0.9230/60 and 0.9320/50. It seems like it is a big old box with lots of little boxes inside.

If USDJPY breaks up through 99.20/30 this week  it will be a decent break and likely a big run as this level represents the top of a multi-touch downtrend as you can see in the chart below.

Target would be 100.20 then 100.90/95 and then 102.

Gold caught me this week short and wrong last week – in a bad way to be honest. I called $1413 some time ago and I have to ride this move out to find where it tops or jump off now and try to catch the down draft when it comes again.

Quite poor trading actually – very poor. But I’ll give it another 24 hours and see how this one goes. If your not short it’s not a great idea at the moment although a lot of the above is about US dollar strengthening when you balance it all out.

Good Hunting

Greg

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