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Daily FX Brief, Aug 16 – Risk-off Sentiment, Top Trade Setup to End the Week!

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On Friday, the greenback is mostly steady, trying to hold on the gains it made on the release of U.S. retail sales figures. Speaking about the recent market activities, two of the most suffered currencies in recent times, the Aussie and the Sterling, kept seeing buying interest as the market adjusts expectations over the timing of the next RBA rate-cutting decision given the strong Aus jobs.

On the other hand, no-deal Brexit is marginally “priced in” as Labour leader, Corbyn seems to unite forces aiming for a no-confidence vote. In abrupt contrast, the market was parted against the Euro this time, as ECB’s Governing Council member Rehn indicated that an overshooting of the forthcoming QE2 is favoured.  Let’s took at these fundamentals…

Economic Events to Watch Today

 


EUR/USD – Daily Outlook

The single currency Euro weakened further, especially after coming out of the descending triangle pattern. The Euro initially attempted to rally during the trading session on Thursday, stretching towards the 1.1160 level before pulling back.

The 1.11 level below is extending support, but it does seem like we are attempting to take out the “melt-up candle” that we held several weeks ago. The Federal Statistical Office (Destatis) reports that Germany underwent a petty deterioration in economic performance. The first quarter of 2019 showed an improvement of 0.4% versus the fourth quarter of 2018.

Further bearish trend added on boosted sentiments that the ECB is about to begin on additional quantitative easing, and that will put extra pressure on the single currency Euro.

On the other hand, the U.S. Federal Reserve is apparently going to do the same, and at this point, if we see a lot of interest around the world, it does sense that the treasury business will direct flows of currency into the United States.


Lately, the EUR/USD has violated the horizontal support level of 1.1169 as this level was extended by descending triangle pattern on the 3-hour timeframe. EUR/USD has formed bearish engulfing candle right below 1.1165 support become resistance area, signalling strong bearish sentiment of investors.

Daily Support and Resistance

R3: 1.1275

R2: 1.1215

R1: 1.1178

Key Trading Level: 1.1154

S1: 1.1118

S2: 1.1094

S3: 1.1034

EUR/USD – Trading Tips

The EUR/USD has already hit our initial target level of 1.1110, and now it may go after 1.1065 and 1.1030, double bottom target.


NZD/CHF – Daily Outlook

The New Zealand dollar declined as global risk aversion edge up again after the US Treasury yield curve reversed briefly overnight, often viewed as a sign of looming recession. The kiwi was trading at 64.35 US cents from 64.58. The trade-weighted index was at 71.61 points from 71.72.

So we can say that the key driver of all of this risk-off sentiment was yield curve inversion. The US Treasury yield curve inverted on Wednesday for the first time since June 2007, with yields on US 2-year notes rising above those on the 10-year note.


On the hourly timeframe, the NZDCHF has formed a bullish triangle pattern which mostly breaks on the upper side. For the moment, it’s keeping steady below 0.6312, but bullish breakout and closing above this level can bring further buying until 0.6340 and 0.6385 (aggressive target).

Failing to break above 0.6315 can bring bearish correction until 0.6295/85.

Daily Support and Resistance

R3: 0.6358

R2: 0.6331

R1: 0.6307

Key Trading Level: 0.628

S1: 0.6255

S2: 0.6229

S3: 0.6204

NZD/CHF – Trading Tips

Consider staying bullish above 0.6280, having placed a stop loss around 0.6240 and take profit around 0.6315 and 0.6355.


GBP/USD – Daily Outlook

For quite a while, the GBP/USD currency pair continued to remain lifeless between 1.20 and 1.21 due to lack of economic events. However, the GBP/USD finally made a move. The GBP/USD pair triggered stops above the 1.2100 figure and rose to 1.2150, with the Pound underpinned by better-than-expected UK Retail Sales, which unexpectedly rose by 0.2% MoM in July. The market was anticipating a 0.2% decline.


 

Technical outlook of the GBP/USD has changed from neutral to bullish as the pair has violated sideways range, in particular, it has crossed above1.2100 level. This level is going to work as support now.

On the upper side, Sterling may face resistance at 1.2180 along with support around 1.2100. The GBP/USD has crossed over a series of 20, 25 and 50 periods EMA, signalling a bullish trend. Now these EMA’s are expected to keep GBP/USD supported above 1.2090.

Daily Support and Resistance

R3: 1.2171

R2: 1.212

R1: 1.2089

Key Trading Level: 1.207

S1: 1.2039

S2: 1.2019

S3: 1.1969

GBP/USD – Trading Tips

On Friday, consider staying bullish above 1.2090 in GBP/USD with an aim of 1.2140 and 1.2180.

All the best!

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