Healthcare Bill reinforce USD weakness

Dollar weakness remains the name of the game, which has been concomitant with the pricing out of Fed rate hike potential in the remainder of 2017. Fed fund futures were in late trade yesterday discounting a 44% probability for a rate 25 bp hike before year-end. This follows weak U.S. inflation data for June last week, along with underwhelming retail sales and manufacturing-sector data readings. Additionally the rejection of Trump’s health care bill from Republicans added further weakness on US Dollar.  Meanwhile, Tokyo markets reopened after a long weekend in Japan and USDJPY fell to a near three-week low of 111.98. The weakness in the dollar also weighted on Asian stock markets today, which lent a backdrop support to the yen. USDJPY has now fallen in five of the last six session, correcting from a four-month high 114.49 over this period. EURUSD rallied to a new 14-month high of 1.1538, and Cable lifted above the highs it saw yesterday. The biggest mover has been AUDUSD, which is up about 1.5%, making a 26-month high at 0.7923. The minutes from the RBA’s early-July policy meeting lit a fire under the Aussie, noting that a tightening labour market and strong house prices require “warrant careful monitoring.”

Therefore another Long position was taken on Aussie strength, after our successful entry on AUDUSD on Friday and more particularly this time on AUDJPY. Entry was taken today morning at 88.57, since the last 3 days, pair seems to be supported quite well by 87.50  level. Hence in the Daily chart pair seems to continue moving in the upper Bollinger Bands area, while it is extending its Upper Bollinger Bands pattern in both Daily and 4-hour charts.  The RSI is at 73 and 76 in the 4-hour and Daily Charts respectively. The parabolic SAR are positive in all time frames from 15 Minutes chart and above.  Nevertheless, in the weekly chart, after 4 bullish sessions, the pair manage to break the upper Bollinger Bands pattern and the 200 weeks SMA.

Targets were set at  89.50 (based on Daily  ATR (14)) and 90.00, with support level at 87.00.

Last Friday, I wrote for AUDUSD that : “Despite the fact that 0.7700 has been a strong resistance level, this morning a Long position was taken in the particular pair , in a Daily and Weekly time frame, after today’s open at 0.7728 followed with 3 Daily white soldiers to close the week strongly and break above the highest high fractal for the last 4 months, which is at 0.7710. Therefore, Entry was taken at 0.7752, with support at 0.7600. On the topside, the 0.7700 level has been a ominous level for Aussie bulls, as numerous gains above here over the last two years have consistently proved to be short-lived affairs. However since this ominous level has been broken the last 2 Days, Long-term targets (Daily and Weekly) have been set above that level, at 0.7800 and 0.7850 respectively.” From this trade, a net Gain of +98 pips was achieved.

However the Summary from July’s entries is :

  • From yesterday’s entry taken  on EURUSD:  +83 pips
  • Cable and AUDUSD entry taken on Friday July 14+59 pips, and  +98 pips as mentioned above.
  • EURGBP on July 12: +42 pips
  • USDJPY and AUDJPY on July 11: Net Loss -140 pips,  and gain + 77 pips .
  • USDJPY on July 4: +121 pips
  • EURGBP on July 6: +77 pips
  • GBPCAD on July 7 : +130 pips

Hence for July we had up to now Net Gain +547 pips, while June was not so successful for me with just net gain pf +236.2 pips , from 14 trades taken during June.

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Andria Pichidi

Market Analyst


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