The weekly FX close tonight is what you need to watch

Another sluggish start to the day with the European complex leading the way for USD purchases in net effect.

News overnight was slim, with again China and Australia dominating the airwaves. The former was out again with slightly softer data prints, while the latter was on the radar on the back of the RBA monetary policy statement. The statement had something in it for everyone, bulls and bears, doves and hawks alike. However the net message was that a stronger AUD was seen as smalls detrimental to the overall health of the Australian economy, but hey, that’s not exactly an atom splitting revelation now is it? Overall we’ve simply seen a drift lower in the AUDUSD alongside all other USD pairs as the Greenback re-gathers some of its lost ground from earlier this week.

The day ahead holds absolutely nothing in store on the data front and the weekly close for many crosses today will be of greater interest than the ensuing price action leading up to tonight. Key levels need to be held on the close tonight to ensure that the “risk on” grind we’ve witnessed so far this week can maintain its momentum heading into the remainder of the month. As noted in this piece in recent days, it’s my view that, that’s what August should look like, however a failure on the close this week could well jeopardise that view and require reassessment.

Key levels to watch for on the close tonight are as follows;

EURUSD: Needs to stay above the 1.2270/80 area to demonstrate a willingness to tackle the 1.2450 area again next week. A close below puts us right back into the range with 1.2130 the most immediate downside border.

AUDUSD: If 1.0530 were to fall tonight, 1.0450 becomes a legitimate target for the Sunday gap open or drift on a lazy Monday morning.

GBPUSD: Mixed signals on the Cable make it smalls harder to get a firm grasp. My underlying bias is for a bullish out performance in the cross, but as noted earlier in the week, this particular cross is now more of a USD story. Any close below 1.5550 opens major support at 1.5470/80 for another test. It seems for the time being though that the wedge/triangle being formed on the daily chart is likely to continue today also.

USDCAD: Trading a little counter intuitively continues to be offered despite USD purchases elsewhere. More chatter this morning of SNB rotation into CAD and AUD have given both a small underlying bid tone as EURCAD and EURAUD remain offered. In the Loonie, 0.9930 needs to be reclaimed and held if we’re to believe that there’s a turn to come in the new week, at this point however it doesn’t look likely.

EURGBP: I remain moderately bullish this cross and it desperately needs to hold the 0.7825 line in the sand tonight to confirm that this move in the last day or so was nothing more than consolidation and profit taking rather than an outright reversal of recent fortune.

That about covers it for today folks, the sun is shining here in London town and the Olympic festivities are drawing to an end, both of which call for the advantage to be taken of! With that, as always I suggest you don’t ruin your weekend with a cheap Friday punt and say helmets on.