16 August 2016 at 14:28 GMT
By John J Hardy
Key developments in FX today:
It was all about the US dollar today, as the currency was driven lower through key support levels in a number of pairs (like 100 in USDJPY and above 1.1200+ in EURUSD) before suddenly trying to stage a comeback later in the day after the New York Fed's influential William Dudley was out saying that the market is underestimating the potential for Fed rate hikes and indicating that September is a live meeting (market assessed the odds of a rate hike at a mere 21% earlier today).
USDJPY dipped well below 100 today but made a strong comeback well above that level – the temptation will be to see this as a hammer reversal if we close on the high side of the day's range or if tomorrow sees the action above the prior August low around 100.70. That would point sharply higher into the large range toward 106.00+ as the Ichimoku cloud is not much higher from here.
Source: Saxo Bank. Create your own charts with SaxoTraderGO click here to learn more
EURUSD pulled through a key resistance area and appeared poised for a test to the 1.1400/1.1500 zone until heavy selling came in on the Dudley comments. This throws a shadow over the attempt higher, though bears might remain cautious until/unless we close down through the 1.1250/00 zone on a daily basis.
USDCHF was caught in another meltdown on today's USD weakness, but note how prior, multiple meltdowns have all failed to lead to any follow on momentum lower. A strong close today or tomorrow well north of 0.9700 puts the focus back higher, with "seeing is believing" the mantra in these choppy times.
AUDUSD pulled to within striking distance of the recent highs but is fading hard later in the day, underlining the 0.7700/50 resistance zone. The beleaguered bears (after the last bearish reversal failed to pan out) will once again want to get involved if we close at the lower end of today's range, with an eye to follow up action through 0.7600 and eventually 0.7500.
Source: Saxo Bank
– Edited by Clare MacCarthy