18 August 2016 at 14:45 GMT
- USD struggling to stay above water
- Cable squeezes to key Fibo level
- AUD 'choppy at the top of the range'
The USD is going to have to decide whether it will sink or swim versus
its G10 rivals soon, JPY in particular. Photo: iStock
By John J Hardy
Key developments in FX today
The USD can't make a firm enough statement for traders to hang their hats on, as USDJPY jumped back above 100.00 today after slipping below yesterday - see chart below. Given the summer markets, we may be susceptible to more choppy trading and false breaks.
Elsewhere sterling put on a minor show, squeezing to a key Fibonacci level in GBPUSD (see chart below) and testing the important first support levels in EURGBP. Tomorrow's action will be key for whether this is merely a consolidation in the downtrend or if something bigger is afoot.
USDJPY punched down through 100.00 overnight after the Federal Open Market Committee minutes failed to sustain interest in buying USD, but conviction is lacking on both sides of the tug-of-war match, and 100.00 was rebroken, leaving traders in limbo.
The next step for bulls would be a test of the 101.25/50 resistance and then the Ichimoku cloud levels, while the bears need a swift and determined punch to new lows, with the latter likely to bring a chorus of official Japanese protests if it materialiaes.
It's a long wait for the September 21 FOMC and Bank of Japan meetings.
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Source: Saxo Bank
Cable squeezed higher on the very strong July UK Retail Sales report today and the rally was stopped up at the 61.8% Fibo of the prior selloff. Bears will want resistance to come in around here or we risking exploring the full extent of the range to the upside and possibly more if the USD is broadly weaker.
AUDUSD has been choppy at the top of the range and traders may be well advised to stand back and allow more determined evidence of a push higher above 0.7750 or break lower through 0.7600 before getting involved.
Source: Saxo Bank
— Edited by Michael McKenna