Video

James Kim@Saxo
James Kim, sales trader at Saxo Capital Markets, Australia, examines trading strategies during week 19 in a technical analysis of charts for forex and indices. Kim looks at trends in the US dollar index and at pairs including EURUSD and AUDUSD. He also examines eMini futures and gold.
Article / 15 August 2016 at 14:22 GMT

FX Board: USD rally wilts, sterling slides

Head of FX Strategy / Saxo Bank
Denmark
  • Greenback recovery rally stalls
  • EURGBP spikes into midweek UK data
  • AUDUSD bears watching 0.75 handle

Michigan Central Station, Detroit
Abandoned: USD bulls have apparently given up on the greenback rally seen late Friday as fears of a slow-moving Fed reassert themselves. Photo: iStock

By John J Hardy

Key developments in FX today

  • The greenback managed to fight back from weak data Friday, but the rally never amounted to much and was back to the soft side in early US trading today.
  • The sterling slide continued and deepened today, especially against the euro, as EURGBP arched to new multi-year highs.
  • Gold and silver are challenging the bulls after a reversal Friday

EURGBP (weekly)

EURGBP pulled to new highs for the post-Brexit cycle and was the first of the major GBP pairs to do so. This perhaps opens the way for the next flatline resistance are toward 0.8750/0.8800 with UK data mid-week the next test for sterling sentiment as speculative short positions have grown to record levels (flagging the risk of an eventual squeeze, though it may be too early for this).

EURGBP

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Source: Saxo Bank 

AUDUSD

AUDUSD reversed from the new highs above 0.7675 last week, but the reversal has lacked energy and we'll perhaps need the Reserve Bank of Australia minutes tonight and other Ausiedata this week to either confirm the rejection or to get the ugly and choppy rally back on track. 

Bears will have a better argument if the action takes the pair back below 0.7500.

audusd
Source: Saxo Bank 

 — Edited by Michael McKenna

John J Hardy is head of FX strategy at Saxo Bank

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FX Board for Monday, August 15, 2016

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