Dollar outlook week starting 10.02.2014

Good morning,

A quiet Monday as per usual after the NFP. So just a quick one with the outlook for the week.

Cable has been pushed down to around 1.64 and has been trading around that all day. Wait for a clear movement and direction before entering. The longer term view is still bearish and Cable does seem overbought but the trend is trying to change now and has been trying to push up for the past week. Did about 150 pips on the upside in the past week and was supported by weak NFP. 1.64 is a a nice level and is trading around both the 100 EMA and the 200 EMA on the 4H chart.

An anti-climatic BoE meeting last week should be more than compensated by this Wednesday’s Inflation report which should answer a number of questions surrounding forward guidance and the short term directional bias for GBP.

The BoE offered no comments last week even as ILO unemployment dropped to just above the bank’s 7% forward guidance threshold. Despite the initial disappointing miss in the January UK PMI Manufacturing data Cable ended the week strongly to trade above 1.6400. On the day we should see some support in the 1.6380 region ahead of 1.6350 with the 50d MA at 1.6420 acting as initial resistance followed by 1.6450 on the topside.

EURUSD still looks like it is bullish for me. The NFP data supported it and I have entered another long position at 1.36. Will stay long unless I get a signal of a short term reversal. The other way to trade this would be to move up up SL just under 1.36 which would close my new position at break even and take a profit of about 80 pips of my position from last week. I will do that if there is still no signal of the reversal before I leave the office.

USDJPY had a panic sell off Friday post the data, but has since showed more positivity as the market scrambled to regain longs after the initial move. It was extremely choppy and the price action suggested the market was uncertain with the news and it feels like in this scenario people revert to what they are good at, which is to buy USDJPY. This has fared well once again and the follow through remains relatively upbeat and we look towards the 102.50/75 congestion zone for the next target which should amplify further gains should we close through this level. The downside will be kept to support around 101.50 should we tail off again but this feels unlikely given the upbeat mood on the open and the markets continued appetite for USDJPY.

EURJPY has also recovered and recent shorts may start to question their thought process given this recent pullback from what was a round of extremely weak price action. Given the speed of that move it was always unlikely to sustain but I feel a further recovery could be on the cards with the 140 pivot point looking reachable which would not only prompt a further short squeeze but may trigger further momentum buying.

AUDUSD failed at 0.90 last week despite the softer US employement data on Friday. For now it looks like the aussie is consolidating on a 0.89 handle with 0.8920 and 0.89 cooming as direct support while supply remains from 0.8980 up to 0.90. I also think that EURAUD has been driving AUD with plenty buyers everytime we approach the key 1.50 support.

Similar price action in NZD with the bird failing exactly where it had to fail towards 0.83. For the start of the week expect dip buyers towards 0.8200 and sellers ahead of 0.83.

Finally USDCAD had a nice move down on Friday taking stops thru 1.1020 after the stronger job data print. USDCAD traded below 1.0970 but the speed of the move back up warrants some cautiousness. The strategy remains overall to buy dips with 1.0970 now seen as the key buy zone. Topside looks at 1.1040 and 1.01060/70 for resistance.

So I am looking to go short on AUDUSD looking to take about 300 pips and putting a stop loss above the 0.91 level.

That is my outlook on the dollar, I am have sold the dollar against the EUR but I am looking to buy the dollar against AUS. I am waiting to see where Cable moves before deciding on which direction it is heading this week and staying away from the other pairs for now. That is it from me today.

Have a good week and happy trading. Good luck.