GROWTHACES.COM Forex Trading Strategies

Taken Positions

USD/JPY: long at 123.70, target 125.80, stop-loss 122.90, risk factor *

USD/CHF: long at 0.9560, target 0.9750, stop-loss 0.9560, risk factor *

EUR/CHF: long at 1.0380, target 1.0580, stop-loss moved to 1.0495, risk factor **

GBP/JPY: long at 192.45, target 195.00, stop-loss 191.30, risk factor **

Pending Orders

EUR/USD: sell at 1.1080, target 1.0750, stop-loss 1.1015, risk factor *

USD/CAD: buy at 1.2900, target 1.3095, stop-loss 1.2820, risk factor *

AUD/USD: sell at 0.7390, target 0.7205, stop-loss 0.7465, risk factor *

NZD/USD: sell at 0.6660, target 0.6405, stop-loss 0.6740, risk factor *

EUR/GBP: sell at 0.7145, target 0.6905, stop-loss 0.7190, risk factor **

EUR/USD: Eyeing Levels Below 1.0810 Next Week

(sell at 1.1080)

• Eurozone PMI composite fell to 53.7 from June’s four-year high of 54.2 but remained slightly above the average seen over the first half of the year. Growth moderated in manufacturing and services, sliding from the recent highs seen in June, but remaining robust in both cases.
• By country, growth slowed in Germany, albeit merely to a two-month low, while a three-month low was seen in France. Elsewhere in the region, the rate of expansion accelerated.

• The PMI survey data were collected between July 13-23, after the July 5 Greek referendum and commencing on the day that Greece and its creditors subsequently struck an agreement on the country’s third bailout, though there was little conclusive evidence from survey respondents as to the extent to which the events directly affected business activity either positively or negatively.
• The PMI survey indicates that the economy grew 0.4% in the second quarter and sustained this steady pace at the start of the third quarter.
• US macroeconomic data suggest that we are getting closer to a rate hike in September. The Conference Board said its Leading Economic Index rose 0.6% mom after an upwardly revised 0.8% mom increase in May. That was much better reading than expected (0.2% mom). Moreover, initial claims for state unemployment benefits declined 26k to a seasonally adjusted 255k for the week ended July 18. That was the lowest level since November 1973. We should notice however that the data are volatile. The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell only 4k to 278.5k last week.
• The market still doubts in a September hike (see the charts below), so the shift in expectations should strengthen the USD. There are to major events scheduled for the next week that may support the USD bulls.

• On Wednesday (July 29), the Fed will end its fifth FOMC meeting of the year. It is widely expected that the Fed will not change rates this time. We expect a hawkish statement that may suggest a hike in September. Let us remind that Fed Chair Janet Yellen said last week that delaying the rate liftoff might mean faster hikes later and we know that is something the Fed certainly wants to avoid.
• On Thursday (July 30), the Bureau of Economic Analysis will release its advance estimate of second-quarter US GDP. We estimate that GDP expanded an annualized 2.7% in the spring, after contracting 0.2% in the first quarter. The main growth driver was most likely consumer spending. Net exports should have been slightly positive after strongly weighing on overall economic activity in the first quarter due to the port strikes. Our forecast is above the market consensus of 2.5%.
• The EUR/USD outlook remains bearish despite recent recovery. We are looking to get short at 1.1080. In our opinion breaking below the July 20 low at 1.0810 is possible already next week.

Significant technical analysis’ levels:

Resistance: 1.1018 (high Jul 23), 1.1035 (high Jul 15), 1.1090 (high Jul 14)

Support: 1.0922 (session low Jul 23), 1.0869 (low Jul 22), 1.0812 (low Jul 21)

AUD/USD: Weak Chinese PMI Hits AUD

(sell at 0.7390)

• The flash China PMI dropped to 48.2, the lowest reading since April last year and the fifth straight month it was below 50, the level which separates a contraction from an expansion. The market expected a reading of 49.7, slightly stronger than June’s final reading of 49.4.
• Investors regularly use the AUD as a liquid proxy for risk in China, Australia’s biggest export market. The AUD/USD dropped to its lowest in six years after disappointing data from China.
• The AUD was also unsettled when Standard & Poor’s said it might ultimately lower Australia’s credit rating should the government’s budget position not improve as it expects.
• The outlook on the AUD/USD remains negative. We have lowered our sell order to 0.7390.

Significant technical analysis’ levels:

Resistance: 0.7362 (session high Jul 24), 0.7418 (high Jul 23), 0.7440 (high Jul 22)

Support: 0.7269 (low Jul 24), 0.7241 (low May 1, 2009), 0.7200 (psychological level)