20June A slowing of the recent downward bias in the US Dollar was featured today. The foreign economic calendar ramps up again tonight with Chinese and European manufacturing data on deck, then UK Retail Sales. Small improvements over negative numbers last month are forecast. Any misses may recharge the US Dollar… similar to what was seen after the April FOMC meeting.
Aussie: 20June The Aussie remains inside its rising channel, bound by 1.0050 to 1.0270, that has been in place since the 01June lows at 0.9564. It also leads our inventory of Overbought markets.
We remind readers that even with the Fed move, there is recent precedent for topping action near the Fed meetings. Additionally, be aware that the recent rally, with the less than compelling volume, shows up near the 50% retracement of the early March through early June sell-off. If this plays out as a bearish rising wedge pattern, look for an additional extended move to lows that measures to near .9000.
That said, all our technicals point to higher levels from here with all four of our directional indicators positively biased.
In what is becoming bigger picture, the recent lows (0.9565 on 01June) lie in a zone that traces back to support from last November. If it the previous negative tone reinstates itself, look for a sustained move lower on stronger Volume to break this major support area and target the 0.9000 level.
Seasonal Snapshot (cash): The 5-year pattern’s upward bias extends until the end of July.
The 15&30yr patterns chop much higher until 20June, and then both fall out of bed throughout the rest of the month.
British: 20June We reshorted the British Pound today just above 1.570 with a stop above the day’s high (1.5773).
Now with the Fed “out of the way”, the Sterling’s attention can turn back to the affairs of Europe. To that end, a look at the BOE minutes shows some divide over restarting asset purchases and a “wait and see” attitude about European risks:
The U.K. Labour market was weaker than forecast in May:
The Sterling is still struggling with the declining 200-day moving average (1.5754).We see further resistance at near 1.5800, both a psychological level and support from late March through mid-April. This is also near the 50% retracement of the late April thorough late May sell-off. An additional risk here is the volume has been anemic during the June rally.
We see support from 1.5630 to 1.5635. This was support in late May, initial resistance on 6/7, and support yesterday and today.
Our directional technicals are all positively biased. Again, the last topping action, in late April occurred right near the FOMC meeting
The currency remains largely inside a rising channel. A break below rising trend line support (1.5535) that extends from the recent low (1.5267 on 01June) that forms the lower end of what may be a pennant, may kick off another large move to the downside, perhaps as low as 1.4600. We are watching our Rate of Change indicator closely.
Seasonal Snapshot (cash): The5&30yr patterns consolidate and the 15yr tracks lower until an upward bias imposes itself on 05July and lasts until 25July.