GBP/CHF rally sellers ahead? [Video]
(Giles Coghlan LLB, Lth, MA – HYCM)
The CHF has reasons for strength. The SNB has dropped its ‘highly valued’ label from the CHF from its June meeting. The returning appeal of traditional safe havens suit flows into the CHF. The CHF is seen as an inflation hedge and the SNB has taken a hawkish tilt and looks set to bring interest rates positive in its September meeting.
The GBP has reasons for weakness. The BoE brought forward recession projections from 2023 to 2022 Q4 and extended those projections for 5 quarters of recession. The UK Manufacturing PMI printed below minimum expectations in a firm contractionary territory with a print of 46. The minim expected was 47.9.
This means that for the coming week it is reasonable to expect the GBPCHF to find sellers on any rallies higher.
Major Trade Risks: The major risk here is if there is a shift in either the monetary policy outlook from either the BoE or the SNB or any significant tier 1 data for either the GBP or the CHF.
Daily recommendations on major – USD/JPY
USD/JPY – 136.98
Although dollar’s upmove from August’s 130.41 low to 137.71 Tuesday suggests correction from July’s 24-year peak at 139.39 has ended, subsequent brief but sharp re-treat to 135.82 the same day and subsequent choppy swings would continue before prospect of another rise, above 137.24 (Wednesday top), 137.60/70.
On the downside, only a daily close below 136.18 may risk weakness to 135.82/85.
Data to be released on Friday
Germany Gfk consumer confidence, France consumer confidence, Italy business confidence, consumer confidence.
U.S. personal spending, personal income, PCE prices index, goods trade balance wholesale inventories, University of Michigan
GBP/JPY trades lower within descending triangle [Video]
(Melina Deltas, CFTe – XM)
USD/CAD stuck below 1.3026 for another week
USDCAD could not find enough buyers to sustain Monday’s bullish extension above the flattening 200-weekly simple moving average (SMA) at 1.3026, with the price gearing down to meet support near its 20- and 50-day SMAs at 1.2894 on Thursday. Recall that the pair has been constantly fighting the 200-weekly SMA since May without success despite some strong flash upside spikes.
The pair is currently trying to recoup some ground ahead of Powell’s Jackson Hole speech, but the momentum indicators are sending only poor signals. Particularly, the RSI remains dim slightly above its 50 neutral mark, the MACD maintains a sideways trajectory above its red signal line, while the stochastics are sloping downwards.
If the bears squeeze the price below the 20-day SMA and the 1.2900 level, where the 38.2% Fibonacci retracement of the 1.2401 – 1.3222 upleg is positioned, traders will look next at the 50% Fibonacci of 1.2800. The 200-day SMA at 1.2764 might be the last opportunity for a rebound before the long-term support trendline drawn from the 20221 low of 1.2006 comes on the radar at 1.2660. Note that the 61.8% Fibonacci is also in the neighborhood. Hence, any violation at this point could generate more aggressive downfalls.
Alternatively, if the pair manages to close above the nearby resistance of 1.2963, the bulls may exchange swords again with the 200-weekly SMA and the 1.3026 barricade. The way higher may not be easy either as a sustainable move above the wall of 1.3057 – 1.3077 is required to drive the pair up to the critical bar of 1.3120. Should those boundaries prove fragile this time, the pair may have a direct flight to July’s top of 1.3222.
Summarizing, there is still a lack of buying confidence in USDCAD below 1.3026 for the third consecutive month. Unless the pair rallies sustainably above that threshold, downside pressures may persist.
GBP/JPY trades lower within descending triangle
GBPJPY is heading south, and it has been holding within a descending triangle pattern since June 9. Currently, the price is moving beneath the short-term simple moving averages (SMAs) and is approaching the 160.00 psychological mark, which is the lower boundary of the triangle. The RSI indicator is standing below the neutral threshold of 50, moving with weak momentum while the MACD is hovering slightly up its trigger line in the negative region.
Violating the flat line of the pattern at 160.00, could see losses extending towards the 200-day SMA currently at 159.05. Even lower, the bears could stall around 157.80 and the 155.55 support.
If the market corrects higher, the bullish action may pause initially near the 20- and 40-day SMAs at 162.05 and 162.95 respectively before attention shifts to the downtrend line and the 163.90 resistance. A rally on top of the latter would probably stage fresh buying pressure, with the price meeting next to 166.40 barrier.
In the medium-term picture, GBPJPY would endorse the negative scenario if there is a penetration of the descending triangle to the downside.