AUD/USD Is Resuming Its Downward Trend

AUD/USD tested the trend line of the pennant it broke out below with mathematical precision and resumed its downward trend.

The pair is within a zone of support at 0.7590 and I think it is very possible for it to form some correction to the upside, but in my opinion it will be rather shallow.

The main trend is bearish and the next support is at 0.7400, followed by 0.7200.

Even if we see a rally from those levels that will be corrective and I we may see a larger move north only if the monthly bar for June closes as another pin bar.

The strong support is at 0.7200 – 0.7150. The limit of the figure, however, is much larger and if the pair does reach it I think we can expect a long-term development to 0.6600.

In my opinion, when it comes to this pair it’s a good idea to open short positions at every corrective move north.

I Expect NZD/JPY To Depreciate To 76.50

Although NZD/JPY is not directly connected to the USD the hiking of the US Federal Funds Rate did have an effect on that pair too. NZD/JPY reached a resistance and a local high at 76.869 and it could not overcome 76.90, beginning a depreciation. Yesterday the depreciation was 57 pips, but today, after the European Central Bank announced its interest rate, the pair retraced almost half of yesterday’s drop.

There are two possible scenarios for further development:

In my opinion, the priority scenario is for a renewal of the depreciation toward the next support at 77.00 – 76.90 and should the pair overcome that support there could be a drop to 76.50.

The alternative scenario is for a renewal of the move north from 76.50 – 76.30 to 79.00+.

USD/JPY Is Moving Toward The Resistance Trend Line

 The pair looks like the USD is preparing to test the resistance trend line of the channel which has started developing in January 2016 from 114.386. I think it will test it around 111.40 – 111.50.

The interesting part will start once the pair reaches the trend line. If it overcomes the resistance and remains above the trend line we could expect a solid rally of the USD.

In the alternate scenario there could be a depreciation toward the support trend line.
Tomorrow FED is expected to hike the interest rate which could give the US currency a serious push north.

Whatever the market chooses, I think the news coming out of the USA will be the catalyst of that movement and until then we could expect the pair to remain undecided.

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The Forex Calendar For This Week

This week there are numerous events that could affect the way the market moves in a major way and it is a good idea to be aware when they will occur:

On Monday there is the UK Manufacturing Production data.

On Tuesday we can expect the UK Average Earnings Index data, the US CPI and Core CPI announcement, as well as a speech by the Reserve Bank of Australia Governor Lowe.

On Wednesday will be announced the UK CPI, the US PPI, Crude Oil Inventories, FOMC Economic Projections, FOMC Statement, the Federal Funds Rate, and there will be a FOMC press conference. Apart from that we can expect the Australian Employment Change and Unemployment Rate.

On Thursday will be announced the UK Retail Sales, the European Central Bank Main Refinancing Rate and there will be an ECB press conference. Also, the US Core Retail Sales and Retail Sales will be announced. The Bank of Japan Policy Rate and Monetary Policy Statement may be announced.

And finally, on Friday there may be a Bank of Japan press conference.

I Expect An EUR/AUD Correction to 1.5750

On the W1 time frame the pair has a well-formed pennant and has reached its support and resistance four times. There is a breakout at 1.5735. The depreciation after the breakout was 503 pips, and the pair has found support in the zone around 1.5274 – 1.5282 where it has formed a double bottom that is very visible on the H4 time frame.

On the W1 time frame the pair has formed two spinning top bars with overlapping bodies which have closed right above the support zone.

During the next week I expect the pair to continue rising toward the resistance zone around 1.5750 – 1.5800 and to test the trend line it broke out below.

After the test the pair should renew its depreciation.

If the pair reaches the limit of the pennant the target of the depreciation should be at 1.4130 – 1.4100.

GBP/USD Found Support At 1.32040 And Began A Correction

The pair broke out below the trend channel in the zone around 1.3675, continued depreciating and found support only once it reached 1.32040.

The first target of the correction to the upside – 1.3450 – has already been reached, but I think this won’t be the end. I expect the corrective move north will continue toward 1.3550 – 1.3600 after which the downward trend will be renewed.

The 1.32 level is a very strong support both on the W1 and monthly time frames and if the pair manages to break out below it and remain below it we could expect that the downward trend will continue with a test of the support in the zone around 1.1985 – 1.2000.

The alternative scenario is for a renewal of the medium term rally of the GBP to 1.3820 – 1.3850.