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In the Zone
- There are some doubts surfacing as to whether the BOC will raise rates tomorrow, even Goldman Sachs are throwing their weight behind this view. I think that the BOC will lose some credibility if they don’t hike and so I believe that Goldman’s are wrong on this occasion, but the recent move in the USDCAD would unwind everything if this was to happen.
What an incredibly boring day yesterday, we are clearly in summer time trading mode where traders are looking to make quick pips with all pairs trading below their monthly daily averages. To put it into perspective, the big mover yesterday was the USDCHF which moved by a paltry 18 pips!
There was not much on the economic calendar yesterday, and this contributed to very low volatility – we may be in store for something similar today before the week kicks off on Wednesday with Fed Chair Yellen’s testimony and then inflation and retail data on Friday.
The EURUSD spent most of the day flirting with the 200 hour MA at 1.1387, but there was not enough liquidity to get through this level and the market bounced late last night. The two large MA levels come in at 1.1387 and 1.1380 (100 hour MA) and this will be the initial target for the sellers, although I don’t think there will be a lot of momentum unless we are able to close below 1.1300. Stay above these levels today and 1.1450 comes into target.
I am still casting an eye over the USDJPY, the price has moved once again to the 114.40 level and has thus far stalled – again. This pair does seem exhausted to me, but we won’t see the momentum unless the pair closes below 113.50 (this was previous support). I am watching this pair to monitor the JPY more than anything else, I still believe that the JPY holds the key and if this pair starts coming off – we may see something similar in the JPY crosses which will lead the major pairs all trading softer.
The AUDUSD is a pair that is causing some doubt in my mind, we sit at pivotal levels this morning. We have support at 0.7597 (100 hour MA) and a major trend line at 0.7615 with a 200 hour MA at 0.7628. I will be watching both levels to dictate the next move for me.
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