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In the Zone
- As Hurricane batters Florida, all eyes will start to turn to Hurricane Jose as yet another threatening storm targets landfall.
The dollar was a little more robust on Friday as the market continued to unwind bets on another interest rate hike, with Hurricane Irma tearing through Florida there will need to be aid packages in both Houston and large part of Florida – this should mean no more interest rate hikes. This notion was for the most part confirmed to us by FOMC member Dudley, the short term effect will show lower growth although the longer term growth should gradually catch up to the dot path – economic data is going to be tough to interpret. Most of the candles on Friday painted towards the end of this move and so we can look more carefully at the technicals going forward.
It seems to be raining divergence across all the pairs as the dollar looks for a relief rally, especially as the North Korea risk event over the weekend passed without much drama – just look at the gap open in gold.
EURUSD has done a lot of work over the last couple of weeks and the pair stalled at a key resistance level of 1.2095 on Friday. This remains the key level to watch on the upside, there is divergence forming however which suggests to me that there are sellers lurking at these levels. We sit at make or break levels this morning however, a break below 1.2000 will target much lower while a break above 1.2040 will target that resistance – definitely one to keep an eye on.
Cable continues to be a nice pair to trade, in early August it respected both trend lines and resistance as we saw some retracement. We are back at those levels now as the GBPUSD has done a complete roundtrip over the last month. The line in the sand for the GBPUSD comes in at 1.3232, get above that level and the bulls will look at trading that pair above 1.3270, stay below will target 1.3100.
Despite the recent move in NZDUSD, I am still looking at reasons for to short the pair and for the head and shoulders pattern to complete itself. The ceiling we had placed there last week was 0.7340 and we had a nice bearish looking pin needle print there over the weekend, the sellers seemed to build big offers at this level which confirms for me that the bias should be to look for Kiwi shorts. My initial target is for a sustained break below 0.7200 and then for the pattern to target 0.6800 eventually.
It’s a longer than normal video this morning as we seek opportunity in the dollar this morning.
Keep an eye out for the afternoon video that tries to tie everything together.
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