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FX Majors Technical analysis– Month of August

August 03, 2017

In the month of July the Dollar has been the negative protagonist and the Euro the positive one, with other currencies more commodity-oriented and capable of earning different positions.

But we are now entering the month of August, a typically volatile month for the so-called “carry trade currencies”. We will see if this year we will get the same historical seasonality that puts emerging currencies and commodities into troubles in the eighth month of the year.

EurUsd

All the attentions of recent days were focused on EurUsd  with its profit of more than 10% since the beginning of the year that actually completed that recovery phase that began in April when Trump pointed the Dollar as a too expensive currency. Technically, the movement that is developing now is typical of a bear trap situation that started below 1.05 and that usually develops with an opposite sign movement which in turn exceeds the opposite end. In this case, 1,171, the top of 2015, was the target that has now been reached and exceeded.

The technical situation is now clear. Going further will probably push the Euro to the resistance of 1.22 / 1.23. Here, besides the 50% of the whole bear market, we also find a series of static resistances generated by the low of the 2005-2012 term. The overbought reached on a weekly scale in addition to a quite aggressive net long Eur repositioning of the hedge funds suggests, however, that EurUsd will have some difficulty to overcome the resistance.

eurusd0208.jpg

UsdJpy

After approaching the resistance of area 115 corresponding to the top of May, UsdJpy has come back in tune with EurUsd albeit less profoundly. This move was also favoured by a fall in the US long-term yields, usually well correlated with UsdJpy. August is a traditionally favourable month for the Japanese currency, so we cannot exclude a downward attempt under the double support of 109. If successful, it would be quite likely to witness an important phase of volatility on all financial markets.

usdjpy0208.jpg

GbpUsd

The Dollar weakness is stronger than the Pound, still prey to Brexit's ghosts. This is the conclusion that can be drawn from the month of July when GbpUsd exceeded the resistance of 1.30. The chart shows that the current one is still a correction within a bear market. The descending trend line going around 1.35 will be the real test for the Cable, for which we can only start being positive beyond this level of resistance.

gbpusd0208.jpg

AudUsd

The strength of industrial raw materials drags the Australian Dollar to 0.80. AudUsd closes an exciting month that moved prices from 0.75 to 0.80. The next few weeks will be useful to see if the scenario has changed and if the Aussie will overcome the long phase of weakness that has kept AudUsd below 0.80. The last useful resistance is that of 0.817. Here the two rising waves that have been developing since the beginning of 2016 would be equal in size. Going beyond would expose AudUsd prospects towards 0.88.

audusd0208.jpg


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