Trading plan for September 4

September 4, 2014

EUR/USD edged up to $1.3150. On Wednesday the single currency got support on the news that the fire in Ukraine ceased. As for the euro area itself, retail sales contracted by 0.4%. The pair tested levels above the 100-hour MA, but some vague comments from Ukraine won’t be able to drive euro up for long, and more downside is likely ahead of the ECB’s meeting. However, the risk that the ECB will disappoint EUR-bears at the press conference is rather high. The spikes up during Draghi’s comments seem quite likely. Important US data releases will add to the volatility. Support is at $1.3130, $1.3105 and $1.3085. Resistance is provided by the last week’s minimums ($1.3160), the 200-hour MA ($1.3173), the H4 Ichimoku Cloud ($1.3200) and last week’s high ($1.3220).

GBP/USD renewed a 5-month low of $1.6440 on Wednesday, hitting our bearish $1.6460 target. However, the pair has slowed the decline on improved risk sentiment, but we target $1.6300 in the coming days. We recommend you moving stops down to $1.6660. Markets remain concerned by an increased chance of Scottish secession from Great Britain on the Sept. 18 referendum. On Thursday the Bank of England will hold a monthly meeting, but no changes in policy are expected. These factors will help the GBP sellers.

USD/JPY jumped to 105.30, but returned back below 105 yen on Wednesday. The short-term bearish correction is unlikely to extend below 104.50. The increased expectations for additional QE and doubts about the second rate hike are supportive for the pair. At the same time, we understand that 105.30/40 is a strong resistance area – 2014 peak and a 6-year high. Buyers may need much more than one attempt to overcome it. BOJ will likely hold monetary policy unchanged tomorrow, but we’ll watch the press conference for hints on additional QE in October.

AUD/USD returned to resistance area of $0.9340 as the RBA rules out the possibility of further rate cuts, Australian GDP growth was slightly better-than-expected and there was good news from China. If the data due in Australia tomorrow come positive, the pair may test this week’s high at $0.9370 and even $0.9400 where we'll think of selling. The level of $0.9280 remains the key support.

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