Bill Baruch, president and founder of Blue Line Futures, reviews and previews the euro, Japanese yen, Chinese yuan, Aussie and Canadian for Friday and the upcoming economic report calendar. Follow his reports Monday-Friday on MoneyShow.com and short Midday Markets video.

Bill Baruch’s Midday Market Minute short video for Sept. 21 here.
Stocks continue to make new highs. We think the market has gotten ahead of itself. Tariffs Monday, Fed Wednesday, stay nimble. Watch for volatility today. Crude has come off over $1 already. Crude in long-term bull market. USD up.

Bill Baruch’s Midday Market Minute short video for Sept. 20 here.
Stocks grind higher Thursday. Banks doing well today. Tech leading higher. Crude retreats, buying opportunity, USD lower.

Bill Baruch’s Morning Express for Sept. 20: Equities sellers exhausted today? WTI climbs. Weaker dollar helps gold.

 

Euro (December)

Session close: Settled at 1.1855, up 100.5 ticks.

Fundamentals: The euro (EUR) gained more than a penny Thursday and several factors worked to finally lead the currency into breakout territory.

First, economic data from the Eurozone has clearly and decisively turned a corner in recent weeks but bringing a tailwind has been strong data from the U.K. CPI yesterday and Retail Sales today both crushed expectations and there is a sentiment coming with such that translates into the entire continent.

ECB Chief Economist Praet said today that the bank must communicate guidance after the first hike. While the ECB is not expected to hike until late next year, the markets have taken his approach as hawkish in that they have priced in the slowest possible pace.

We have been adamant all year that growth and inflation will show up in the Eurozone and the market has underpriced-in the pace of hikes.

Lastly, Brexit talks this week have failed to yield substance, however, there is a positive sentiment that the talks have taken steps in the right direction, a supportive factor for both the euro and the pound.

When it comes to the U.S dollar, slower than expected inflation data last week has taken its time to trickle into the market but it has certainly weighed on price action. Most importantly, after the latest announcement of tariffs this week, the dollar did not catch a safe-haven bid. From a positioning standpoint, this has encouraged longs in the dollar and/or shorts in the euro to reduce exposure now that this angle has seemingly exhausted itself.

The Dollar Index (DXY) lost about 0.75% today despite both Philly Fed Manufacturing and Weekly Jobless Claims beating expectations.

On the data front tomorrow, we look to Flash (preliminary) PMIs from September.

First, French GDP is due at 2:45 am EDT.

Regional PMIs begin at 3:00 am EDT from France and then German before the Eurozone read at 4:00 am EDT.

U.S PMIs are due at 9:45 am EDT.

Technicals: The consolidation all week has been extremely healthy, and we noted this through our FX Rundown videos on both Tuesday and Wednesday. Today’s settlement and breakout above major three-star resistance at 1.1831 is bullish and should garner further momentum to our next huge level at 1.19355-1.1954.

Ultimately, the euro is in an intermediate-term downtrend since peaking through March, however, a close above this next major three-star resistance level would neutralize such a trend.

First, there is minor resistance at 1.1871 and it would be good to see a close above here at minimum tomorrow in order to signal that the new trend higher is holding strong. Price action must continue to close above 1.1831 to confirm the breakout is still taking place.

To the downside, previous resistance is now support at 1.1783-1.18055 and this also aligns with our near-term momentum indicators; traders can buy dips into here but as we said above, we must see a continued close above 1.1831.

Bias: Bullish/Neutral

Resistance: 1.1871*, 1.19355-1.1954***, 1.2010-1.2013**, 1.2123-1.2152***

Pivot: 1.1831***

Support: 1.1783-1.18055**, 1.1700-1.1709**, 1.1658*, 1.16125-1.1620***, 1.1570*

 

Yen (December)

Session close: Settled at .89465, up 19 ticks.

Fundamentals: Thursday was a prime example why the yen (JPY) is the most unenthusiastic trade out there. Although the dollar got clobbered against every major currency (except for the Mexican peso), the yen again lost ground against the dollar.

U.S benchmarks posted breakout sessions which put pressure on the yen. However, the yen cannot capitalize and sustain gains on trade-related fears because of its proximity to China. The Bank of Japan said earlier this week they plan to keep their easy money policy intact. And after a head fake from them in the first quarter, no one is willing to trust they are going to take a step toward tightening anytime soon. We will be watching National CPI data out of Japan tonight. It is expected at +0.9% YoY, a far cry from the target 2%.

Technicals: We remain softly Bearish in Bias, however, this is not where you want to be entering a short, this is where you want to be capitalizing on shorts. Price action tested and held first key support head-on today at .8935. There is a heavy downtrend with a trend line from the September 6 high aligning with our momentum indicators and today’s session high; this is first key resistance and the immediate-term weakness will remain intact until a close above here.

Bias: Neutral/Bearish

Resistance: .8961-.89805**,.9058-.9075**, .91235-.9145**, .9184***

Support: .8935**, .88675***

 

Aussie (December)

Session close: Settled at .7294, up 26 ticks.

Fundamentals: It feels as if the Aussie (AUD) crossed over an imaginary line where the outlook just could not get any worse and that in and of itself was bullish. Ultimately, this was a risk-on tailwind that spread through emerging markets and commodities and the Aussie was a key beneficiary. The U.S dollar is weaker, equity markets are higher, the Chinese yuan has strengthened, and Palladium is $75 on the week.

With no data out of Australia tonight, the technicals are front and center before Eurozone and U.S Flash PMIs tomorrow morning.

Technicals: Price action is breaking out of the minor bull-flag pattern that we discussed in the FX Rundown videos over the last two days. This immediate-term bullishness is running into our major three-star resistance at .7313-.7318 so traders must tread cautiously and for this reason, we have now reduced our Bullish Bias.

However, we are watching the trend line that it broke out above as well as our momentum indicator to provide support and to define this immediate-term strength at .7257-.7273; as long as it stays above here, we have a soft Bullish Bias.

Bias: Neutral/Bullish

Resistance: .7313-.7318***, .7383-.7408**, 7486***

Pivot: .7257-.7273

Support: .7218-.7232**, .7122-.7150***, .7088**, .6962**, .6809***

 

Canadian (December)

Session close: Settled at .77585, up 3.5 ticks.

Fundamentals: The Canadian (CAD) broke out in the exact manner that we expected. Today, technical resistance which we will discuss in the Technical section below coupled with a soft session for energies held the currency back from further gains. Additionally, we have failed to hear positive news on a new NAFTA deal and traders were hesitant to position on either side of the trade ahead of tomorrow’s data dump.

CPI and Retail Sales are both due at 8:30 am EDT and we expect volatility. For this reason, we have recommended clients to exit all longs against major three-star resistance.

Technicals: Price action broke out perfectly from the bull-flag we discussed on our FX Rundown videos over the last two days and tested our major three-star resistance at .7774-.7804 perfectly. Our near-term momentum indicators have called up with the stalled trade and a move below .7757 would encourage a wave a profit taking.

We are recommending traders to be flat as our target has been achieved and we are awaiting the data tomorrow.

Bias: Neutral/Bullish

Resistance: .7774-.7804***, .7886**, .7981-.7982***

Pivot: .7757

Support: .76955-.7699**, .7651-.7667***, .7575***

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View a short video: Bill Baruch: Trading Futures. Gold, USD, yuan.

Recorded: TradersExpo Chicago July 24, 2018.

Duration: 4:34.