Forex markets are trending towards safe havens like the yen and Treasuries, Says Bill Baruch.

Euro (ECU)

Fundamentals: Rounding out last week, there were some positives for the euro. German Harmonized CPI surprised to the upside and Industrial Production was a bright spot. However, this was only one side of the coin; U.S CPI also surprised to the upside and today’s July NY Empire State Manufacturing bounced back from a dismal June. The currency market measures strength versus a counterpart and there has not been a catalyst on either side of the euro or U.S. dollar to break price action from the more immediate trading range.

In fact, the dollar traded higher Monday despite U.S Treasury yields edging lower. Today brings a deluge of key economic indicators. The closely watched German ZEW Sentiment along with the Eurozone read are due at 4:00 am CT. U.S Retail Sales is due at 7:30 am CT, Industrial Production follows at 8:15 and Business Inventory data for May is due at 9:00. Fed speak also highlights the day and we look to no less than five speakers highlighted by Fed Chair Powell at noon CT.

Technicals: Price action has struggled directly at first key resistance at 1.13475-1.13585 and the market is working through a near-term downdraft until it can close above here. On a positive note, the 1.1305-1.1310 pivot is sticky and first key support at 1.1255-1.1264 has held. Ultimately, we may get a fundamental catalyst to encourage volatility tomorrow.

Bias: Neutral/Bearish

Resistance: 1.13475-1.13585**, 1.1394**, 1.1440-1.1446**, 1.1486***, 1.15345-1.1562***

Pivot: 1.1305-1.1310

Support: 1.1255-1.1264**, 1.1207-1.1212***, 1.11265-1.11565***

Japanese yen (JYU)

Fundamentals: Despite U.S equity markets at record highs, the Japanese yen has laid constructive groundwork in recent sessions. A generally unenthusiastic U.S Dollar Index has helped keep a bid under the yen as well as gold. Probably the most surprising asset on the board today was the U.S 30-year Treasury bond and how it recovered more than a point from the overnight low to finish higher.
Technicals: The yen’s test, hold and bounce from major three-star support last week cannot go unnoticed. Friday’s tape paves a path of least resistance higher. We expect a direct test to .9345-.9350 at minimum and although this is only slightly higher, a close above here would encourage a wave higher of up to another 1%. However, a failure to hold .9293-.9310 would begin to dent these hopes.

Bias: Bullish/Neutral

Resistance: .9345-.9350**, .9422-.94585***, .9524**, .9614***

Pivot: .9293-.9310

Support: .9233-.9258***, .9175-.9198***

Australian dollar (ADU)

Fundamentals: The Australian dollar posted a strong follow-through session on the heels of strong economic data from China last night. Although year-over-year GDP was the slowest pace of growth on record, Industrial Production, Fixed Asset Investment, Retail Sales and quarterly GDP all came in stronger than expected. It is way too early to assume growth is turning a corner, but this is a bright spot, nonetheless. Tonight, the RBA will release the minutes from their July 2 meeting where they cut rates by 25 basis points. At that meeting they noted the global economy was “reasonable” but felt trade risks “tilted to it the downside.”

Technicals: We noted in our video last week that we are not Bullish in Bias, but the risks were defined in taking a shot long. After Friday’s sharp move higher incurred follow-through today, the Aussie is still not in the clear and sits at major three-star resistance. However, this is a strong tape and we are now Bullish, but we must, must, must see a close above .7064 tomorrow and from there we expect to see .7128-.7155 this week.

Bias: Bullish/Neutral

Resistance:.7054-.7064***, .7128-.7155***

Support: .6973-.6982***, .6931**, .6809-.6861***, .6300***

Canadian dollar (CDU)

Fundamentals: On Friday, the Canadian hit the highest level since late October when on its way down from the United States–Mexico–Canada Agreement (USMCA) top. The path of the Bank of Canada has foreseeably diverged from other central banks, but this is not the only tailwind supporting price action. Crude oil has broadly held the $60 mark in recent weeks and there is progress on USMCA. Still, the Canadian data is iffy and tomorrow we will see if foreign cash is coming into the country or leaving at 7:30 am CT. Last month showed surprisingly large outflows. Wednesday will be most pivotal with CPI and Manufacturing Sales.

Technicals: Price action is at nine-month highs and trending higher. Still, it has not closed out above major three-star resistance at .76595-.7685 and as we noted last week, wait for a pullback to be a buying opportunity; a test and hold against .7617-.7618. Longer-term, the 50-day moving average is setting up to cross out above the 200-day and this should provide a tailwind sometime next week.

Bias: Neutral/Bullish

Resistance: .76595-.7685***, .78355***

Support: .7617-.7618**, .7562-.7566***

Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.com.

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