Australian Reserve Bank governor Lowe forced traders to perform emergency longs close on the Australian currency market on Wednesday early in the morning, as the banker announced more neutral forecasts. Lowe said that rates could go in any direction, recognizing risks on the domestic and international fronts. On this news for the Asian trading session, the Australian dollar has lost almost one and a half percent. On the other "fronts" of FOREX market, no changes have happened, except that the dollar shows signs of overbought conditions, and in the vicinity of the level of 95.95 for USD dollar index, this is a serious technical signal. More details on USD dollar index please find below.
EUR / USD - the market has reached the local correction targets, pullback is likely
Corrective pullback of the European currency continued as expected down to support area 1.1380-1.1395. It is in this area buyers are likely to counterattack, and will force sellers to close part of shorts. It is interesting that market area 1.1380-1.1395 coincides with a very strong resistance zone for USD dollar index - an area of 95.95-96 points. And this fact only increases the likelihood of a possible pullback. Today we have a very informative day - United States publishes a large amount of statistical data. And if the technical picture suggests that now it is time for careful longs, the fundamental background calls for being extremely cautious. Perhaps a good tactic would be to wait and see until the market closes above 1.1400 or at least 1.1395.
Trading recommendations - cautious longs in area of 1.1380-1.1395
GBP / USD - strategic level 1.3000 was broken through on Tuesday
Yesterday, British currency rate was dropped from a very important psychological mark, as sellers broke through a strong line of defense around 1.3000. GBP sell-off was stopped closer to the support line of the medium-term channel 1.2474-1.3200. So, now we have new area of market support 1.2900-1.2920, and the resistance in the market area is around 1.3000, respectively. Looks like the market is going to spend several trading days in the specified side range.
Trading recommendations - cautious longs in 1.2920 area with a target of 1.3000
Gold - forms a narrow consolidation channel
The gold market is consolidating in a tight range, forming a sideway consolidation pattern 1310-1315. Perhaps the current inactive phase of the market is due to the fact that the Asian part of the planet went on a large-scale holiday. In any case, it is interesting that the local growth of the dollar over past five days did not have virtually any negative effect on gold. Dollar index gained from 94.95 up to 95.95 and for USD index it is a big ranges. What are the prospects for the gold market? While only one thing is clear: it is not a good decision to enter the market in this range, the risks are very high. Support 1310 looks fragile. However we retain in our opinion that the market will test highs 1350 in the coming months, but before that the real support 1300 will be well tested and stop orders that are concentrated below 1300 will be activated, as is often the case in this market.
Trading recommendations - limit orders around the 1300 level
The US dollar index is in focus the strategic level of 95.95-96 points
Our expectations at the beginning of the week that USD index will reach the resistance around 95.95 justified. We wrote a lot about the significance of this mark in our previous reviews. If briefly as it has happened historically the market area 95.95-96 is a very important and strong strategic level. We will observe how events will develop around this mark. As for our expectations, they remain the same. We expect US currency to shift to the red, as the growth that has been going on for five days, is a correction. And discussed level is a suitable area of the market to see a reversal. Today it is a very busy day in terms of information and statistics. Let's see what will be the reaction of the market to the output data.
Trading recommendation –sell from 95.95-96