Market Update – August 26

FED BALANCE SHEET AND USD (INVERSE)

These 3 charts are from Nordea’s latest FX Weekly.  The relationships between the Fed’s balance sheet / USD, Trump’s job approval / USD, and EURUSD / US-Europe Covid case count spread all point to a stronger USD from current levels.

TRUMP JOB APPROVAL AND USD

EURUSD AND US-EUROPE COVID 19 CASE COUNT

EURUSD HOURLY

The USD is drifting lower ahead of Jackson Hole, which is a possible ‘sell the news’ event or maybe Powell does not address additional Japanification measures and the USD can get out of its own way.  Near term EURUSD levels have not changed.  1.1880 is still proposed resistance from the 8/21 high, 61.8% retrace, and 2 legs up from the 8/21 low.  The lower parallel is now about 1.1695.

8/24 – 3 lower highs and 2 lower lows since the EURUSD high.  I like that strength has failed near VWAP from the high twice and that today’s high is near the high volume level (circled) from 8/19.  1.1880 is still resistance if reached and the big test for the bulls remains the lower parallel, currently near 1.1675 (see below).

USDJPY HOURLY

USDJPY tagged the center line of the channel from the 7/31 low today, which confirms the channel as ‘operable’.  A break above the channel opens up the top of the channel, which intersects channel resistance from the March high at 107.80 (200 day average is 108.00).  Proposed support is 105.90.

NZDUSD 4 HOUR

No change to Kiwi levels and proposed downside.  Ideal resistance is still .6585.  There is a lot there; the 200 period average on the 4 hour chart, June high, resistance in July, support on 8/3, high volume level from 8/19, and VWAP from the high (see futures chart below for volume indicators).

8/19 – Kiwi downside remains favored.  Over the last week, the upper and lower parallels of the short term bearish channel have nailed the pivots.  Resistance should be .6575/85 (8/3 low and June high).  Initial downside focus is still .6380, which is now joined by the 200 day average.

NEW ZEALAND DOLLAR FUTURES HOURLY