GBP/CHF Targets

Chart Of The Day

gbpchf061217

Investors continued to sell sterling, taking the currency within pips of its pre-election low. Theresa May spent most of her time after the election apologizing to her party members, especially those who have lost their seats. She said “I got us into this mess and I’m going to get us out,” but no amount of damage control at this point could change the current situation. She’s still at risk of losing her job and as she said today, “I’ll serve you as long as you want me,” which may not be very long. The Queen’s decision to delay her speech to Parliament suggests that she believes there could be more leadership changes. All of this ongoing uncertainty is weighing heavily on the currency and will most likely overshadow this week’s economic reports and Bank of England rate decision. If the Prime Minister steps down we could see another leg lower in the pound. Inflation data is scheduled for release tomorrow and with commodity prices falling, slower price growth is expected all around. If political troubles are combined with softer data, GBP will sink further taking GBP/CHF down with it.

Technically, the 20-day SMA has just moved below the 100 and 200-day SMA, which is negative for the currency. The break of 1.23 exposes the currency pair to the March low of 1.2215 and possibly even a drop down to the 61.8% Fib retracement of the Oct 2016 to May 2017 rally at 1.22.

AUD/CAD Targets Top of Range

AUD/CAD Targets Top of Range

Chart Of The Day

AUD/CAD Targets Top of Range

For the past week we’ve seen AUD/CAD consolidate between a relatively tight 0.9435 and 0.9535 trading range. This type of performance tends to happen when commodity currencies move in the same direction and / or the U.S. dollar dictates trading. While further range trading is possible, we also think that AUD/CAD is prime for an upside breakout. Fundamentally, the smaller decline in Chinese imports, rise in Chinese steel demand and less dovish RBA is positive for AUD. In contrast, the deterioration in Canadian manufacturing and housing market activity along with USD/CAD nearing oversold levels means that even if CAD rises further, its gains should AUD.

Technically, AUD/CAD has done a great job of holding above the 20-day SMA at 0.9435. If this level is broken then a move to the May low near 0.9335 becomes likely. However if AUDCAD breaks above 0.9540, the 61.8% Fib retracement of the 2015 year end rally then 96 cents will be the target. Either way, we are at least looking for a move to the top of the range at 0.9535 before any of that happens.

GBP/JPY Targets 196

GBP/JPY Targets 196

Chart Of The Day

GBP/JPY Targets 196

We like GBP/USD and we like USD/JPY, which makes GBPJPY one of our favorite trades. This is a historic week for the British pound because for the first time ever, the Bank of England will deliver its monetary policy announcement, release the minutes from the meeting and its Quarterly Inflation Report at the same time on “Super Thursday”. Forty five minutes later, BoE Governor Carney will hold a press conference. We know that the head of the U.K. central bank tends to maintain a hawkish bias and most likely more than 1 MPC member will vote in favor of a rate hike. At the same time today’s HOT ISM non-manufacturing report drove the dollar sharply higher and will have the market positioning for a strong NFP report.

Technically, GBP/JPY has broken above the July high of 194.60. The next area of resistance is right below 196, where the currency pair consolidated mid June. After that, 200 is in focus because not only is it a key psychological level but also the 61.8% Fibonacci retracement of the 2007 to 2011 decline. However if GBP/JPY breaks below 193, it could sink down to 190 at which point there is a risk of a double top. With that in mind we don’t think the uptrend will break.