Forex technical review for August 12

The dollar was lower in trading today with the greenback losing the most vs the CHF, NZD and EUR. Concerns that the China devaluation would delay the Fed from tightening was the catalyst.

EURUSD

On the daily chart, the EURUSD pushed above the topside trend line (which failed yesterday) at the 1.1061 level and from that point, buyers took charge.

The pair trended higher for most of the day with the largest corrective move coming in the NY afternoon session The correction started when the price stalled just below the July high at the 1.1215 level (see daily chart). The high for the day came in at 1.12128. The correction lower from the peak, did hold support trend lines on the hourly chart (see hourly chart below). These lines will be close support in the new day. A move below and the selling bias might increase. Remember, we are still in the midst of the summer season and although the market action today was trendy, the pair did stall right at the July high. So buyers need to keep control. They do that by holding support.

GBPUSD

The GBPUSD had a up and down session in the London morning. Employment – specifically wages came in less than expectations – and this led to a steep fall in the price of the pair. The low actually fell below trendline support, and the 100 hour moving average (blue line chart below). However, the price quickly rebounded. In the North American morning session, the price extending above trendline resistance, and although the momentum showed signs of stalling, the price eventually pushed higher in extended the month of trading range by about 10 pips (1.5659 vs. 1.5649).

The correction off the day's high, took the price right back down to the underside the broken trendline (see chart above at the circle 5), and found support.

So as we head into the new trading day, traders will be focused on that broken trendline below (currently at 1.5600) and the price for the month of August at 1.5649 and 1.5659. It will likely be a break above or below either of those levels that will help dictate the next move for the pair. Currently, the buyers are remaining in control.

PS Remember, that the GBPUSD going back to July 13 has only a 265 pips trading range. That is extraordinarily low for a month-long. As a result, because of the break higher today, the bias will swing to the buyers and anticipation of a break at some point above the month long high at 1.5689. That scenario can change. So watch the trendline support below at the 1.5600 area.

AUDUSD

The AUDUSD reversed most of the decline after the China devaluation. The pair did stall against the underside of the broken trend line (currently at 0.7385). If the buyers are to continue, they would need to push the price above (and stay above) to solicit a run toward the highs from yesterday and from last week at the 0.7417 to 0.74387 area.

Failure to extend above that area could see a test of the 100 and 200 hour moving averages (blue and green lines in the chart below). Should the price break below those levels, look for increased selling momentum.

The market seems to be unsure about the implications for continued China weakness. Does the actions by the PBOC indicate day will do anything to stimulate the economy, or are things so bad that there is more problems ahead. Australia relies on a strong China for export growth.

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