U.S. Dollar Technicals in Focus

Another quiet data week ahead, bar the usual Non Farm payroll numbers on the First Friday of the month.

With another relatively weak May behind us, focus this week is back on the USD's rather impressive rally and a risk focused currency. The U.S. seems to be the first nation to drag itself out of the doldrums, which has caused it to act as a risk on prospect as well as a partial safe heaven. This for the most part results in some rather confused price action, but nonetheless enforces focus on the U.S. Dollar Index (a basket of currencies, primarily made up of the euro against the U.S. dollar).

Towards the end of last week, the expected USD strength actually resulted in a push lower in the currency as speculators positioned themselves aggressively on one side of the trade; this week starts in slightly more neutral territory as far as the order book goes.

European PMI figures could feature tomorrow morning; the U.S. ISM Index is slated for the afternoon.

EUR/USD
The weekly chart with COT report looks increasingly Bearish; the high Commercial Index is typically pointing to further shorts.

The daily chart displays a similar picture, with the pair struggling to maintain its hold above the 200 Day SMA and the Ichi cross still pointing lower. Our concern with this picture is the Retail Order book which remains overly short. That said, the moves towards the end of last week may result in Retail buying in the pair, which offers the potential for further shorts.

Given the order book positioning, our preferred strategy is to look for shorts on a lower cross on the short-term stochastics and a switch in the order book from an overall Bearish to Bullish position (contrarian opinion). This would likely result in a potential position between the 1.3000 and 1.3050 mark.



GBP/USD
Unlike the euro, the pound moved slightly further in the order book towards the end of last week and the higher stochastic cross resulted in a switch in the order book for a move lower.
We are now looking for shorts in this pair, assuming it can maintain itself below the 1.5250 mark.
A switch to a more Bearish order book would result in repositioning long.

Note the support on the Daily and Weekly chart in the Pound which could cap moves lower as the pair carves out a lower range. We expect to see further chop between the 1.5400 and 1.5000 mark, and therefore would not want to be aggressively positioned towards either end of this range.


AUD/USD
The aussie continues to attempt to push lower to clear out the aggressively positioned Retail Order book.
We maintain our outlook, expecting the pair to find support around the 0.9500 / 0.9600 levels for a correctional push higher. However; the pair remains aggressively bought by speculators. With a highly one-sided order book, the risk remains to the downside in the short-term.
We continue to hold shorts whilst the order book remains one-sided, looking for the book to clear before buying the pair for a correctional move higher.


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