The decision to devalue the Yuan affects financial markets for two days already. During the Asian session, oil prices kept falling.
After the growth during the Asian session, the US Dollar started weakening during the European session due to rising concerns over the chances of the US interest rate hike in September. The hike may be postponed until early 2017.Thus, it is important to consider the Fed’s William Dudley Speech today.
Tomorrow, US Retail Sales statistics for July is worth noting.
Soft monetary policy in Canada, falling oil prices, expectations of the US interest rate hike, lowering indicators of some sectors of economy and growing housing prices are likely to further strengthen the pair in the medium term. Local weakening should be seen as an opportunity to enter long positions.
Support and resistance
On the daily charts, OsMA and Stochastic are in the sell zone; on the 4-hour chart, they are turning to sales, indicating the further downward correction.
Consider long positions from the levels of 1.3000 (lower border of the channel), 1.2960 (ЕМА144), 1.2890 (ЕМА200 on the 4-hour chart). In the medium term, the pair may grow to 1.3300, 1.3500 and, probably, further to 1.4000 (2004 high).
Only if the support level of 1.2800 is broken through, the pair would move down.
Support levels: 1.3000, 1.2960, 1.2890, 1.2800.
Resistance levels: 1.3100, 1.3175, 1.3200, 1.3300.
Open long positions when the price rolls back to 1.3010, 1.2970, 1.2900 with targets at 1.3100, 1.3160, 1.3190, 1.3230 and stop-loss at 1.2850.
Open short positions when the level of 1.2800 is broken through with targets at 1.2650, 1.2540, 1.2290 (23.6% Fibonacci).