Date : 16th October 2015.
CURRENCY MOVERS OF 15th October 2015.
AUDUSD, Daily
As expected the pair rallied from the 0.6938 support. AUD has now been trading at resistance and just recently failed to stay above the daily Bollinger Bands. The 100 period SMA has been limiting the upside in the occasions while the September pivotal high at 0.7280 has been supporting price yesterday and today. Price is now trading at 0.7263. A close below 0.7266 would make yesterday’s candle a pivot and a lower high. This looks likely. A break below 0.7200 would open a way to the 0.7020 support. If 0.7200 fails to support price look for reversals in 0.6938 – 0.7020 range for long trades and 0.7344 - 0.7382 for short trades.
AUDJPY, Daily
With AUDUSD rallying the AUDJPY moved higher as well. The pair hit resistance at 88.65 and reversed after trading outside the Bollinger bands. Now price action is taking place inside Bollinger Bands and the pair is fluctuating near 50 day simple moving average. There is some support at 86.08 but the 4h chart reveals a lower high after price reacted lower from a 30 period SMA and increases the chances price will break below this support. This would make the 82.88 – 84.29 a reasonable target level. Look for bullish reversals inside this range while 87.80 – 88.65 is a range for bearish reversals.
MACRO EVENTS & NEWS
FX News Today
Bund futures are outperforming and yields heading south, while Eurozone spreads narrow, as weak inflation numbers bolster hopes of further ECB easing. Pressure on Draghi to at least set the stage for a widening or extension of the QE program next week are mounting amid the uncertainty about the global growth outlook. Nowotny’s comments yesterday that even core inflation is clearly below target further fuelled speculation of additional measures, although the Austrian central bank head called for structural reforms rather than hinting at ECB action.
The Eurozone posted trade surplus of EUR 19.8 bln in August, down from EUR 22.4 bln in the previous month. Exports were up 6.0% y/y in August, versus nominal import growth of 3.0% y/y, although considering that lower oil prices are suppressing the nominal import bill, real import growth will have been higher.
Eurozone final CPI was confirmed at -0.1% y/y, in line with the preliminary number and down from 0.2% y/y in the previous month. The breakdown confirmed that the drop back into negative territory was driven by a sharp decline in energy prices, which were down -1.7% m/m and -8.9% y/y, versus -7.2% y/y in August. Core inflation remains much higher at 0.9% y/y, but as Nowotny highlighted yesterday, this is also considerably below the ECB’s 2% limit for price stability. So more arguments for the doves at the ECB although the amount of stimulus in the system is already substantial and while central bankers want to keep markets happy they also seem wary of additional action, especially as monetary policy alone can’t fix the Eurozone’s problems.
Main Macro Events Today
• Canada Manufacturing: We expect shipments, due today, to tumble 1.5% m/m in August after the 1.7% gain in July. A 3.6% plunge in exports values provides a compelling reason to forecast a pull-back in manufacturing shipments during August.
• US Industrial Production: September industrial production data is out Friday and we expect a 0.2% (median -0.2%) headline decline for the month which follows a 0.4% decline in August. This would bring capacity utilization down to 77.3% from 77.6% in August. The September employment report was weak and we saw declines in hours worked as well as employment in both manufacturing and mining which will likely weigh on the release.
• US Michigan Consumer Sentiment: The first release on Michigan Sentiment is out on Friday and should reveal a headline increase to 89.0 (median 88.4) from 87.2 in September. The already released IBD/TIPP poll for October improved to 47.3 from 42.0 in September and the Bloomberg Consumer Comfort survey is poised to average 45.0 for the month.
EURUSD UPDATE
EURUSD, Daily
EURUSD sold off in the wake of mixed U.S. data that highlighted a 40 year low in U.S. jobless claims, slightly better core CPI reading, and a small improvement in the Empire State index. The EURUSD market sell off yesterday was a standard knee jerk reaction to the headline positive jobless claims, which saw renewed interest in buying the USD. Technically, the sell off was expected, as momentum indicators have been signaling that buying interest in the EURUSD has been slowing with the stochastic oscillator reading as overextended. Price now sits around the 1.1370′s, and I expect this area to hold, unless today’s U.S. release of the UoM Consumer Sentiment comes in above expectations. The 1.1370′s also happens to be the 38.2% Fibo from the July low (1.0808) – August High (1.1713), so I would expect price support around current levels. My conclusion for the short term trader is to add long positions above 1.1370 for targets between the 1.1460′s and 1.1560′s.
Please note that times displayed based on local time zone and are from time of writing this report.
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Janne Muta
Chief Market Analyst
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John Knobel
Senior Currency Strategist
Hot-Forex
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