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Fundamental Currency Analysis

Fundamental Currency Analysis

October 01, 2014      Guest post by Jay Hawk at Orbex.

Fundamental Currency Analysis

USD: The U.S. Dollar Index is currently up +0.0370 or +0.04 percent to 85.9730 after opening the day at 85.9360 in Asia. The U.S. Dollar is trading higher against all seven of its major counterparts in anticipation of employment and manufacturing data out later today, which if better than expected, would make a stronger case for the Fed raising interest rates. The Greenback is higher despite yesterday’s release of Chicago PMI, which printed at 60.5 compared to an anticipated reading of 61.6, and CB Consumer Confidence, which showed a reading of 86.0 versus an expected print of 92.2. U.S. economic numbers to be released later today include ADP Non-Farm Employment Change (207K), ISM Manufacturing PMI (58.6) and Crude Oil Inventories (+0.6M).

EUR: The Euro is off fractionally against the U.S. Dollar after yesterday’s release of mixed Eurozone economic data. The Eurozone CPI Flash Estimate increased +0.3% y/y, in line with expectations, while the Eurozone Core CPI Flash Estimate, which increased +0.7% y/y versus an expected rise of +0.9%. The Eurozone Unemployment Rate held steady at 11.5%, while German Retail Sales increased +2.5% m/m, significantly higher than the expected increase of +0.6%, however, German Unemployment Change came in at +12K versus an expected decline of -2K, while French Consumer Spending increased +0.7% versus an expected decline of-0.2%. Out later today will be Spanish Manufacturing PMI (52.3), Italian Manufacturing PMI (49.4) and a German 10-year Bond Auction (1.05/1.4).

GBP: Sterling is off against the U.S. Dollar today after yesterday’s release of the UK Current Account, which came out showing a widening deficit of -23.1B compared to an expected deficit of-16.9B with the previous number downwardly revised to -20.58B. UK Final GDP however showed an increase of +0.9% versus +0.8% anticipated, while Nationwide HPI declined -0.2 m/m versus an expected increase of +0.6%. Todays expected UK fundamental data include Manufacturing PMI (52.6) and a speech by MPC member Forbes

JPY: The Japanese Yen made a fresh six year low against the Greenback today, trading at a level not seen since August of 2008. Expectations of a widening interest rate differential with the United States are one of the main drivers for the continued decline in the currency. Japanese Tankan Manufacturing Index printed at 13 versus an expected reading of 10, while the Tankan Non-Manufacturing Index came out with a reading of 13 compared to 17 anticipated.

CHF: The Swiss Franc is trading fractionally lower against the U.S. Dollar after yesterday’s release of the KOF Economic Barometer, which printed at 99.1, in line with expectations. Later today, the SVME PMI (52.1) will be released.

AUD: The Aussie made an eight month low against the Greenback today after yesterday’s release of Retail Sales, which saw an increase of only +0.1% versus analyst expectations of a +0.4% increase. Today’s Australian data will have Building Permits (+1.1%) and the Australian Trade Balance (-0.75B)

CAD: The Loonie is trading at a level not seen since late March against the Greenback after yesterday’s release of Canadian GDP, which printed at 0.0% m/m versus an expected increase of +0.2%, while RMPI declined -2.2% m/m compared to an expected decline of-1.7%, and IPPI, which gained +0.2% m/m versus an expected drop of-0.2%. No significant Canadian data is expected later today.

NZD: The Kiwi is off against the U.S. Dollar today ahead of today’s tentative release of the GDT Trade Index (0.0% last) and ANZ Commodity Prices (-3.3% last).

Highlighted Chart of the Day: USD/JPY

A daily candlestick chart of the USD/JPY currency pair appears above showing the rate trading at a new recent high this morning as it trades within its medium term up channel drawn in red that resulted from an upside break of a longer term triangle. In addition, the rate is now moving comfortably above its increasingly rising 200 day Moving Average shown in green, and its 14 day RSI drawn in blue in the indicator box reads well inside overbought territory. (See additional technical analysis in the section below.)

Technical Analysis for the Majors

EUR/USD: The Euro rose correctively this morning after falling sharply to a new recent low of 1.2570 late yesterday. Its falling 200 day MA now lies at 1.3539, and its 14 day RSI pushed further into oversold territory at the 21.01 level. Resistance is seen at 1.2663 and 1.2714, with support noted at 1.2570. Its outlook is correctively bullish near term but bearish medium term.

USD/JPY: USD/JPY rose past the psychological 110 level to reach a new six year high at the 110.08 level this morning, after also moving higher yesterday. The rate’s 14 day RSI is rising in overbought territory at the 83.06 level, but it failed to confirm today’s fresh high. The rate also remains well above its rising 200 day MA currently at 102.94. Its outlook is bullish near term and medium term. (See highlighted chart above.)

GBP/USD: Cable made a new recent low yesterday at the 1.6166 level but has not yet fallen that far this morning. The rate is situated comfortably below its declining medium term trendline now drawn at 1.6306. It also lies just below the 38.2% Fibonacci retracement level of its long term rally from 1.4812 to 1.7190 at 1.6282 that provides theoretical resistance, with the 50.0% Fibo level providing theoretical support at 1.6001. Also, the rate’s 200 day MA lies at 1.6733 with a falling slope, and its 14 day RSI fell within lower neutral territory to read at the 37.09 level. Its outlook is bearish near term and medium term.

USD/CHF: The Swissy corrected lower this morning after rising to a new recent high at the 0.9596 level yesterday. Support is now seen at 0.9531 and at 0.9488. The rate’s 14 day RSI is rising in overbought territory at the 74.52 level after failing to confirm yesterday’s new high. The rate is also trading well above its rising 200 day MA now situated at the 0.8983 level. Its outlook is bullish near term and medium term.

AUD/USD: The Aussie fell to a new recent low at 0.8662 this morning, after rising correctively yesterday. Resistance is seen at 0.8766 and 0.8790. The rate remains below its falling 200 day MA now at 0.9234, and its 14 day RSI fell within oversold territory to read at the 22.89 level after failing to confirm today’s new low. Its outlook is bearish near term and medium term.

USD/CAD: USD/CAD rallied to a new recent high at the 1.1222 level this morning after also rising yesterday. Its 14 day RSI rose to read just under overbought territory at the 69.92 level after confirming today’s fresh high. Also, the rate is still trading comfortably above its increasingly rising 200 day MA now situated at 1.0935. Its outlook is bullish in the near term and medium term.

NZD/USD: The Kiwi fell this morning after rallying correctively yesterday, as it seems to be entering into a consolidation phase above its recent 0.7706 low. The rate remains beneath the lower support line of its medium term down channel currently situated at 0.7915. Its 14 day RSI is in oversold territory at the 22.89 level, and the rate remains well below its falling 200 day MA now at 0.8497. Resistance is noted at 0.7816/29, with support seen at 0.7737/46 and 0.7706. Its outlook is neutral near term but bearish medium term.


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