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Fundamental Currency Analysis

Fundamental Currency Analysis

October 2nd, 2014    Guest post by Jay Hawk at Orbex.

USD: The U.S. Dollar Index is trading lower today, off -0.2530 or -0.29% to 85.7190 after opening the day at 85.8260 in Asia. The Greenback is lower reacting to excessive gains in the past two weeks, according to some analysts. Also pressuring the currency were mixed economic data, with yesterdays release of ADP Non-Farm Employment Change, which came in slightly better than expected at 213K new jobs in September, versus an expected 207K. ISM Manufacturing PMI conversely, came out at 56.6 missing the analyst consensus of 58.6, while Crude Oil Inventories came out at -1.4M versus an expected reading of +0.6M. Thursday’s U.S. data includes Weekly Initial Jobless Claims (299K) and Factory Orders (-9.4%).

 

EUR: The Euro is fractionally higher against the U.S. Dollar today after yesterdays release of Spanish Manufacturing PMI, which came in better than expected at 52.6 compared to 52.3, while Italian Manufacturing PMI showed a reading of 50.7 compared to a consensus of a 49.4 print, and the German 10-year Bond Auction which showed a yield of 0.93 percent with a bid to cover ratio of 1.1 compared to a previous auction result of 1.05/1.4. Traders will be closely watching todays release of the ECBs Minimum Bid Rate (0.05%), the ECB Press Conference and Spanish Unemployment Change (31.3K).

 

GBP: Sterling is trading slightly higher against the U.S. Dollar today after yesterdays release of UK Manufacturing PMI, which came out at 51.6 versus an expected 52.6 print. Todays only significant UK economic number is Construction PMI (63.7).

 

JPY: The Japanese Yen reversed direction, trading higher against the Greenback today despite a decline in the Japanese Monetary base reported yesterday, to 35.3% from 40.5%, with a consensus of a 38.9% print. No significant economic data is expected out of Japan today.

 

CHF: The Swiss Franc is trading fractionally higher against the U.S. Dollar today after yesterdays release of the SVME PMI (52.1) will be released.

 

AUD: The Aussie traded higher against the Greenback today after yesterdays release of Building Approvals, which increased 3.0% m/m compared to an expected increase of +1.1 percent, with the previous number downwardly revised to +2.1%. Also out was the Australian Trade Balance, which showed a contracting deficit of -0.79B versus -0.75B that was expected. No significant Australian numbers will be out until next week.

 

CAD: The Loonie reversed direction, trading higher against the Greenback today in the absence of any significant Canadian economic data releases.

 

NZD: The Kiwi is gaining against the U.S. Dollar today after yesterdays release of the GDT Trade Index, which came out showing a decline of -7.3% versus a previous reading of 0.0%. No economic releases are expected from New Zealand today.

 

Highlighted Chart of the Day: USD/JPY

 

A daily candlestick chart of the USD/JPY currency pair appears above showing the rate breaking down out of its medium term up channel drawn in red that came after an upside break of a longer term triangle. In addition, the rate is trading above its rising 200 day Moving Average shown in green, and its 14 day RSI drawn in blue in the indicator box has finally fallen out of overbought territory. (See additional technical analysis in the section below.)

 

Technical Analysis for the Majors

 

EUR/USD: The Euro rose correctively to 1.2673 this morning after failing to make a new low yesterday, with support noted at 1.2570 and resistance at 1.2663/73 and 1.2714. Its falling 200 day MA now lies at 1.3534, and its 14 day RSI recovered somewhat within oversold territory to read at the 24.54 level. Its outlook is correctively bullish near term but bearish medium term.

 

USD/JPY: USD/JPY hit a new six year high at the 110.08 level yesterday, but then closed lower and continued lower this morning to finally break down from its medium term up channel. The rates 14 day RSI has finally fallen out of overbought territory to read at the 65.65 level after failing to confirm yesterdays high. Nevertheless, the rate remains above its rising 200 day MA currently at 102.97. Its outlook is correctively bearish near term and bullish turning neutral medium term. (See highlighted chart above.)

 

GBP/USD: Cable made a new recent low yesterday at the 1.6161 level but rose correctively this morning to 1.6249. The rate remains below its declining medium term trendline now drawn at 1.6292. It also lies below theoretical resistance at the 38.2% Fibonacci retracement level of its long term rise from 1.4812 to 1.7190 at 1.6282, with the 50.0% Fibo level offering theoretical support at 1.6001. Also, the rate’s 200 day MA lies at 1.6731 with a falling slope, and its 14 day RSI recovered to central neutral territory to read at the 41.83 level. Its outlook is correctively bullish near term and bearish medium term.

 

USD/CHF: The Swissy corrected lower to 0.9525 this morning, as it broke the 0.9540 neckline of its recent double top in the 0.9595/96 region made yesterday and the day before. Support is now seen at 0.9525/31 and at 0.9488. The rates 14 day RSI remains in overbought territory at the 74.52 level, and the rate is trading comfortably above its rising 200 day MA now situated at the 0.8986 level. Its outlook is bearish near term and bullish medium term.

 

AUD/USD: The Aussie rose correctively to 0.8814 this morning after falling to a new recent low at 0.8662 yesterday, breaking its medium term down trend line at 0.8734 in the process. Resistance is seen at 0.8814 and 0.8830 with support noted at 0.8766 and 0.8790. The rate remains below its falling 200 day MA now at 0.9233, and its 14 day RSI rose back into lower neutral territory to read at the 34.88 level after failing to confirm yesterdays new low. Its outlook is bullish near term and bearish turning neutral medium term.

 

USD/CAD: USD/CAD fell sharply to 1.1070 this morning after making a new recent high at the 1.1222 level yesterday. Todays fall in the rate broke its medium term up trend support line now at 1.1186. Its 14 day RSI fell to read in central neutral territory at the 54.50 level after confirming yesterdays fresh high. Also, the rate is now approaching its mildly rising 200 day MA from above that is now situated at 1.0935. Its outlook is bearish in the near term and bullish medium term.

 

NZD/USD: The Kiwi rose correctively this morning to 0.7927, as it continues to consolidate above its recent 0.7706 low seen last week. The rate briefly pushed above the lower support line of its medium term down channel currently situated at 0.7905, but then fell back below it. Its 14 day RSI has recovered into lower neutral territory at the 33.87 level, and the rate remains well below its falling 200 day MA now at 0.8495. Resistance is noted at 0.7927, with support seen at 0.7816/29 and 0.7737/46. Its outlook is neutral near term but bearish medium term.


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