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Fundamental Currency Analysis

Fundamental Currency Analysis

Fundamental Currency Analysis

October 03,  2014    Guest post by Jay Hawk at Orbex.

USD: The U.S. Dollar Index is higher today, gaining +0.1840 or +0.21% to 85.7850 after opening the day at 85.6240 in Asia. The Greenback is gaining as improving U.S. data continues priming the market for higher U.S. interest rates. Supporting the Dollar were mixed economic numbers yesterday, including Weekly Initial Jobless Claims, which declined to 287K compared to a previous reading of 295K and beating analyst expectations of 299K. Also out yesterday were Factory Orders, which declined -10.1% versus an anticipated decline of -9.4%. Later today will be this week’s U.S. highlight, monthly Non-Farm Employment Change (+216K), the Unemployment Rate (6.1%), the Trade Balance (-41.0B), ISM Non-Manufacturing PMI (58.5) and Average Hourly Earnings (+0.2%).

EUR: The Euro is trading slightly lower against the U.S. Dollar today after the ECB left its Minimum Bid Rate unchanged at 0.05%. At the ECB Press Conference, ECB President Mario Draghi said that, “The ECB has first of all lowered interest rates so much that now we are close to zero and can’t go down any lower, and as I said no other great central bank is now having banks pay for depositing money with the central bank.” Also out was Spanish Unemployment Change, which came out at 19.7K compared to 31.3K that was expected. Today’s Eurozone data included Spanish Services PMI (56.9), Italian Services PMI (49.6) and Eurozone Retail Sales (+0.1%).

GBP: Sterling is trading lower against the U.S. Dollar today despite UK Construction PMI, which came out printing at 64.2 versus an expected reading of 63.7. Today’s UK releases are limited to Services PMI (59.1).

JPY: The Japanese Yen resumed its decline against the Greenback today after comments from the BOJ Governor Haruhiko Kuroda, speaking before the Japanese Parliament the head of Japan’s central bank said that the Yen’s weakening was positive for the Japanese economy on the whole as long as the decline was a reflection of the actual state of the Japanese economy. Kuroda also said that he remained committed to achieving the bank’s two percent inflation target as soon as possible.

CHF: The Swiss Franc is trading lower against the U.S. Dollar today in the absence of any economic data out of Switzerland until next week.

AUD: The Aussie steady against the Greenback today after yesterday’s release of the AIG Services Index, which printed at 45.4 versus a previous reading of 49.4, and HIA New Home Sales, which increased +3.3% m/m versus a previous decline of -5.7%. No further data out of Australia is expected this week.

CAD: The Loonie is trading lower against the Greenback today in the absence of any significant Canadian economic data releases.

NZD: The Kiwi sold off against the U.S. Dollar today as traders speculated the RBNZ will intervene further in the markets to weaken the currency to support New Zealand exporters.

Technical Analysis for the Majors

EUR/USD: The Euro fell to 1.2642 this morning after rising correctively to 1.2698 in yesterday’s session. Support is noted at 1.2613 and 1.2570, with resistance seen at 1.2663/73 and 1.2714. Its falling 200 day MA now lies at 1.3529, and its 14 day RSI remains in oversold territory at the 27.70 level. Its outlook is neutral near term but bearish medium term.

USD/JPY: USD/JPY rose this morning to 108.99 after falling sharply for the previous two days. Resistance appears at the recent six year high of 110.08 and at the bottom line of its recently broken medium term up channel at 109.62, with support noted at 108.24 and 108.00. The rate’s 14 day RSI remains in upper neutral territory and now reads at the 63.77 level. The rate is also trading above its rising 200 day MA currently at 103.00. Its outlook is neutral near term and bullish turning neutral medium term.

GBP/USD: Cable came off to the 1.6111 level yesterday but has since consolidated above that level and below the subsequent 1.6161 reaction high. The rate remains below its declining medium term trendline now drawn at 1.6265. It is situated below theoretical resistance at the 38.2% Fibonacci retracement level of its long term rally from 1.4812 to 1.7190 at 1.6282, with the 50.0% Fibo level providing theoretical support at 1.6001. Also, the rate’s 200 day MA lies at 1.6729 with a falling slope, and its 14 day RSI has fallen to lower neutral territory to read at the 33.94 level. Its outlook is bearish near term and medium term.

USD/CHF: The Swissy corrected lower to 0.9516 in yesterday’s session before rising to 0.9560 this morning, after having recently made a double top in the 0.9595/96 region. Support is now seen at 0.9516/40 and at 0.9488. The rate’s 14 day RSI is reading just inside overbought territory at the 71.59 level, and the rate is trading comfortably above its rising 200 day MA now situated at the 0.8989 level. Its outlook is neutral near term and bullish medium term.

AUD/USD: The Aussie rose correctively to break its medium term down trend line now drawn at 0.8675 and peak at 0.8825 yesterday, although the rate then softened to 0.8773 in this morning’s session. It now looks to be forming a near term triangular pattern, as resistance is seen at 0.8814 and 0.8825/30, with support noted at 0.8763/66 and 0.8773. The rate remains below its falling 200 day MA now at 0.9232, and its 14 day RSI remains in lower neutral territory at the 34.61 level. Its outlook is neutral near term and bearish turning neutral medium term. (See highlighted chart above.)

USD/CAD: USD/CAD fell sharply to 1.1070 yesterday but has since erased all of its losses to trade at 1.1176 this morning, as the rate consolidates under its recent high of 1.1222 made two days ago. Yesterday’s fall in the rate also broke its near term up trend support line now drawn at 1.1228. Its 14 day RSI now reads in upper neutral territory at the 64.09 level, and the rate is situated above its mildly rising 200 day MA now at 1.0936. Its outlook is neutral in the near term and bullish medium term.

NZD/USD: The Kiwi rose correctively to 0.7927 yesterday, but fell mildly this morning to 0.7849, as the rate continues to correct higher from its recent 0.7706 low seen last week. The rate is currently trading around the level of the lower support line of its medium term down channel currently situated at 0.7894. Its 14 day RSI remains in lower neutral territory at the 35.15 level, and the rate remains below its falling 200 day MA now at 0.8493. Resistance is noted at 0.7927, with support seen at 0.7816/59 and 0.7737/46. Its outlook is neutral near term but bearish medium term.


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