The Euro headed lower against the dollar today, taking most of the other majors with it following a Reuters report that suggested the ECB is ready to begin buying corporate bonds as soon as December. Stock soared on the news as risk sentiment improved, although the Yen failed to notice and still sees decent demand against the dollar and the crosses. Today’s direction will be driven by inflation data, first from Australia and then later in the day from the US. Also of note, Japanese trade data is coming up, while the European highlight will be the BOE MPC Vote and BOE Minutes.
EUR/USD: 1.2726
Having traded on a firm note for the first half of the session, reaching 1.2840, the Euro turned sharply lower on the release of a report citing that the ECB is preparing to buy corporate bonds, possibly as soon as December.
Having been down to a low so far of 1.2714, the Euro looks rather heavy and comes ahead of the US CPI reading, later today, that is generally expected to reinforce the growing divergence between the directions of the US and the EU economies, and would help to keep the Euro under pressure.
The Euro is currently sitting on the 200 HMA (1.2730), which may act as a pivot for a while, but a test of 1.2700 does not seem so far away. A break of this would lead towards 1.2645 (61.8% of 1.2501/1.2885) and then to the 15 Oct low at 1.2624 which would see bids, ahead of 1.2600. I would be doubtful of heading back to 1.2500 ahead of the release of the EU flash PMI’s due on Thursday, but if we do so it may be sign of the resumption of the larger dollar uptrend, where I am looking for a run towards 1.2000. At this stage, while the dailies still point higher, I suspect that it is too early to be thinking of this.
If the US CPI fails to meet expectations (1.6%yy, 1.7% Ex F/E), then the dollar will again come under pressure and head back to 1.2785 (100 HMA) and then to 1.2800 and possibly to the session high at 1.2840. With the shorter term indicators pointing lower, I doubt that we see it much above 1.2800, but if wrong, a break to the topside would head towards last week’s spike high at 1.2885. If this is taken out then, look for a run to 1.2900 and possibly to 1.2950 (38.2$% of 1.3699/1.2501 & weekly Tenkan) but with the dovish EU outlook it is difficult to the see the Euro being up here very long, if indeed it even gets close.
Right now, use 1.2700/50 as a guide with a bias to the downside towards 1.2685, but overall dependent on the outcome of the US CPI and possibly from further dovish comments from the ECB.
Economic data highlights will include:
US CPI.
Meta Trader – AxiTraderEUR/USD: 4 Hour
USD/JPY: 106.87
Yen strength has been the theme of much of the day, first against the Dollar and then against the Euro, which has seen it unable to join in the general risk-on theme seen in other markets. Despite the strong rally in equities, the dollar has so far been unable to regain 107.00 against the dollar, although some form of catch-up would not really surprise as the day wears on, but doubts as to the timing of GPIF asset reallocation out of JGBs and into stocks and other higher-returning assets may continue to weigh on the topside.
On the topside, 107.00 (200 HMA: 109.95) will be the first hurdle to be overcome ahead of the previous session high at 107.38 and 107.50.
On the downside, 106.50 (100 HMA) will find bids ahead of the session low at 106.24. I don’t think we go down here again today unless the US CPI fails to match expectations, but if incorrect, look for a run towards 106.00.
Buying dips remains the preferred strategy.
Japan Trade data coming up.
Economic data highlights will include:
Trade Balance.
Meta Trader – AxiTraderUSD/JPY: 4 Hour
GBP/USD: 1.6121
Cable was unable to make any real headway to the topside today and topped out at 1.6183, where the Fibo resistance capped it (1.6180:23.6% of 1.7191/1.5876) and it has since turned a bit lower to sit on session lows, dragged down by the weakness in the Euro.
Today will see the MPC Vote result (exp 2/7) and the BOE Minutes to provide the direction, but overall it would not really surprise to see Cable continue to chop around in a broad 1.6080/1.6180 range, with the US CPI to drive the dollar’s direction later in the day.
Below today’s low, the downside will find bids at 1.6100 – not so far away – , a break of which would head back to the 100 HMA at 1.6085 and the 200 HMA at 1.6060. This should be reasonable support, but if it were to give way, look for further declines towards 1.6030 and then back to 1.6000.
On the topside, 1.6150 will see minor sellers ahead of the 1.6180 level. I would be doubtful of heading back here today unless the BOE spring a surprise, but a break of 1.6180 would see a run towards 1.6200, above which would head to the 9 Oct high at 1.6226. Further resistance would arrive at 1.6275 (61.8% of 1.6523/1.5873) and 1.6365 (76.4%).
Use 1.6080/1.6150 as a near term guide with a mild bias to the downside eventually towards 1.6000/30..
Economic data highlights will include:
MPC Vote, BOE Minutes.
Meta Trader – AxiTraderGBP/USD: 4 Hour
USD/CHF: 0.9482
US$Chf continues to chop around within the broad 0.9400/0.9500 range and currently appears set to test the topside again.
Currently sitting at the session high, pushing up against the 200 HMA and the Fibo resistance at 0.9485 (38.2% of 0.9686/0.9360), a break higher would take the dollar back to 0.9500 and potentially on to 0.9520 (50 % pivot), with further strength likely to see a run towards 0.9560 (61.8%).
The downside today will find bids at 0.9440 (100 HMA) and then again at 0.9400. I don’t see the dollar down here at all , but if incorrect, then further losses could take us back to last week’s 0.9360 low and possibly down to 0.9312 (38.2% of 0.8698/0.9686).
Trading from the long side, buying dips and looking for a run above 0.9500 appears to be the plan.
Meta Trader – AxiTraderUSD/CHF: 4 Hour
AUD/USD: 0.8780
The Aud hit a high of 0.8832 after the solid Chinese GDP came in at 7.3% for Q3, slightly softer than the previous reading but still above the general expectation of 7.2%, and backed up by solid industrial production data.
That was as good as it got for the Aud though, and it has since been forced back below 0.8800, under pressure from the stronger US$, and currently sits at 0.8780. This comes ahead of today’s Q3 Inflation data (exp 0.4% qq, 2.3%yy, previous 3%yy) which is expected to come in a fair bit softer than the previous reading due to the repeal of the Carbon Tax.
A particularly weak reading could have the Aud on the back foot once again and looking for a run towards the support at around 0.8750/60, below which would head towards Friday’s lows around 0.8730 and then to 0.8700. I doubt that we are heading below here today unless the CPI is overly weak, but if wrong, would hint at a run towards last week’s lows at 0.8685, 0.8675 and below there at 0.8651.
Although the short term indicators are mildly negative, the dailies still point higher, so we may well be in for a continuation of the current choppy trade over the next couple of days, within the 0.8700/0.8830 range. In the short term 0.8800 will again see sellers ahead of the 0.8832 session high. I don’t think we are heading up above 0.8800 today, but if wrong, a stronger topside break would take the Aud to 0.8841 (23.6% of 0.9504/0.8641), beyond which would see a run to 0.8860 (15 Oct high) and possibly to 0.8894 (9 Oct high).
Economic data highlights will include:
WBC Leading Index, CB Leading Indicator, CPI.
Meta Trader – AxiTraderAUD/USD: 4 Hour
NZD/USD: 0.7955
Having taken out 0.8000, following the release of the Chinese data yesterday – triggering stops in a quick spike to 0.8034 -, the Kiwi has been heading downhill ever since and currently sits above session lows of 0.7944, where the 100 HMA (at 0.7953) is currently acting as a pivot.
With no local data today, direction will come via the Aud CPI, and then later, the US CPI. The NZ Q3 CPI is due early Thursday as well and will be the main focus for the Kiwi over the next 24 hours.
Technically, a break of the session low, which the short term indicators suggest is possible, would head towards the 200 HMA (0.7905). Below 0.7900 would see a deeper correction towards 0.7885 and possibly 0.7840 although this seems rather a long way off for now.
The topside, which currently looks a little less likely would see sellers at 0.7980 (minor) and then at 0.8000. The session high of 0.8834 looks out of reach, but if wrong, further strength would see a run towards 0.8070.
Look for a run towards 0.7900, with the top looking covered by 0.7970/80.
Meta Trader – AxiTraderNZD/USD: 4 Hour
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