Friday finished a generally choppy session, with much of the focus on the US equities markets again as they headed higher, as risk sentiment continues to recover from the recent sell-off. This theme may continue after the weekend EU bank stress tests came in pretty much as expected.There is plenty of data out in the next few days, starting today with the German IFO and some secondary US data. This comes ahead of the US Durable Goods, tomorrow, the FOMC meeting, Wednesday, and the US GDP Thursday. Elsewhere, the RBNZ I/R decision and German Unemployment., both Thursday, and the provisional EU CPI (Friday) will be in focus.
EUR/USD: 1.2680
The Euro had a relatively quiet session on Friday but did manage a squeeze up to 1.2695 ahead of the weekend’s banks stress tests, after a leaked report suggested an improvement on the 2013 outcome, when 25 banks failed the tests. In early trade on Monday, the Euro has returned to a 1.2700 high after the stress tests came in pretty much as expected – Currently at 1.2680 in pre-retail market. Conditions are thin – and the clocks have changed in the UK/Europe.
Elsewhere on Friday, the dollar was also mildly on the back foot due to an individual testing positive for Ebola, although the outbreak caused nothing like the reaction in October, and indeed the equity markets put in another strong performance as risk sentiment improves. The Euro came off its highs after comments from Merkel and French PM, Hollande. Merkel noted that Draghi has made it clear to EU leaders that reforms & improved investment was key for the EU recovery, while Hollande stated that negotiations over France’s deficit reduction continues but “France thinks it has done what is necessary’.
There is a bit of data due on most days this week, starting today with the German IFO (exp 104.2. previous 104.7) and followed by some secondary US data, but the main focus will be on what the Fed has to say after the FOMC meeting on Wednesday (early Thursday- Asia), and then on the US GDP on Thursday. On Friday, at the end of a busy week, we will get the provisional EU CPI for October and another soft reading could put the Euro under pressure going into next weekend.
With regard to the FOMC, the Fed is expected to finally wind up the QE programme, which could see some significant changes to the official statement. As with last month though the main focus will be on whether the Fed will finally drop the phrase of “considerable time” with regards to keeping rates low following the ending of QE. This is likely to bring about the main volatility of the week and should be watched closely.
Technically, there is little change. On the topside, 1.2695/1.2700 will be the first hurdle to overcome and we have seen this tested in early Monday trade, and with the 4 hour charts looking positive we could see a break higher towards the 200 HMA at 1.2725 and then onto the 22 Oct high at 1.2740. Beyond there may be tricky in the short term, but if incorrect, a break would then head on to 1.2780 and possibly to 1.2800 and to the 21 Oct high at 1.2841.
The downside will again see near-term support at the Fibo level at 1.2645 (61.8% of 1.2501/1.2885) and at Friday’s 1.2634 low. Below this would see return to the Thursday session low 1.2613, below which the Euro would head on to 1.2600 with further bids to be seen at 1.2590 (76.5%) and at the minor low at the minor 7 Oct low at 1.2580. Once that gives way though, there is little to stop the Euro heading back to 1.2500. I think this will eventually occur and that at some stage we will head for a long term target at 1.2041 (July 2012 low), but which looks unlikely to come about for a while.
A 1.2650/1.2725 day may be in store, with a mild upside bias.
Economic data highlights will include:
M: German IFO, US Composite/ Services PMI, Dallas Fed Mfg Survey, Pending Home Sales
T: US Durable Goods, Consumer Confidence, case Schiller House Price Index
W: FOMC/Fed I/R Decision, Statement
T: German Unemployment, EU Consumer Confidence, Business Climate, Services Sentiment, German Provisional CPI US GDP, Personal Consumption Expenditure, Jobless Claims,
F: German Retail Sales, EU CPI, Unemployment, US Core Personal Consumption Index, Personal Income,/ Spending, Rts Michigan Consumer Confidence Survey, Chicago Purchasing managers Index.
Meta Trader – AxiTraderEUR/USD: 4 Hour
USD/JPY: 108.15
US$Jpy remained well underpinned on Friday, helped along its way by the improving risk sentiment after another positive close in the US equities markets ensured a diminished need for any safe haven Jpy buying going into the weekend.
While the consolidation close to 108.00 is constructive for further gains, I would not be getting too carried away yet, although I do think the upside is the way to go. The dollar finished the week just above the Fibo resistance level at 108.10 (61.8% of 110.08/105.18) and while the 4 hour charts still remain positive in their outlook a test of 108.75 (76.4%) should not be ruled out. Above here would again test the 109/110 level although I am a little doubtful that we are going to see it up here today.
The downside should see bids at 108.00 today which may well hold it, but below which would head back towards 107.80, 107.65 (Daily Kijun) and possibly to 107.50. Further support would be seen at 107.35 (100 HMA) and at 107.00 (200 HMA)) although this looks well over the horizon,
Use 107.90/108.50 as a guide today. Buying dips for an eventual return to 110+ remains the longer term strategy.
Economic data highlights will include:
M:
T: Provisional Industrial Production
W:
T:
F: CPI, Unemployment, BOJ Policy Statement, Housing Starts.
Meta Trader – AxiTraderUSD/JPY: 4 Hour
GBP/USD: 1.6086
Friday’s Q3 0.7% GDP growth, which came in as expected, put the UK on course for a 3% annual growth figure, causing some interim volatility in Cable, but at the end of the session, while it ended a bit higher, it remained confined to a 1.6016/97 range.
The short term indicators do point a little higher now, and having closed just above the 100 HMA on Friday, we could see a squeeze back towards 1.6100 above which could take us back to Thursdays high at 1.6130. Above that could see a further squeeze to the descending trend resistance at 1.6160 and then to 1.6180 (23.6% of 
1.7191.1.1.5874), which should be strong, although unlikely to be seen in the next couple of sessions.
While the topside is mildly favoured in the short term, selling rallies remains the preferred strategy for a more medium term back to test 1.6030 (Daily Tenkan) and then 1.6000. A break of last week’s 1.5994 low would then open the way for a run towards the 16 Oct low at 1.5936, and eventually, via 1.5900, back to the trend low at 1.5873.
While the short term looks mildly positive, selling into strength for resumption of the longer term dollar up-trend remains the favoured strategy.
Economic data highlights will include:
M:
T: UK Net lending
W: UK Mortgage Approvals, Consumer Credit
T:
F.
Meta Trader – AxiTraderGBP/USD: 4 Hour
USD/CHF: 0.9518
US$Chf chopped around on Friday, closing a little lower, but ended up not travelling too far from where it started the day, and once again supported above 0.9500 (100 HMA).
This could be the same again today, although the 4 hour charts suggest that 0.9500 could come in for a more rigorous test later on, a break of which would head towards 0.9480 (200 HMA). Below here would see a run towards 0.9460 (daily Tenkan), although I am not sure we head this low today.
If the session’s data decides that he dollar is to head higher, then sellers will arrive at Friday’s high of 0.9545, above which could squeeze on towards 0.9560 (61.82% of 0.9686/0.9360) and eventually to 0.9600 (0.9608; 76.4%).
Economic data highlights will include:
M:
T: UBS Consumption Indicator
W:
T:
F:.
Meta Trader – AxiTraderUSD/CHF: 4 Hour
AUD/USD: 0.8801
The Aud is opening higher in early NZ trade following the weekend stress tests that have come in in line with expectations, giving some relief to risk sentiment. The Aud is currently at 0.8805, in very thin conditions, having briefly been up to 0.8820.
After breaking down to a low of 0.8718 in Asia on Friday, short covering then set in and slowly squeezed the Aud higher through the session to reach 0.8823 (daily Kijun) at the NY open, after which a slow drift lower set in for the Aud to close back at familiar levels, seen regularly last week at around 0.8785.
More choppy trade looks to be the most likely outcome early in the week and I would not be looking for too much of any sort of directionally move, possibly until the FOMC result on Thursday. In the meantime, using the daily Tenkan (0.8765) as a pivot seems to have been a useful strategy recently, which may continue to be the case over the next day or so.
The Aud currently appears to be trading in a symmetrical triangle formation, the parameters of which were seen on Friday, so going with a break of either side would seem to be the plan, and it would appear that by the look of the short term indicators that it could be the topside that eventually comes under pressure. A break of 0.8820/25 would see a squeeze on towards 0.8842 (23.6% of 0.9502/0.8642) and then to 0.8860 (15 Oct high) and possibly to 0.8898 (9 Sept high). If seen I think it would present a better sell opportunity ahead of an eventual return to lower levels.
The downside will find buyers again at the various levels from 0.8720 to 0.8760. I don’t really see it getting much below 0.8750 today, but if wrong and we do head lower, Friday’s 0.8720 base should easily hold. If that turns out to be incorrect, then look for a run down to 0.8700 and then to the recent lows at 0.8685, 0.8675 and below there to 0.8651.
Economic data highlights will include:
M:
T:
W:
T: HIA New Home Sales
F: PPI, Private Sector Credit.
Meta Trader – AxiTraderAUD/USD: 4 Hour
NZD/USD: 0.7845
The Kiwi headed to 0.7793 on Friday before short covering saw a squeeze back to 0.7880 where it ran out of steam and closed the week at 0.7850.
The focus this week will be on the RBNZ meeting on Thursday and after the recent soft NZ data, the danger for the Kiwi may be to the downside if the RBNZ take a more dovish tone following the recent cycle of tightening rates. Before then, with a holiday today, and with little data due, it will be international factors that drive it, with the US Durable Goods and the FOMC Meeting providing the main interest ahead of Thursday.
For now, the topside looks capped now at 0.7880 although we could see a squeeze back to 0.7900. If so it would be a decent sell opportunity, with a SL left above the daily Tenkan (0.7910), 200 HMA at 0.7915.
The downside will again see bids at 0.7790/0.7800 and for now that should hold it. If wrong look for a run back towards the recent low at 0.7707, although this appears unlikely yet, and only then, if the RBNZ appears to be overly dovish which is unlikely, although they could once again lament the current elevated value of the Kiwi and attempt to talk it lower.
Economic data highlights will include:
M: Labour Day Holiday.
T: ANZ Business Confidence, Activity Outlook
W:
T: RBNZ IR Decision
F: Building Permits.
Meta Trader – AxiTraderNZD/USD: 4 Hour
AUDJPY: 95.05
Once again it was the Yen crosses that were at the centre of the action last week, and by and large most did roughly as expected in our outlook of the 20 Oct, albeit that it was a choppy ride along the way. Generally, from a technical perspective, further upside progress currently looks possible and will possibly eventuate as long as the stock markets retain their bid tone. Any return to the downside volatility seen recently will see the Yen crosses turn sharply lower, so keep stops on the downside firmly in place.
Given the action currently taking place in the US dollar, and with most of the other crosses moving around in choppy fashion, I am currently avoiding them until they find some clear direction.
AUDJPY did turn higher as we had hoped and even beat our most optimistic outlook of 94.50, by reaching up to as high as 95.28 on Friday, before closing around 95.00. Having broken back, and closed, above the weekly cloud top at 94.25, further upside momentum looks very possibly although the weekly Kijun/Tenkan, both at 95.30, will provide stern resistance. Above that though would head on to the 100 DMA at 95.75, and then 96.00, and then to the daily cloud base at 96.25 which will again be strong resistance.
With the daily momentum pointing higher, I suspect that dips will be buying opportunities, with the points to watch being at the daily Kijun at 94.85 and at the 200 DMA at 94.60. Below there could see an acceleration back towards 93.80/94.00, although I think this is doubtful, but if so, would I suspect be a good area to buy some Aud.
Meta Trader – AxiTraderAUDJPY: Daily
NZDJPY: 84.85
The cross stuck within our expected 83.50/85.50 range last week, heading higher from the 83.95 low for the first half of it, before easing back in the second half to finish just under 85.00. I suspect we may be in for much of the same this week although the parameters may be moved up a little to 84.00/86.00 given the mildly positive outlook of the daily momentum indicators. The 100 DMA (86.000) will provide the resistance, as with the 200 DMA 87.05, if seen, although I am not sure the cross has the legs for this right now.
The downside should find support at 84.50 and back towards 84.00. Dips appear to be a buy, with a SL placed below 83.80.
Meta Trader – AxiTraderNZDJPY: Daily
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