US industrial production to contract again

Forex News and Events

More ECB easing (by Peter Rosenstreich)

The European story remains supported by the weak Euro. EU PMI manufacturing stands at 52 (China 49.8 and US 53.1) and PMI composite 53.6. Yet decent growth is not translating into inflationary pressures. EU CPI -0.1% y/y while is decelerating to 0.9%. France’s CPI and HICP both fell 0.4% m/m in September, marking a fourth-straight month of decline. Expectations that inflation will pick up due to waning oil-price base effects are unlikely to materialize. ECB has two clear reasons to increase stimulus: the need to sustain the weak Euro competitive advantage and offset disinflationary impulses. Draghi’s recent comments suggest that he is content with the current path of inflation and traders have already discounted the likelihood the ECB will ease. Further evidence that deflation and/or a stronger Euro, which could derail the fragile recovery, will force ECB to become more forthright about additional stimulus. In addition the inability for the 28 members of the EU to come up with a cohesive strategy on immigration at the EU summit indicates how fragmented the union has become. Risk of members drifting away will weigh on the euro invest-ability. We would steer clear of following the EURUSD higher.

U.S. Industrial Production (by Yann Quelenn)

There is a single observation to be made: the American economy is not recovering as we are being lead to believe. Previous manufacturing survey data shows that U.S. activity remains weak. Jobs data for the past two months has also proved a disappointment, while September's NFPs surprised markets with a very low read. In addition, the latest retail sales have revealed a slight drop and to make matters worse, goods exports have lowered by 10% since February.

September’s U.S Industrial production data, due later today, is expected to fall 0.2% m/m, following the 0.4% decline in August. The EURUSD is set to increase on this release. However, on the medium-term, we remain bearish on the pair as expectations for a Fed rate hike increase for 2016, especially for the March meeting. Yet, for the moment, targeting 1.1500 seems a good option.

A new era is on the horizon. The ECB started a QE and it is already almost certain that this monetary policy will be expanded above its initial end of September 2016. The EURUSD will not move on who is not recovering but rather on who is declining less.

USDJPY - Breaking Support At 118.61

The Risk Today

Yann Quelenn

EUR/USD is still in a bullish momentum. Hourly resistance at 1.1460 (18/09/2015 high) has been broken. Other resistance can be found at 1.1561 (26/08/2015 low). Support can be found at 1.1087 (03/09/2015 low). Stronger support lies at 1.1017 (18/08/2015 low). Expected test of the resistance at 1.1561. In the longer term, the symmetrical triangle from 2010-2014 favored further weakness towards parity. As a result, we view the recent sideways moves as a pause in an underlying declining trend. Key supports can be found at 1.0504 (21/03/2003 low) and 1.0000 (psychological support). We remain in a downside momentum.

GBP/USD is now consolidating. Hourly resistance at 1.5383 (22/09/2015 low) has been broken. Hourly support can be found at 1.5087 (05/05/2015 low). Stronger support can be found at 1.4960 (23/04/2015 low). Expected consolidation before entering into another upside move. In the longer term, the technical structure looks like a recovery. Strong support is given by the long-term rising trend-line. A key support can be found at 1.4566 (13/04/2015 low).

USD/JPY has broken hourly support at 118.61 (04/09/2015 low) before bouncing back. Stronger support can be found at 116.18 (24/08/2015 low). Hourly resistance can be found at 121.75 (28/08/2015 high). A long-term bullish bias is favored as long as the strong support at 115.57 (16/12/2014 low) holds. A gradual rise towards the major resistance at 135.15 (01/02/2002 high) is favored. A key support can be found at 116.18 (24/08/2015 low).

USD/CHF is declining and has broken hourly support at 0.9528 (18/09/2015 low). Hourly resistance can be found at 0.9844 (25/09/2015 high). Expected consolidation. In the long-term, the pair has broken resistance at 0.9448 suggesting the end of the downtrend. This reinstates the bullish trend. Key support can be found 0.8986 (30/01/2015 low).

Resistance and Support: