Stocks and USD rally

Forex News and Events

Global equity markets are green across the board with US stock future pointing to a higher open. In addition the USD is strong against most G10 and EM currencies. There is a clear indication that a general risk rally and USD improvements are not incompatible. Meaning, that current expectation for a Fed interest rate hike should not derail risk appetite. Today, October CPI data should provide further support for the Fed to begin tightening monetary policy in December. Headline CPI should come in at 0.2% from -0.2% m/m prior read, while core CPI is expected to remain steady at 1.9% y/y. However, commodity prices have been unable to benefit from investor’s risk appetite. RBA Assistant Governor Christopher Kent stated today that upside in commodity prices were limited due to China’s shift in development strategy. Without a recovering China, it is unlikely that any commodity rally will have much real demand support.

German Business Sentiment

German economic conditions keep on declining. The ZEW, economic sentiment indicator, which includes economic data such as inflation, is likely to reveal the truth behind this statement today. Data is expected to print in line with the October figure, 55.2. Sentiment has already declined sharply from September, when the indicator stood at 67.5.

The European outlook seems evermore uncertain. The current political situation in Portugal and Spain is weighing on the ECB monetary policy as peripheral bonds yields are soaring. In addition, the refugee crisis is far from being over and the Paris attacks may amplify this crisis. The geopolitical situation is extremely tense. In Greece, creditors have reached an agreement for the next tranche payment. Nevertheless, we still believe that Germany remains the most competitive European economy. From our point of view, Germany is the only European country capable of controlling its debt-to-GDP ratio, which remains below 80%. Other European countries struggle to debase the currency and are faced with continually mounting debt. We remain bearish on the EURUSD. During the night the pair was headed below 1.0700 and we view 1.0600 to be the next target.

The Risk Today

Peter Rosenstreich

EURUSD is still heading downwards. Hourly support lies at 1.0675 (10/11/2015 low) has been broken. Hourly resistance can be found at 1.0897 (05/11/2015 high). The technical structure is clearly negative. Stronger resistance stands at 1.1095 (28/10/2015 high). Expected further consolidation of the pair. In the longer term, the technical structure favours a bearish bias as long as resistance holds. Key resistance is located region at 1.1453 (range high) and 1.1640 (11/11/2005 low) is likely to cap any price appreciation. The current technical deteriorations favours a gradual decline towards the support at 1.0504 (21/03/2003 low).

GBPUSD is declining . Hourly support can be found at 1.5027 (06/11/2015 low). Hourly resistance lies at 1.5264 (13/11/2015 high). Stronger resistance can be found at 1.5529 (22/09/2015 high). Expected to show continued buying interest pressures. The long-term technical pattern is negative and favours a further decline towards the key support at 1.5089 , as long as prices remain below the resistance at 1.5340/64 (04/11/2015 low see also the 200 day moving average). However, the general oversold conditions and the recent pick-up in buying interest pave the way for a rebound.

USDJPY is strengthening and remains in an uptrend channel. Hourly resistance lies at 123.60 (09/11/2015 high). The short-term technical structure favours a further rise. Strong support lies at 120.80 (22/10/2015 low). Expected further test of the hourly resistance at 123.60. 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).

USDCHF is increasing confirming persistent buying interest. The pair is riding a uptrend channel. Hourly support is given at 0.9944 (06/11/2015 low). Expected to further consolidate. In the long-term, the pair has broken resistance at 0.9448 and key resistance at 0.9957 suggesting further uptrend. Key support can be found 0.8986 (30/01/2015 low). As long as these levels hold, a long term bullish bias is favoured.

Resistance and Support: