ECB to Ease Monetary Policy? Pound Roller Coaster Ride After BoE; U.S. Stocks After FOMC

The buck was broadly lower against its G10 counterparts on Thursday after the FOMC minutes revealed the concerns that forced Fed to hold interest rates in September policy meeting. The central bank worries on the downside risks to inflation, the dollar appreciation and the consequences a rate hike will have on their credibility. The inflation rate is still below the Fed’s target of 2% for more than three years and amid China’s situation is not likely to pick‐up in the near future. The minutes include policymakers’ conclusion that the economy is near the goal of “full employment” something that is doubtful after the last NFP report, adding one more concern to the bank and pushing the sooner probable date for an initial rate hike in 2016!

Daily Technical Analysis and Forecasts

ECB to ease monetary policy?

The euro fell versus the major currencies early on Thursday, following the weak German Trade Balance and the more than expected shrank Exports, at steepest slowdown since 2009. Later in the day the ECB Monetary Policy Meeting Accounts plunged it further as policymakers expressed their concerns about the inflation and the general economic outlook. The ECB chief economist Peter Praet said that the troubles that been faced from emerging economies were clouding the global outlook. Furthermore, the risks on the downside for the inflation have increased! After these developments, attention turn to QE changes! The ECB President Mario Draghi stated many times in the past that the central bank is ready to adjust the stimulus program if it will be needed. Even though the boost to the program has not taken seriously, the recently added risks may change that soon.

Daily Technical Analysis and Forecasts

EUR/USD – Technical Outlook

The single currency rose to a 2 week high against the greenback after minutes from the Federal Reserve's latest meeting suggest it may wait to raise rates. However, the euro bulls failed to sustain the move above the psychological level of 1.1300. At the moment, the buyers are increasing the attempts to break above the latter level, as this is the fifth time that is retesting that level within the last two weeks.

The 1.1300 level is quite significant as it includes the descending trend line, which started back in mid‐August, as well as, the 50‐SMA on the weekly chart. On the downside, the 1.1240 – 1.1250 zone will be the next key test for the pair, as it includes both, the 50‐SMA and the 200‐SMA on the 1‐hour chart. However, following yesterday’s false break‐out below the 1.1000 level there is little real change to the outlook and for the time being, with the short term charts giving little hint in either direction, a neutral stance is required.

Pound closed near its opening levels after a volatile day!

On Friday morning, the sterling was traded mixed against the G10 currencies following a volatile day with market‐driver news. The BoE Monetary Policy Committee voted 8‐1 to keep the keep the interest rates unchanged, as it was widely anticipated. The decision announcement alongside the BoE minutes plunged the pound, however, the speech of the BoE Governor Mark Carney boosted the currency back, eliminating its losses. In the minutes, the policymakers suggested that inflation could remain below 1% until the spring of 2016. In addition, even though the wages are increasing, is not enough to take inflation back to BoE 2% target. They also highlighted their concerns for the global economy and the bad influence of the fiscal consolidation on domestic activity. The economic expansion is seen to slow down further, on the global low demand environment.

The BoE Governor left the monetary policy options open. He didn’t negate with the risks the economy faces but stated that BoE is not Fed rate hike dependant. Fed’s plans and decision for the timing of a rate hike, are not decisive for a similar move by the BoE. The British central bank is ready to take responsibilities and evaluate by itself the right timing to start the process towards the monetary policy normalisation.

Daily Technical Analysis and Forecasts

GBP/USD ‐ Technical Outlook

The pound is trading higher for a third day against the dollar, the longest winning streak since mid‐ August. The pound traders went on the a rollercoaster ride yesterday with the currency pair racing to a high of 1.5372 during the European trading session, only to reverse and give up its gains and hit a low of 1.5260, shortly after the BoE policy meeting. However, the pair gained a strong momentum during the Carney’s speech, and closed the day positive, gaining more than 0.90%, adding 110 pips to its value.

Following the above move, the GBP/USD pair managed to close back above 1.5630 yesterday, which is quite a bullish signal. The crossing of the RSI above 50, as well as above 70, on the 4‐hour chart, would also support this. Therefore, the next target for the bulls will be the 1.5400. On the other hand, if the pair faces a pullback in the next couple of hours it should find support around 1.5330, which coincides with the 200‐SMA on the 4‐hour chart. Moreover, if we see this pullback I would expect the pair to consolidate roughly around the 1.5350 as today we do not have any market affecting news.

USD/CAD ahead of September's Employment Report

USD/CAD continued to extend its losses early Friday, with the pair now trading below a significant level of 1.3000. The next key support to watch will be now the 1.2780 – 1.2840 zone and then the 1.2750 level, which coincides with the 200‐SMA on the daily chart. Below here, the 23.6% Fibonacci level will be ready to provide a significant support to the price action near the 1.2550.

However, for now I would expect the pair to close the week in red, as the pair is standing negative of 1.40%, so far this week. Therefore, I would expect the pair to test the 1.2780 level until the end of the day, and then to consolidate between that level and 1.3000.

In the longer term, I remain bearish, with the next major target being 1.2550, however, if we switch to a higher timeframe (weekly), we should expect the pair to start forming a pattern (either trend reversal or continuation) between 1.2500 and 1.3400, therefore medium term traders should watch that very closely.

The CAD traders are looking forward to the employment report, scheduled to be released later in the day. The market predicted that unemployment rate has slowed down to 6.9% from 7.0% before, while net change in employment has been 10,000 in September from 12,000 before.

Daily Technical Analysis and Forecasts

USD/JPY – Technical Outlook

The USD/JPY pair remains trapped within a very tight range since the mid‐August and it is currently challenging the 50‐SMA and the 200‐SMA on the 4‐hour graph. A break below the 118.50 with a daily closing will change the short‐term outlook; whilst coming back above 121.75 will bring the bullish picture back into focus.

U.S. Indices continue to rise as Fed prevented stronger dollar

After the FOMC Minutes that prevented a stronger dollar amid the concerns over China’s situation, the U.S. stocks managed to close with considerable gains! The Dow Jones Industrial Average surged above 17,030 for the first time after August 20, when the index fell more than 13% in 6 days, found support on the 15,250 level and picked up. On Thursday, DJIA added +138.46 points at its value with Apple Inc. to be the top loser stock.

Both the S&P500 and the Nasdaq Composite Index are about to close the week positive of gains 3.18% and 2.19% respectively. Amid the top gainer stocks in the S&P500 index was energy companies like, Noble Energy Inc. (NYSE: NBL) and Marathon Oil Corp. (NYSE: MRO) with gains near 6.7% and 5.4% respectively.

Apple mobile‐payment service to roll‐out in retail stores!

The Apple stock (NASDAQ: AAPL) plunged ‐1.16% after the company announced that will install the device needed at some Starbucks coffee stores, KFC, and Chill’s restaurants to boost mobilepayment service. The service will be in a pilot form and these stores will accept that kind of payment by the end of 2016. The announcement may drop the stock in the short‐term, based on the fact that previous efforts of other companies like Google Inc., and eBay Inc. to promote the mobile payment service failed, but in the long‐term this may be proved out the start of a new technology leisure in our life, and profitable for Apple Inc., that will promote indirectly the apple watch as well! It’s notable that apple watch is a new‐launched device the recorded below forecast sales, unprecedented for the Apple.

Apple – Technical Outlook

Apple stock fell for a second consecutive day, however, the losses were limited. Looking at the weekly performance the stock is set to deliver a second consecutive negative week, following a 3.77% losses the previous week. Moreover, the stock started the month in negating footing as it has been traded negative ‐0.73% so far this month, following a ‐2.18% for September, ‐7.04% for August, ‐3.28 for July and ‐3.73% for June; more than 15% losses the last 4 months.

Following the mid‐August move, where the share moved below the psychological level of $100.00, but didn’t achieve a daily close below that level, it will now be the next highlight for the stock, whether can hold above this level and for how long.

Daily Technical Analysis and Forecasts

Economic Indicators

Today, the International Monetary Fund will begin its meeting. In Norway, the inflation rate for September will be out. In UK, Goods trade balance for August will be eyed. August’s wholesale inventories from U.S will be released.

The CAD traders will keep a tab on Canada’s employment report for September. The unemployment rate is forecasted to have slowed down to 6.9% from 7.0% before while the Canadian economy is expected to have added 10,000 jobs in September vs 12,000 the previous month. On Saturday afternoon, Bank of Canada Stephen Poloz will have a speech and he is expected to comment on the Employment report will be released the day before.

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