Varengold Bank Research Team
Varengold Wertpapierhandelsbank AG
Good morning from rainy Hamburg and welcome to our second-last Daily FX Report for this week. Israeli Prime Minster Benjamin Netanyahu said President Barack Obama yesterday that he must make sure that any final nuclear deal with Iran doesn’t leave it at the threshold of being able to develop nuclear weapons. Beyond that China Foreign Minister said that foreign countries should not meddle in China’s domestic affairs after US calls for Chinese authorities to show restraint towards the mass protests in Hong Kong.
However, we wish you a much luck in trading today!
Market Review – Fundamental Perspective
Yesterday the Dow Jones index of shares declined 1.4 percent and the Standard & Poor’s index fell 1.3 percent. U.S. Treasure yields rose to almost the highest versus the German counterparts since 1999 while the USD is close to its strongest level in two years versus the EUR. Germany sold 10-year bonds to yield less than 1 percent for the first time. The USD declined from a six-year high against the JPY amid bets it gained too much and too fast. The EUR/USD touched 1.2584 before trading at 1.2623. The USD/JPY tumbled 0.7 percent to 108.89 and the EUR depreciated 0.7 percent to 137.46 JPY. The EUR/GBP traded at 0.7795 after reports showed U.K. manufacturing grew at the slowest pace in 17 months. The GBP bought 1.6189 USD.
The European Central Bank is going to meet today and economists forecasted that interest rates will remain unchanged after unexpectedly dropping them to records on September 4. The ECB will present details on Thursday of a new asset-buying plan with which it hopes to revive the flagging euro zone economy and see off the specter of deflation. It plans to buy asset-backed securities with a view to support lending to the small- and mid-sized firms that form the backbone of the euro zone economy. Yesterday data showed that manufacturing in the euro zone slowed in the past month to the lowest since July and fell to 50.3 as new orders dropped for the fist time in over a a year. It is still above 50 which separates growth from contraction. In addition yesterday the Institute of Supply Management said that its index of national factory activity weakened to 56.6 in the past month, which is the lowest since June. The FED will start publishing a new monthly index of U.S. labor market conditions on Monday, October 6, that draws on a range of data to give a better sense of the economy’s health.
Daily Technical Analysis
GBP/JPY (4 Hours)
After the pair had rose close to a six year high on September 19 around 180.71 it started a sideways trend. Currently it is trading even below the lowest Bollinger band which might be a signal for a comeback of the bears. The MACD is also assuming an upcoming decrease.
Support & Resistance (4 Hour)
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