Volatile conditions look likely to continue into the w/e. Stocks, Oil bounce well from the lows.

Another volatile session has ended with most currencies not too far removed from where they were yesterday. With only secondary data due it could end up being another choppy one today, albeit possibly without too much direction. Equities, bonds and oil all had another wild ride, with the peripheral  EU Club-Med bonds in particular seeing a steep selloff, reawakening concerns of a resumption of the EU debt crisis. Volatile conditions but with little overall direction could largely cover the action today. Have a good weekend.

EUR/USD: 1.2797

It has been another volatile session, with the Euro falling sharply to a low of 1.2705 on the back of the selloff in the peripheral EU bonds, before bouncing again after some cautious comments from various Fed board members saw the dollar weaken, taking the Euro back up to 1.2840 before once again heading lower, to currently sit close to 1.2800.

Elsewhere the final reading of the EU CPI was unchanged at 0.3% yy in September while the Core reading was revised up to 0.8% from previous estimate of 0.7%. In the US, the jobless claims improved by 23k to 264k in the week ended October 11 versus expectation of 285k which helped to underpin the dollar somewhat. IP and CU were both better than expected as well, and did the dollar no harm.

The choppy conditions look likely to continue into the weekend and the points to watch remain largely the same as yesterday. On the topside, 1.2845 has been the session high, just below yesterdays spike up to 1.2865. If this is taken out then, look for a run to 1.2900 and possibly to 1.2950 (38.2$% of 1.3699/1.2501).

On the downside, minor bids will arrive at around 1.2750, ahead of the session low at 1.2705.  Yesterday’s low of 1.2624 appears out of site for the time being and with the 4 hour indicators remaining mildly positive another test of the topside would not really surprise.

There is some secondary data out from the US later in the day although the focus will again most likely be on the stock and bond markets. Janet Yellen will be speaking and if she maintains a particularly cautious tone then we may be in for further dollar weakness but overall I think it is going to be choppy again without too much direction one way or the other. Medium term players will be looking for levels to sell the Euro.

Economic data highlights will include:

EU Construction Output, Janet Yellen Speech, US Building Permits, Housing Starts Rts/Michigan Consumer Sentiment Index.

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EUR/USD: 4 Hour

USD/JPY: 106.25

 US$Jpy has been choppy again today within a range of 105.50/106.30 but currently sits just below the highs assisted by the stronger than expected US Claims and Industrial Production data and the bouncer from the lows in the stock market.

It looks as though the 4 hour indicators are trying to head a little higher and if minor resistance at around 106.30/40 can be overcome, then we may be in for a move back towards 106.85 (100 HMA) and possibly on to 107.00. Above here would look towards 107.50 (200 HMA) although I think we would need to see a move higher in the equity markets to make this possible and is probably unlikely to be seen today.

The downside will find bids at 106.00 and then at the session lows at 105.50 which comes ahead of yesterdays spike down to 105.18.

I think that buying dips remains the plan, and unless today sees another fall in the stock markets I would use 105.80/106.80 as a guide. Once this correction has finished, a return to 108.00 and higher will,  think, be the most likely outcome.

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USD/JPY: 4 Hour

GBP/USD: 1.6070

Cable had another volatile session and has recovered well from its lows of 1.5940 to finish NY just below the highs of 1.6085.

The shorter term indicators look generally positive though and if the highs can be taken out then, having now overcome both the 100 (1.6000) & 200 HMA’s (1.6050), we may be in for a move higher in order to test strong trend/Fibo resistance at 1.6120. A break of this would trigger stops and allow Cable to head on to 1.6200.

The downside will find initial support at the 100/200 HMA’s, below which would head back to the session low at 1.5940, but which looks unlikely to be seen today.

I suspect we are in for a run towards 1.6120 and would therefore use 1.6050/1.6120 as a guide, with a preference to trading it from the long side

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GBP/USD: 4 Hour

USD/CHF: 0.9433

US$/Chf has been choppy again within a 0.9400/90 range, which could well contain it again today.

A break of the downside would see 0.9370 (38.2% of 0.8855/0.9686) and yesterday’s spike low at 0.9360 come into play, below which the dollar could head back towards 0.9300, albeit that this looks unlikely today.

The topside would see sellers at 0.9500 (100 HMA) and then at 0.9530 (200 HMA).

Overall another choppy but directionless session looks to be in store

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USD/CHF: 4 Hour

AUD/USD: 0.8759

The Aud dived to a low of 0.8685 as risk sentiment turned sour in the early US session, when the stocks took another dive. Sentiment since turned around, and the equity market bounce has allowed the Aud to head back to close the session at 0.8760 having been up to a high of 0.8787.

Given the choppy sideways trade of recent days within the broad 0.8650/0.8850 range, I would imagine that this will continue to contain it into the weekend and given that the 4 hour indicators are flat, for the coming session 0.8700/0.8800 looks likely to cover it. Neutral.

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AUD/USD: 4 Hour

NZD/USD: 0.7943

The Kiwi was unable to take out 0.8000 and headed down to a low of 0.7885 in early NY as risk sentiment soured on the back of a weaker stock market. The subsequent bounce has allowed the Kiwi to recover to reach 0.7975 before settling a little lower around 0.7940.

More choppy trade within the broad 0.7900/0.8000 looks likely today, with the session low, at 0.7885, well supported by the 100 HMA (0.7885) and the 200 HMA (0.7860).

On the topside, a break of 0.8000 would take out the strong down trend resistance, triggering plenty of stops in the process and could head on towards 0.8050 and possibly to 0.8100. I don’t see it happening today though.

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NZD/USD: 4 Hour