EUR/USD Roller Coaster on the Run! Pound Plunged 450 pips in 7 Days!

EUR/USD Roller Coaster on the Run! Pound Plunged 450 pips in 7 Days! NOK collapsed after Norges Bank Rate Cut!

Fed Chairwoman Janet Yellen’s hawkish speech increased by far volatility in the market. Most of the major FX pairs closed at their opening levels after sharp moves except NOK cross pairs. Norges Bank cut interest rates, for the second time this year, plunging the currency.

Fed Chairwoman said clearly rate hike is likely this year
On Thursday, most of the major FX pairs ended near their opening levels, however, there was significant volatility during the trading session. The U.S. dollar was the driver currency of the day moved by Janet Yellen’s comments. The greenback fell sharply the first half of the trading session and rallied upwards the rest of the day. Fed Chairwoman said that the U.S. central bank is likely to raise interest rates later in this year if the economy achieves the conditions they set which include the increase of inflation rate and employability maximization. Beyond that, she kept a distance by saying that economic “surprises” could force them to change that plan.

The Durable Goods Orders met expectations of -2.0% in August while the Durable Goods Orders ex-Transportation remained the same with 0.0% change, falling short of the forecasts to have grown by 0.1%. The New Home Sales showed a recovery in the sector after a slight slowdown the months before.

Euro marginally unchanged but had significant volatility through the day!
The euro currency pairs closed Thursday’s trading session at the same level they opened, except against the Norwegian krone, as Norway’s central bank cut interest rates by 25bp to 0.75%, and the New Zealand dollar.

The German Gfk survey showed a decreased morale among the consumers in October of 9.6, below the market’s forecasts to fall at 9.8 from 9.9 before. The IFO Survey revealed that the Current Assessment in Germany worsened more than expected in September while the Business Climate and the Expectations, also for September, improved. The Targeted LTRO (Long-Term Refinancing Operation) decreased to €15.5 billion from €73.8 billion before.

EUR/USD, roller coaster on the run!
The euro had a roller coaster ride this morning against the dollar, in fact, the EUR/USD tested the 1.1297 level with a range of 150 pips. The most surprising thing is that the pair went all the way back, in only eight hours, from 1.1297 to yesterday’s opening levels of 1.1165. In my last EUR/USD post, my closing comments emphasized that the market was heavily short euro and that a move towards 1.1090 – 1.1105 zone might squeeze out some late shorts to the game. Downward pressure may eventually return, following the temporary buy above the aforementioned zone, however, the key to watch will be the 50-SMA around the 1.1150 and the 200-SMA slightly below the 1.1090 – 1.1105 zone, both on the daily time. So, a break of these obstacles would strongly suggest there’s been a change of bias in the markets.

Sterling covered its losses despite the absence of domestic economic news
The absence of market-driver news at the domestic macroeconomic front on Thursday pushed the GBP cross pairs to react as the rest of the major FX pairs, closed near their openings levels. The only economic indicator released from the UK was the BBA Mortgage Approvals for August which rose to 46.7K from 46.3K prior.

GBP/USD is also looking bearish!
Sterling is also looking a little bearish against the dollar this morning. The bearish move came following the break below the significant 1.5500 level, as well as, below the both the 50-SMA and the 200-SMA on the daily and 4-hour charts. If we see a 4-hour or even better a daily close below the significant level of 1.5160, then we could see a much bigger retracement, following seven consecutive negative sessions. Therefore, the key level to watch for this pair is the 1.5160. A close below here would have suggested that the pair had entered a new downtrend, prompting a move towards 1.5100 for intraday traders and then to 1.4980 for short to medium term traders.

Norwegian Krone Slumped after Surprise Rate
Cut The Norwegian krone plunged near 2.5% against the U.S. dollar, the Euro, and the British Pound, after Bank announced its decision to its benchmark interest rate by 25bp to 0.75%, the second rate cut in the year. The central bank took this surprise decision on the weak growth of the economy. The Governor Oeystein Olsen stated that “Growth prospects for the Norwegian economy have weakened, and inflation is projected to abate further out. The Board has therefore decided to lower the key policy rate now.” He also added that the current economic outlook suggests further rate cuts in the coming year.

The U.S. dollar surged above the psychological level of 8.3000 against the NOK, following the announcement from the Norges Bank, closing the day with gains more than 2%. It is very remarkable that the USD/NOK pair is on track to record a fifth straight positive month, currently being at 2.45% for September. Having in mind the above, we should pay more attention to the longer term chart, which is continuing to show the pair as being bullish and according to an old saying that “The trend is your friend” we remain bullish on this pair, with the next target being the 1.4850 and then 1.4920.

Gold - Technical Outlook
Gold surged above $1,142 on rate hike doubt, while the dollar regained some of its ground against its major counterparts. The precious metal found a strong support around the psychological level of $1,100 and since then is moving north. The next obstacle for the bulls will be the $1,170 barrier, the August’s high, while it will be a very significant move for the bulls to sustain the move above the $1,142 level, as well as, above both the 50-SMA and the 200-SMa on the 4-hour chart. Short-term traders should also watch the 200-SMA on the daily chart as is ready to provide a significant resistance to the metal around the $1,170 level, a level that I think we could see in the next few days.

U.S. Indices lower on Yellen's comments
Fed Chair Yellen pushed the U.S. stocks lower. All of the three most popular closed down for the third consecutive day. The weekly performance of the three indices showed that Dow Jones and S&P 500 lost more than 1% while NASDAQ edged lower near 2.0%. The blue-chip stock Caterpillar Inc. was the top loser company of DJIA with a record loss of -6.30%!

Economic Indicators
The German Buba president has Jens Weidmann has a press conference. In US, the release of final GDP growth for Q2 will hog the limelight.

The personal consumption expenditures for Q2 is scheduled to come out as well as the flash Markit Services and Composite PMI for September. The University of Michigan will print the flash consumer sentiment index also for September.