WEEKLY MARKET OVERVIEW

On Friday, USD ended up losing value against most of the major currency pairs. It was due to much release of better data regarding rate of unemployment compared to market’s expectation and industry forecasts. According to United States Department of Labor, unemployment rate in the economy went improved to 7.8% compared to 8.1% from September, 2012. It certainly provided a boost to American investors who are hoping for an economic recovery.

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As anticipated by our technical analysis, USD/JPY rose to 78.xx the whole week anticipating the better than expected unemployment data, released on Friday.

Prior to that European Central Bank announced their Interest rate policy on Thursday (October 4, 2012) and again, as anticipated they left the rate unchanged to 0.75%. However, interesting is that ECB top brass Mario Draghi commented regarding the “irreversible” nature of EURO currency. Market interpreted it as positive and EUR/USD went up to 1.3070 last week. Perhaps the EURO strengths was also fueled by comments from Spanish premier Mariano Rajoy’s comment that Spain shall not seek any full-scale sovereign bailout.

On the other side of the world, China’s negative economic outlook affected the commodity based Currency AUD. As Australia’s major export market for Iron Ore and other natural resources is dominated by Chinese imports. Australian Central Bank decreased the interest rate from 3.25% from previous 3.5% last week and AUD went down to a 10 weeks low against USD at 1.0150. Regardless of the rate cut, Australian economy is doing much better compared to the rest of the world and fundamentally we would suggest looking for AUD to resume the uptrend in coming weeks.

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As we mentioned last week, technically, USD/JPY is in a ranging and we were expecting the pair to move upwards to 78.10 area. USD/JPY did exactly that and touched 78.85 last week. We would be following this pair very closely with a limit sell order around 79.00 with a tight stoploss order. As it is in a range bound market, expect the pair to bounce from here downwards before anything can be said with certainty.

EUR/AUD had been on a strong downtrend since the days it reached 2.000 years ago. Currently the pair is rebounded from the lows of 1.1600 to 1.2810 last week. It is currently in a very interesting position since it crossed 55 SMA on Weekly timeframe for the first time since September 2011. Regardless of such promising uptrend lately, in the long run technically it will remain bearish unless it breaches above 1.3 resistance level. From a pure technical point of view we expect the pair to bounce back from 1.29xx price level and resume its downtrend as the interest difference between AUD and EUR is just too big for the downtrend to change.

EUR/USD had completed the retracement back to SMA 21 in the starting of October and had resumed the uptrend on daily chart last week. However, Interesting fact is that SMA 8 has crossed SMA 21, MACD signal is showing short bias and already Stochastic have turned reached almost overbought levels. Given the fundamental uncertainty over EURO’s long term perception, and with the technical overview, it seems like the pair might be losing energy to go any further. On the weekly chart, EUR/USD is already at the SMA 55 High/Low channel. Thus, unless it is closing above 1.34 this week, we would continue to be biased about the fall of EUR/USD in coming weeks.

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