Daily Forex Market Preview, 20/10/2017
The political developments in both New Zealand and Spain kept the markets busy on an otherwise calm Thursday. The Spanish government invoked Article 155 of the Spanish constitution in a bid to end the semi-autonomy for Catalonia. This comes amid the Catalonian leader Puigdemont threatened on Thursday to declare independence, in response to the Spanish government seeking clarification.
In New Zealand, the NZ First party announced that it was supporting the Labor party marking a change of government for the first time in nine-years. Although still a minority government, the Green party is also expected to lend support.
The kiwi fell sharply since the morning amid populist measures proposed by the NZ First party leader Peters. Among a number of things, the NZ First party wants to curb immigration and also prefers more central bank intervention and a weaker exchange rate. The RBNZ is also expected to see an additional mandate of full employment coming under its purview besides the current price stability.
On the economic front, UK retail sales fell 0.8% on the month more than expected. The data continued to dampen the outlook for a proposed BoE rate hike later down the line.
Looking ahead, the economic data today is relatively muted. Canada’s monthly inflation data is expected to be released alongside the retail sales numbers. The data comes ahead of BoC meeting next week. The Fed Chair, Janet Yellen is expected to speak later in the evening.
EURUSD intraday analysis
EURUSD (1.1814): After posting strong gains for the second day, the EURUSD was seen pulling back in early trading session today. This comes after price rallied back to the resistance area of 1.1843 – 1.1822. As long as this resistance holds, EURUSD could be seen pushing lower. Support at 1.1720 which was missed previously is likely to be the target to the downside. In the medium term, EURUSD could be seen maintaining the range within these levels. There is also the descending triangle pattern that has formed on the 4-hour chart which also suggests a near-term test to the support level of 1.1720. Although EURUSD could trade sideways, the bias for a downside breakout is increasing.
USDJPY intraday analysis
USDJPY (113.16): The USDJPY remains tightly range bound with price action see testing the upside resistance at 113.00 in the past few sessions. Still, USDJPY has been posting a consolidation that could signal a possible breakout. With the Japanese elections due over the weekend, we could expect to see a breakout emerging by Monday’s open. Price action needs to post a convincing close above 113.00 in order to validate any further gains to the upside. Thus, there is a strong chance that USDJPY could push back and close within the range of 113.00 and 112.04.
XAUUSD intraday analysis
XAUUSD (1284.25): Gold prices briefly bounced higher yesterday, but the reversal was strong enough to push prices lower. The downside is now likely to see gold prices falling back to the familiar support level of 1275 – 1274 area. Establishing support here could keep gold prices from posting further declines. However, this cannot be ruled out as a break down below 1274 level could mark further drop in prices. The lower support at 1262 also comes with a horizontal support level as well as the dynamic support from the daily chart’s rising trend line.
