By GCI Forex Research
Fundamental Outlook at 0800 GMT (EDT + 0400)
USD
The dollar was largely range-bound throughout a quiet Asia session, with little news or economic data to act as drivers. Asia equity performance has been mixed, although the S&P 500 closed fractionally ahead. EURUSD traded 1.3908-1.3993, USDJPY 80.67-80.89. Kansas City Fed President Hoenig again called for Fed rate hikes and claimed that embarking on another round of QE would be a “dangerous gamble”. New York Fed President Dudley said that he “would put very little weight” on what the market has priced in for the scale of further easing – the FOMC will decide what is best to satisfy its mandate. He said that if the Fed sticks to its mandate, then the dollar will look after itself. Existing home sales rose more than expected in September at 10.0% and the upturn in contract closings, reflected in the data, appears roughly consistent with the earlier improvements in mortgage applications and in initial sales contract signings in the pending home sales index. Although the sales pace was still weak on a historical basis, sales appear to have bottomed. The current activity index in the Dallas Fed manufacturing survey rose to 2.6 in October from -17.7 in September versus consensus -8.0. Other regional surveys had previously shown improvement or at least a fading of weakness. S&P/Case Shiller, Conference Board consumer confidence and the Richmond Fed manufacturing survey are due.
EUR
ECB Governing Council Member Weber said he saw no point in commenting on euro levels though he was critical of excessive currency volatility. Weber said the quicker the European interbank market recovers, the quicker the ECB should be able to withdraw nonconventional measures and return to a more normal monetary policy. He also said current rates are appropriate but the ECB should not keep rates too low for too long.
At 24.4% y/y (cons. 17.1%, prev. 11.2%) and 5.3% m/m, Eurozone industrial new orders for August were well above expectations. The trend in new orders suggests that industrial activity may continue to hold up. The August numbers benefited from a lower euro but it remains to be seen how recent appreciation will affect external demand.
EURUSD long positioning remains near this year’s extremes and we are still cautious on chasing significant upside above 1.40.
JPY
Rhetoric levels from Japanese officials escalated over the past 24 hours, despite the G20 pledge to “refrain from competitive devaluation”. Finance Minister Noda said Monday’s FX moves were somewhat one-sided, a term he used ahead of the Sept 15 act of intervention. He also noted that the G20 felt excessive FX moves were undesirable, a clear indication that he sees justification in the text of the communiqu? for further intervention. Noda said he is watching FX markets with great interest and is ready to take decisive action when needed.
Economy Minister Kaieda warned that “excessive intervention should be avoided but the government can be allowed to do so if currency moves are volatile and one-sided”. Deputy Finance Minister Igarashi also suggested that FX intervention remains very much an option and said: “A surprise move would probably be effective to some extent. We can’t make an announcement in advance that we will act, but, on the other hand, we can’t say that we won’t act either.” He had earlier said that any intervention would be aimed at restraining excessive currency swings and the latest G20 language appeared to give them the green light on that basis.
GBP
The advance estimate of Q3 GDP is expected lower at consensus 0.4% q/q (UBSe 0.5%) after 1.2% previously. But on a y/y basis, we expect to see an increase from the previous reading. We remain cautious on sterling given the government’s recently announced spending cuts.
TECHNICAL OUTLOOK
USDJPY targets 79.75.
EURUSD BULLISH Remains constructive above 1.3637/1.3559 support zone, trigger to bear trend. Resistance at 1.4159 ahead of 1.4373.
USDJPY BEARISH The pair targets 79.75 with scope for 77.91 next. Resistance at 81.49 yesterday’s high.
GBPUSD BULLISH Holds above 1.5606 keeping our focus on the upside. Resistance at 1.5942 ahead of 1.6107.
USDCHF BEARISH Recovery has scope for 0.9918 breakout low. Next big support below 0.9463 at 0.9225.
AUDUSD BULLISH Upside potential targets 1.0004; move above the level would expose 1.0166. Support defined at 0.9662 ahead of 0.9542 reaction low.
USDCAD BEARISH Break of 1.0162 brings focus back to the downside with next support at 0.9981. Tough resistance at 1.0380/1.0407 area.
EURCHF BULLISH Violation of 1.3665 leaves next resistance at 1.3924. Near-term support at 1.3456 ahead of 1.3265.
EURGBP BULLISH Momentum is positive; expect extension of gains towards 0.9039 and 0.9150 next. Near-term support defined at 0.8773.
EURJPY BULLISH Need a break below 111.56 to trigger bear trend. Upside capped at 115.68.
Forex Daily Market Commentary provided by GCI Financial Ltd.
GCI Financial Ltd (”GCI”) is a regulated securities and commodities trading firm, specializing in online Foreign Exchange (”Forex”) brokerage. GCI executes billions of dollars per month in foreign exchange transactions alone. In addition to Forex, GCI is a primary market maker in Contracts for Difference (”CFDs”) on shares, indices and futures, and offers one of the fastest growing online CFD trading services. GCI has over 10,000 clients worldwide, including individual traders, institutions, and money managers. GCI provides an advanced, secure, and comprehensive online trading system. Client funds are insured and held in a separate customer account. In addition, GCI Financial Ltd maintains Net Capital in excess of minimum regulatory requirements.
DISCLAIMER: GCI’s Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be U.S.ed as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.
