10 Окт 2018

FOREX Newsletter

FOREX Newsletter

October 10, 2018

 

Pulse of the Market

·      With US yields reversing lower after hitting 9-year highs, USD/JPY took another trip below 113

·      No US economic reports were released yesterday and nothing specific triggered the reversal

·      After hitting 6 week lows, the euro ended the day unchanged against the U.S Dollar

·      The strongest currency was the British pound, which was trading purely on Brexit speculation

It was a rollercoaster ride in the foreign exchange market yesterday with currencies rebounding strongly after hitting fresh lows at the start of the NY session. We often see turnarounds yesterday but the abruptness of yesterday’s moves caught many investors by surprise. No US economic reports were released yesterday and nothing specific triggered the reversal. However EUR and GBP popped right after 14 GMT, a time when many options expire. This coincided with the unexpected resignation by UN Ambassador Nikki Haley so it is not clear whether investors perceived her resignation as a lack of confidence in the Trump Administration or it was all option related flow. Either way, option expirations and Haley’s resignation should only have a short term impact on currencies. Broader themes remain in play and that’s why the recoveries in euro and other high beta currencies may not last. With US yields reversing lower after hitting 9-year highs, USD/JPY took another trip below 113. Less hawkish comments from Fed President Kaplan didn’t help. While he believes that the central bank should be bringing interest rate towards neutral, he doesn’t seem to share his peers’ concerns that inflation could get out of hand and the Fed may not need to hike rates past neutral. He advocates gradual, patient rate increases. Meanwhile President Trump isn’t letting up on China. After hitting 6 week lows, the euro ended the day unchanged against the U.S dollar. For the second day in a row, Germany’s economic reports were disappointing. Although the trade surplus increased, exports and imports fell but the main focus was Italy and not data. In an attempt to stem the rise in Italian bond yields, Economy Minister Tria tried to reassure investors that they will bring their deficit back to target and pledged to do whatever it takes to contain the rise in yields if the spread between German and Italian yields hits 400 or 500 bp. It seems that these promises may have worked, at least in the short term because the recovery in EUR/USD coincided with a backup in Italian rates. The strongest currency yesterday was the British pound, which is trading purely on Brexit speculation. Reports by Dow Jones that the EU and UK are making progress sent GBP/USD above 1.31 but nothing official has been announced. The European Union is expected to present a trade offer to the UK today. Last but not least all 3 commodity currencies performed well yesterday.

 

Time(GMT)   Economic Release IMP Actual Forecast Prior
06:00 Japan Machine Tool Orders (YoY) (SEP) Medium 5.1%
08:30 U.K Trade Balance (AUG) Medium -£1150 -£111
08:30 U.K Visible Trade Balance (Pounds) (AUG) Medium -£10900 -£9973
08:30 U.K Industrial Production (YoY) (AUG) Medium 1.0% 0.9%
08:30 U.K Manufacturing Production (YoY) (AUG) Medium 1.1% 1.1%
08:30 U.K Gross Domestic Product (MoM) (AUG) Medium 0.1% 0.3%
11:00 U.S MBA Mortgage Applications (OCT 5) Medium 0.0%
12:30 Canada Building Permits (MoM) (AUG) Medium -0.5% -0.1%
12:30 U Producer Price Index Final Demand (YoY) (SEP) Low 2.7% 2.8%
23:01 U.K RICS House Price Balance (SEP) Medium 1.0% 2.0%

 

Euro

The single currency remained close to a 7-week trough as worries about the Italian budget persisted which raised new concerns within the European Union. The current concerns over a possible economic slowdown in Italy coupled with global stock market weakness has resulted in a sell off of the single currency. Overall, the EUR/USD traded with a low of 1.1430 and a high of 1.1501 before closing the day around 1.1489 in the New York session.

 

Yen

The Japanese Yen pair traded sideways after posting losses in the past three sessions. On the release front, Japanese current account surplus dropped to JPY 1.43 trillion, shy of the estimate of JPY 1.52 trillion. There are no major U.S events on the schedule. Today, the U.S publishes PPI and the U.S Treasury Currency report, a semi-annual publication. Overall, the USD/JPY traded with a low of 112.85 and a high of 113.37 before closing the day around 112.93 in the U.S session.

 

British Pound

The British Pound ended yesterday’s session higher but Earlier in the session the pound stumbled around half a per cent after Theresa May’s spokesman, James Slack, talked down the prospect of an imminent Brexit deal. Mr Slack was speaking to reporters and his words threw a wet blanket over expectations that a deal with the EU might be forthcoming. Overall, the GBP/USD traded with a low of 1.3031 and a high of 1.3148 before closing the day at 1.3141 in the New York session.

 

Canadian Dollar

The Canadian Dollar lost ground against its U.S counterpart as the greenback broadly strengthened and the International Monetary Fund cut its forecast for global economic growth in 2018 and 2019. The IMF said that the U.S-China trade war was taking a toll and emerging markets were struggling with tighter liquidity and capital outflows. Overall, USD/CAD traded with a low of 1.2933 and a high of 1.3001 before closing the day at 1.2944 in the New York session.

 

Australian Dollar

The Australian Dollar eked out a modest bounce yesterday as the prospect of more Chinese stimulus lifted key commodity prices and squeezed short positions in the beaten-down currency. The rally was helped by gains in Chinese iron ore and coal futures on expectations Beijing would ramp up infrastructure spending to aid the economy. Overall, AUD/USD traded with a low of 0.7052 and a high of 0.7101 before closing the day at 0.7100 in the New York session.

 

Euro-Yen

EUR/JPY is trading below 14 and above 50, 100 days moving average. Fast stochastic is giving a bearish tone and MACD is also issuing a bearish stance. The Relative Strength Index is above 42 and lies below the neutral zone. In general, the pair has lost 0.25%.

 

Sterling-Yen

Currently, GBP/JPY is trading below 14 and above 50, 100 days moving average. Fast stochastic is issuing a bearish tone and MACD is also indicating a bearish stance. The Relative Strength Index is above 58 reading and lies above the neutral zone. On the whole, the pair has gained 0.15%.

  

Aussie-Yen

Currently, the cross is trading above 14, 50 and 100 days moving average. Fast stochastic is giving a bearish tone and MACD is indicating a bullish stance. The Relative Strength Index is above 41 reading and lies below the neutral region. In general, the pair has gained 0.11%.

  

Euro-Sterling

This cross is currently trading below 14, 50 and 100 days moving average. Fast stochastic is indicating a bearish tone and MACD is also issuing a bearish signal. The Relative Strength Index is above 28 and lies below the neutral region. On the whole, the pair has lost 0.39%.

  

Sterling-Swiss

This cross is trading above 14, 50 and below 100 days moving average. Fast stochastic is issuing a bullish stance and MACD is also indicating a bullish tone. The Relative Strength Index is above 70 and lies above the neutral region. In general, the pair has gained 0.36%.

 

Appendix

  

FOREX Closing Prices for October 09, 2018
Currency Open High Low Close Net Chg
EUR/USD 1.14881 1.15019 1.14308 1.14893 0.0000
USD/JPY 113.184 113.373 112.85 112.938 -0.2740
GBP/USD 1.30869 1.31483 1.30311 1.31418 0.0051
USD/CHF 0.99242 0.9954 0.99092 0.99175 -0.0005
USD/CAD 1.2955 1.30013 1.29332 1.29444 -0.0017
EUR/JPY 130.061 130.206 129.316 129.777 -0.3250
GBP/JPY 148.144 148.729 147.321 148.438 0.2150
CHF/JPY 114.026 114.08 113.642 113.842 -0.2210
AUD/JPY 80.088 80.26 79.792 80.194 0.0850
EUR/GBP 0.87776 0.87893 0.87313 0.87413 -0.0034
EUR/CHF 1.14008 1.14133 1.13668 1.13967 -0.0006
GBP/CHF 1.29871 1.3051 1.29557 1.30354 0.0046

  

Daily Pivot Points
  Trading Range  
Contract S3 S2 S1 Pivot R1 R2 R3
EUR/USD 1.1375 1.1403 1.1446 1.1474 1.1517 1.1545 1.1588
USD/JPY 112.21 112.53 112.73 113.05 113.26 113.58 113.78
GBP/USD 1.2949 1.2990 1.3066 1.3107 1.3183 1.3224 1.3300
USD/CHF 0.9855 0.9882 0.9900 0.9927 0.9945 0.9972 0.9989
USD/CAD 1.2850 1.2892 1.2918 1.2960 1.2986 1.3028 1.3054
EUR/JPY 128.44 128.88 129.33 129.77 130.22 130.66 131.11
GBP/JPY 146.19 146.75 147.60 148.16 149.00 149.57 150.41
CHF/JPY 113.19 113.42 113.63 113.85 114.07 114.29 114.51
AUD/JPY 79.44 79.61 79.90 80.08 80.37 80.55 80.84
EUR/GBP 0.8661 0.8696 0.8719 0.8754 0.8777 0.8812 0.8835
EUR/CHF 1.1325 1.1346 1.1371 1.1392 1.1418 1.1439 1.1464
GBP/CHF 1.2882 1.2919 1.2977 1.3014 1.3072 1.3109 1.3168

 

Sources:  News, Charts & Quotes (Courtesy: Reuters, US Department Of Treasury)

 

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