27 9 月 2018

FOREX Newsletter

FOREX Newsletter

September 27, 2018

 

Pulse of the Market

·      The Federal Reserve raised interest rates for the third time this year by 25bp

·      USD/CAD broke to the upside following the Federal Reserve’s monetary policy announcement

·      After consolidating for 4 consecutive trading sessions, EUR/USD is prime for a breakout

·      Sterling, on the other hand, was surprisingly resilient due largely to the massive short exposure

 

The Federal Reserve raised interest rates for the third time this year by 25bp. The U.S dollar appreciated against all of the major currencies after the rate decision except for the Japanese Yen and Swiss Franc. The inconsistency in the Dollar’s performance is a sign of risk aversion. The Dow dropped more than 100 points today while 10-year yields fell nearly 5bp. The Fed’s rate hike should have driven Treasury yields higher especially after they said not much has changed since June, but the fact that it indicates that Chairman Powell failed to satisfy the bulls. Between the central bank’s economic projections, the dot plot and Powell’s comments on the economy, there’s no question that the Fed will continue to raise interest rates. Fed fund futures were unchanged after the rate decision with the market pricing in 77% chance of a follow-up move in December. Powell described the economy as strong and said he’s positive on growth. Investors were hoping for unambiguously hawkish comments from the Fed Chair and while he had a lot of good things to say, the mere mention of the possibility of rate cuts capped the rally. According to Powell, if inflation surprises to the upside, they could move faster but if the economy slows they would probably cut rates. They also oppose taking away more of their tools (in case there’s a need for them). While the risk of easing is minimal, because of these comments today’s move can’t be described as a hawkish hike (it wasn’t a dovish one either). Looking ahead, 113 could turn into a double top for USD/JPY. After consolidating for 4 consecutive trading sessions, EUR/USD is prime for a breakout. Although tomorrow’s ECB economic bulletin and Eurozone consumer confidence report are likely to be positive, we think EUR/USD is vulnerable to a correction. Shorter term charts show a strong rejection of 1.18 and if EUR/USD breaks below 1.1725, we could see a swift sell-off towards 1.1670.

 

Time(GMT)   Economic Release IMP Actual Forecast Prior
06:00 German GfK Consumer Confidence (OCT) Medium   10.5 10.5
06:35 BOJ Kuroda speaks in Tokyo High      
08:00 ECB Publishes Economic Bulletin Medium      
12:00 German Consumer Price Index (YoY) (SEP) High   2.0% 2.0%
12:30 U.S Advance Goods Trade Balance (AUG) High   -$70.6b -$72.2b
12:30 U.S Gross Domestic Product Annualized (QoQ) (2Q) High   4.2% 4.2%
12:30 U.S Personal Consumption (2Q) Medium   3.8% 3.8%
12:30 U.S Durable Goods Orders (AUG ) High   1.9% -1.7%
12:30 U.S Initial Jobless Claims (SEP 22) Medium   210k 201k
13:30 ECB President Draghi Addresses ESRB Conference in Frankfurt High      
14:00 BOE’s Carney chairs panel in Frankfurt. High      
14:00 U.S Pending Home Sales (YoY) (AUG) Medium     -0.5%
20:30 U.S Powell Makes Brief Remarks on U.S Economy at Senate Event High      
21:45 Canada Poloz Speech in New Brunswick High      
23:01 U.K GfK Consumer Confidence (SEP) Medium   -8 -7

 

Euro

The single currency ended yesterday’s trading session lower as the dollar gained in choppy trading after the Federal Reserve raised U.S interest rates as expected for the eighth time, flagged more rate hikes and signaled the end of the “accommodative” policy era. The statement said the Fed still foresees another rate hike in December. Overall, the EUR/USD traded with a low of 1.1724 and a high of 1.1796 before closing the day around 1.1737 in the New York session.

 

Yen

The Japanese Yen spiked higher shortly after the release of the U.S Fed interest rate decision in reaction to the central bank’s monetary policy statement and comments from Fed Chairman Jerome Powell. That move raised the most questions with some traders saying this likely means that the Fed no longer believes its policy is accommodative. Overall, the USD/JPY traded with a low of 112.61 and a high of 113.11 before closing the day around 112.70 in the U.S session.

 

British Pound

The British Pound slipped as investors remained cautious about negotiations between Britain and the EU on a Brexit deal and as broader currency markets waited for an expected Fed interest rate hike. With little in the way of big market-moving economic data in the near-term, domestic politics and sentiment around Brexit talks remain the driver for the pound. Overall, the GBP/USD traded with a low of 1.3136 and a high of 1.3215 before closing the day at 1.3164 in the New York session.

 

Canadian Dollar

The Canadian Dollar weakened to its lowest in more than a week against the greenback as the Fed hiked interest rates and investors worried that Canada would be left out of a trade deal with its NAFTA counterparts. Canadian Prime Minister Justin Trudeau shrugged off U.S pressure to quickly agree to a deal on the North American Free Trade Agreement. Overall, USD/CAD traded with a low of 1.2942 and a high of 1.3022 before closing the day at 1.3016 in the New York session.

 

Australian Dollar

The Australian Dollar held firm ahead of what should be a well-flagged rise in US interest rates. The Australian Dollar traded slightly lower today in Asian session as ABS job vacancy data softened and Chinese industrial profits pulled back sharply. The US Federal Open Market Committee raised its interest rates yesterday. Overall, AUD/USD traded with a low of 0.7238 and a high of 0.7313 before closing the day at 0.7255 in the New York session.

 

Euro-Yen

EUR/JPY is trading above 14, 50 and 100 days moving average. Fast stochastic is giving a bullish tone and MACD is also issuing a bullish stance. The Relative Strength Index is above 764 and lies above the neutral zone. In general, the pair has lost 0.44%.

 

Sterling-Yen

Currently, GBP/JPY is trading above 14, 50 and 100 days moving average. Fast stochastic is issuing a bullish tone and MACD is also indicating a bullish stance. The Relative Strength Index is above 61 reading and lies above the neutral zone. On the whole, the pair has lost 0.34%.

  

Aussie-Yen

Currently, the cross is trading above 14 and below 50, 100 days moving average. Fast stochastic is giving a bullish tone and MACD is also indicating a bullish stance. The Relative Strength Index is above 58 reading and lies above the neutral region. In general, the pair has lost 0.11%.

  

Euro-Sterling

This cross is currently trading above 14, 50 and 100 days moving average. Fast stochastic is indicating a bullish tone and MACD is also issuing a bullish signal. The Relative Strength Index is above 51 and lies above the neutral region. On the whole, the pair has lost 0.09%.

 

Sterling-Swiss

This cross is trading below 14, 50 and 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 52 and lies above the neutral region. In general, the pair has lost 0.02%.

 

Appendix

  

FOREX Closing Prices for September 26, 2018
Currency Open High Low Close Net Chg
EUR/USD 1.17636 1.17964 1.17245 1.17379 -0.0027
USD/JPY 112.958 113.117 112.613 112.709 -0.2420
GBP/USD 1.3181 1.32159 1.31363 1.31643 -0.0016
USD/CHF 0.96479 0.96998 0.96215 0.96582 0.0011
USD/CAD 1.29525 1.30229 1.29426 1.30164 0.0065
EUR/JPY 132.907 133.093 132.208 132.318 -0.5850
GBP/JPY 148.911 149.07 148.256 148.392 -0.5020
CHF/JPY 117.048 117.178 116.426 116.667 -0.3770
AUD/JPY 81.878 82.472 81.738 81.774 -0.0910
EUR/GBP 0.89217 0.89441 0.8899 0.89156 -0.0008
EUR/CHF 1.13505 1.13825 1.133 1.13387 -0.0014
GBP/CHF 1.27188 1.27773 1.26861 1.27162 -0.0002

 

 

 

Daily Pivot Points
  Trading Range  
Contract S3 S2 S1 Pivot R1 R2 R3
EUR/USD 1.1638 1.1681 1.1709 1.1753 1.1781 1.1825 1.1853
USD/JPY 112.01 112.31 112.51 112.81 113.01 113.32 113.52
GBP/USD 1.3049 1.3093 1.3128 1.3172 1.3208 1.3252 1.3288
USD/CHF 0.9542 0.9582 0.9620 0.9660 0.9698 0.9738 0.9776
USD/CAD 1.2885 1.2914 1.2965 1.2994 1.3045 1.3074 1.3126
EUR/JPY 131.10 131.65 131.99 132.54 132.87 133.42 133.76
GBP/JPY 147.26 147.76 148.08 148.57 148.89 149.39 149.70
CHF/JPY 115.58 116.01 116.34 116.76 117.09 117.51 117.84
AUD/JPY 80.78 81.26 81.52 81.99 82.25 82.73 82.99
EUR/GBP 0.8850 0.8874 0.8895 0.8920 0.8940 0.8965 0.8985
EUR/CHF 1.1266 1.1298 1.1318 1.1350 1.1371 1.1403 1.1423
GBP/CHF 1.2585 1.2635 1.2676 1.2727 1.2767 1.2818 1.2858

 

 

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

 

 

Disclaimer

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