The EUR/USD pair fell hard during the course of the week, slamming into the 1.25 level. That level of course is a large, round, psychologically significant number and therefore we would not be surprise at all to see a little bit of a bounce from here. However, we believe that the 1.28 level above is massively resistive, and as a result we would be willing to sell on some type of pullback at this point in time. We have no interest in buying, as we believe that although this market is oversold, it is far too risky to go long of the Euro right now.
After trading down to 1.2500 on Friday, the EUR/USD is posting an inside day with a bias to the upside. Prior to Friday’s U.S. jobs report, the Euro had been consolidating against the U.S. Dollar. This was because the European Central Bank’s monetary policy decision on Thursday was a little less than traders expected. Most traders were looking for the announcement of more aggressive stimulus measures. Instead the ECB maintained its current status, opting instead to release additional stimulus as needed. This decision could be behind this morning’s slight upside bias. If the rally continues today then look for a test of the long-term downtrending angle at 1.2612. The market picks up strength on a breakout over this level with the next target 1.2714.Based on the short-term range of 1.2994 to 1.2500, the main objective of this developing rally is 1.2747 to 1.2805.
The AUD/USD pair initially rallied during the course of the week, slamming into the 0.88 handle. That level of course is massively resistive, and as a result we feel that the sellers will continue to step into this marketplace every time we rally. After all, the gold markets have been absolutely brutalize lately, and have broken down below the $1200 level, which is a sell signal for the longer-term charts as well. We believe that the gold markets are heading down to the $1000 handle, and that should translate into a much lower valued Australian dollar.
Technically, the AUD/USD traded through the January 24 bottom at .8659, making a new low for the year. It did close over back over this level, suggesting weak sell stops were hit. Today, sellers are likely to go after this level with more conviction.The first downside target is a steep downtrending angle at .8561. Crossing over to the bearish side of this angle should lead to a test of the major multi-year 50% level at .8544. Traders should watch for a technical bounce, following a test of this level.
Fundamentally, sellers took control of the market, following the release of the September jobs report which showed the U.S. economy added 248,000 new jobs versus pre-report estimates of 215,000. The unemployment rate also fell below 6.0%. The news drove up U.S. interest rates which made the U.S. Dollar a more attractive investment than the Australian Dollar.
The GBP/USD pair initially tried to rally during the course of the week, but then fell hard. We ultimately broke down below the bottom of the 1.60 handle, and as a result it looks like we are testing serious support levels right now. The British pound continues to suffer overall, and we believe that if we can break down below the 1.58 level, we should then head to the 1.55 handle next. Any rally at this point time will be treated with suspicion, and we believe the sellers will get involved when those happen.
Rally should continue to offer selling opportunities, and that’s exactly what we will treat them as. We don’t have any interest in buying this pair right now, so this is a “sell only” type of market. We believe that the US dollar will continue to reign supreme given the fact that the employment numbers were so strong.
The USD/JPY pair fell to the 108 level during the course of the week, but then bounced enough to form a hammer. The hammer of course is a very bullish sign, and as a result we feel that this market is going to continue going higher. On top of that, the Bank of Japan continues its ultra-easy monetary policy, which of course will ring down the value of the Japanese yen overall. On the other side the Pacific, we have the Federal Reserve and the tightening of monetary policy via tapering off of quantitative easing, which of course should bring up the value the US dollar.
The 110 level above of course is massively resistive, and as a result the market needs to close above that level on a daily timeframe in order for us to start buying, which would send the market heading back towards the 115 level, and continue to offer “buy on the dips” type of opportunities. Any pullback from here should offer buying opportunities as well, as the 105 level is the “floor” in this market.
Data Update for 6th to 10th Oct 2014
|2:30am||NZD||High||NZIER Business Confidence||32|
|Tentative||JPY||High||Monetary Policy Statement|
|AUD||High||RBA Rate Statement|
|Tentative||JPY||High||BOJ Press Conference|
|2:00pm||GBP||High||Manufacturing Production m/m||0.20%||0.30%|
|6:00pm||CAD||High||Building Permits m/m||11.80%|
|11:30pm||USD||High||FOMC Meeting Minutes|
|4:30pm||GBP||High||Asset Purchase Facility||375B||375B|
|GBP||High||Official Bank Rate||0.50%||0.50%|
|Tentative||GBP||High||MPC Rate Statement|
|8:30pm||EUR||High||ECB President Draghi Speaks|