EUR/JPY looks to add to the rally near 121.00.
The cross remains bid amidst a weaker Dollar.
Focus of attention remains on Brexit deal and UK politics.
The upbeat momentum in the single currency continues to prop up the rally in EUR/JPY to the 121.00 region, where some decent resistance has emerged so far.
EUR/JPY focused on Brexit, risk appetite
The cross keeps its march north unabated for the second week in a row today, trading in the area of 3-month peaks in the 121.00 neighbourhood.
The positive momentum surrounding the European currency coupled with persistent outflows from the Japanese safe haven in favour of riskier assets have been sustaining the sharp rebound in the cross to levels last seen in late July.
In addition, the recently clinched Brexit deal has added to the broad-based positive momentum in the risk-complex, giving extra support to the upside in the cross.
In the meantime, markets’ attention remains on the EU Summit, which finishes later today and the Brexit vote at the UK Parliament tomorrow.
EUR/JPY relevant levels
At the moment the cross is gaining 0.05% at 120.90 and faces the next hurdle at 121.35 (monthly high Oct.17) seconded by 122.26 (200-day SMA) and then 123.35 (monthly high Jul.1). On the flip side, a breach of 119.79 (100-day SMA) would expose 118.35 (55-day SMA) and finally 117.07 (monthly low Oct.3/7).
Crude oil extends recovery on Friday, WTI trades above $54.
US Dollar Index moves sideways above the 97.50 mark.
FOMC members George, Kaplan, and Clarida are scheduled to speak later in the day.
The USD/CAD pair lost nearly 70 pips on Thursday amid the broad-based selling pressure surrounding the Greenback and the positive impact of recovering crude oil prices on the commodity-related Loonie. After posting its lowest daily close since late July at 1.3137, the pair had gone into a consolidation phase on Friday and is moving in a very tight channel. As of writing, the pair was posting small gains at 1.3140.
USD remains under pressure
Disappointing macroeconomic data releases from the United States (US) on Thursday, which showed a large contraction both in manufacturing and industrial production, forced the US Dollar Index to slump to its lowest level in seven weeks at 97.50. In the absence of fundamental drivers that could help the USD find demand, the pair is struggling to gain traction.
On the other hand, after adding more than 2% on Thursday, the barrel of West Texas Intermediate (WTI) continued to edge higher ahead of the weekly Baker Hughes rig count data. At the moment, the WTI is up 0.55% on the day at $54.40.
Later in the session, Kansas City Fed President Esther George, Dallas Fed President Robert Kaplan, and Federal Reserve Vice-Chair Richard Clarida will be delivering speeches.
Industrial production in China expanded at a more robust pace than expected in September.
US Dollar Index continues to move sideways near the 97.50 mark.
NZD/USD remains on track to post gains for the fourth straight week.
The NZD/USD pair built on Thursday’s gains and climbed to its highest level since mid-September at 0.6377 on Friday. As of writing, the pair was trading at 0.6370, adding 0.4% on a daily basis. Unless the pair makes a sharp U-turn and erases more than 50 pips in the remainder of the day, it will close the week in the positive territory for the fourth straight week.
Chinese data help antipodeans
Earlier in the day, the data from China showed that the Chinese economy expanded by 1.5% on a quarterly basis in the third quarter to match the market consensus. Additionally, industrial production in China in September rose by 5.8% on a yearly basis following August’s reading of 4.4% and beat analysts’ estimate of 5% to provide a boost to antipodeans.
On the other hand, the selling pressure surrounding the Greenback remained intact on Friday and helped the pair stretch higher. The upbeat market sentiment dampened the demand for the USD throughout the week and the disappointing macroeconomic data releases from the US put additional weight on the currency’s shoulders.
Ahead of Kansas City Fed President Esther George, Dallas Fed President Robert Kaplan, and Federal Reserve Vice-Chair Richard Clarida’s speeches later in the session, the US Dollar Index is at its lowest level since August 23 at 97.47, losing 0.1% and 0.9% on a daily and weekly basis, respectively.
The USD remained depressed amid increasing odds of a further Fed rate cut move.
The prevalent risk-on mood/recovering US bond yields might help limit the downside.
Investors look forward to speeches by influential FOMC member for a fresh impetus.
The USD/CHF pair failed to capitalize on its attempted intraday bounce and is currently placed at the lower end of its daily trading range, or over three-week lows near the 0.9860 region.
Following this week’s sharp pullback from the vicinity of the key parity mark, the pair lost some additional ground for the third consecutive session on Friday and fell to an intraday low level of 0.9865 amid persistent US Dollar selling bias. Firming expectations that the Fed will cut interest rates again in October kept the USD bulls and continue exerting some downward pressure on the major.
Fading safe-haven demand does little to lend support
The pair added to its losses recorded over the past two trading session but is likely to show some resilience at lower levels on the back of subdued demand for traditional safe-haven assets. This was evident from a goodish pickup in the US Treasury bond yields, which helped limit any deeper USD downfall and might further collaborate towards limiting the downside.
However, given the previous session’s decisive break below a two-month-old ascending trend-channel, any meaningful recovery attempt might still be seen as an opportunity to initiate some fresh bearish positions. In absence of any major market-moving economic releases, the USD price dynamics/broader market risk sentiment might continue to act as key determinants of the pair’s momentum.
Later during the US session, speeches by influential FOMC members – Dallas Fed President Robert Kaplan, Kansas City Fed President Esther George and Fed Governor Richard Clarida – will now be looked upon to grab some short-term trading opportunities.
- The AUD/JPY pair is struggling to pick up a bid despite the solid rebound in China’s factory activity.
- China’s GDP growth slowed to the lowest since 1992 in the third quarter.
- The pair may drop below 74.00 if equities turn risk-averse due to the dismal China GDP.
AUD/JPY is struggling to gather upside traction and remains well below Thursday’s high of 74.40 despite the stronger-than-expected rebound in China’s factory activity.
The Industrial Production rose at an annualized rate of 5.8%, beating the forecasted rebound to 5% from August’s print of 4.4% by a big margin.
Even so the AUD, a proxy for China and a Commodity Dollar, is not finding takers. Notably, AUD/JPY has pulled back from 74.30 to 74.15. The AUD’s failure to cheer the Industrial Production could be associated with China’s dismal third-quarter growth rate released at 02:00 GMT.
The gross domestic product (GDP) for the July-September period came in at 6% – the worst quarterly reading since 1992 – missing the forecasted rate of 6.1% and down from the preceding quarter’s 6.2% print.
Further, Mao Shengyong, spokesman for the National Bureau of Statistics, said the country is facing mounting risks and challenges both at home and abroad, possibly keeping traders from buying the AUD on upbeat factory data.
Looking forward, the AUD/JPY pair may face increasing selling pressure if the global equities turn risk-averse in response to the dismal China GDP, boosting demand for the anti-risk Japanese Yen. As of writing, the pair is trading largely unchanged on the day at 74.11.
- AUD/USD remains firm on China data.
- China GDP slipped below forecast on YoY, Industrial Production rallied.
- Market sentiment remains lackluster amid an absence of major trade/Brexit news.
With China’s Industrial Production and Retail Sales rising to a three-month high, AUD/USD remains on the front foot while taking the bids to 0.6832 during early Friday.
Although the quarter-on-quarter (QoQ) figure of China’s third-quarter (Q3) Gross Domestic Product (GDP) met 1.5% forecast, YoY numbers lagged below 6.1% expectations to 6.0%. However, September month Retail Sales matched upbeat forecast of 7.8% and the Industrial Production (IP) for the same month grew past-5.0% market consensus to 5.8%.
Read: China’s GDP growth slows to 6% in Q3 while Industrial Production betters estimates, AUD keeps gains
Market sentiment turns sour recently as the United States’ (US) planned tariff on the European Union (EU) goods kick-on today. It should also be noted that the trade-negative comments from the White House Economic Adviser Larry Kudlow and the mixed messages from the Reserve Bank of Australia (RBA) Governor add to the markets’ trouble amid a lack of major news form the trade/Brexit front off-late.
Having witnessed initial reaction to the data from the key customer, Aussie traders will keep an eye over the final round of Fedspeak before the Federal Reserve officials enter the blackout period before the next policy decision. As a result, comments from Robert Kaplan, Esther George, and the Vice-Chair Richard Clarida will be closely followed considering the recent increase in the odds of the Fed rate cut.
Prices need to rally past-100-day Exponential Moving Average (EMA) level close to 0.6855 before advancing further towards 0.6900 round-figure, if not then 0.6810/05 will be the key to watch as a downside break of the same will recall 0.6780 and 0.6755/50 rest-points back to the chart.
- GBP/JPY has backed off from highs near 141.50 registered on Thursday.
- A deeper drop to key support at 139.32 looks likely due to the bearish divergence of a technical indicator.
GBP/JPY is currently trading near 139.70, representing a 0.22% loss on the day, having hit a high of 141.50 on Thursday on Brexit optimism.
The ongoing pullback is likely to be extended further to the 50-hour moving average (MA) support, currently at 139.32, as the 4-hour chart is reporting a bearish divergence of the relative strength index (RSI). Further, the long upper wick attached to Thursday’s candle and the overbought reading (above 70) on the RSI indicates buyer exhaustion.
It is worth noting that the 50-hour MA consistently reversed pullbacks throughout the recent 1,100 pip rally from 130.43 to 141.50. The short-term outlook, therefore, would turn bearish if the 50-hour MA support is breached.
A strong bounce from that key support may yield a re-test of Thursday’s high of 141.50, although as of now, that looks unlikely.
Trend: Deeper pullback likely
- USD/CHF struggles around 38.2% Fibonacci retracement after declining to a three-week low.
- Bearish MACD favors further downpour to 0.9800/9795 support-zone.
With its sustained trading below 50-day SMA, coupled with the bearish MACD, USD/CHF stays on the sellers’ radar even if it clings to 0.9880 during early Friday.
The September 24 low nearing 0.9840 acts as immediate support for the pair while the previous month low and 23.6% Fibonacci retracement of April-August south-run, close to 0.9800/9795 support-zone, could restrict further downside.
During the pair’s further weakness below 0.9795, 0.9715 and 0.9690 will become bears’ favorites.
Should traders ignore a bearish signal from the 12-bar Moving Average Convergence and Divergence (MACD), they need to provide a daily closing beyond 50-day Simple Moving Average (SMA) surrounding 0.9885 to aim for last week’s low near 0.9905.
However, odds of short-term weakness can’t be defied unless the pair rises back beyond 0.9947/50 confluence including a two-month-old rising trend line and 50% Fibonacci retracement.
USD/CHF daily chart
The US Dollar Index extends slide on Thursday.
Crude oil prices stay relatively quiet ahead of weekly inventory data from the United States (US).
Manufacturing sales in Canada is expected to expand by 0.6% in August.
After closing the previous day virtually unchanged near the 1.32 handle, the USD/CAD pair came under renewed bearish pressure and fell to its lowest level in five weeks at 1.3157 before rebounding modestly. As of writing, the pair was trading at 1.3173, erasing 0.22% on a daily basis.
USD struggles to find demand
The broad-based USD weakness on Thursday seems to be driving the pair’s market action. Although there were no fundamental developments impacting the Greenback’s market valuation directly, the decisive gains seen in major European currencies, especially the British Pound, following the announcement of a Brexit deal hurt the demand for the USD.
The US Dollar Index, which closed the previous two days in the negative territory and slumped to its lowest level since late August at 97.50 earlier in the day, was last down 0.3% on the day at 97.70.
Later in the session, manufacturing shipments and ADP private-sector employment data from Canada will be looked upon for fresh impetus. The US economic docket will feature housing starts, building permits, and weekly jobless claims figures.
Meanwhile, crude oil prices stay resilient supported by the upbeat market sentiment on Thursday and help the commodity-related Loonie preserve its strength. As of writing, the barrel of West Texas Intermediate (WTI) was trading at $53.10, adding 0.25% on the day. The Energy Information Administration’s (EIA) weekly crude oil stock report could be the next catalyst on the WTI.
EUR/GBP loses further ground to the 0.8570 region.
UK-EU clinched Brexit deal.
Attention now shifted to UK Parliament vote on Saturday.
The buying pressure around the Sterling has dragged EUR/GBP to fresh multi-month lows in sub-0.8600 levels on Thursday.
EUR/GBP (much) weaker after deal
The European cross continues to suffer the greatly improved sentiment surrounding the British Pound, particularly after UK and EU negotiators reached an agreement earlier in the European morning.
The focus of attention has now gyrated to the 2-day EU Summit in Brussels, which starts today and the UK Parliament, which is due to vote on the recent Brexit deal. In addition, UK PM Boris Johnson is expected to ask his EU peers to rule out another extension of Article 50.
In the UK docket, headline Retail Sales came in flat on a monthly basis during last month, missing consensus. On a brighter note, Core sale expanded more than estimated 0.2% inter-month.
EUR/GBP key levels
The cross is up 0.07% at 0.8633 and faces the next resistance at 0.8807 (61.8% Fibo of the May-August rally) followed by 0.8820 (200-day SMA) and finally 0.8906 (50% Fibo of the May-August rally). On the other hand, a drop below 0.8574 (monthly low Oct.17) would expose 0.8488 (monthly low May 6) and then 0.8474 (2019 low Mar.12).