The USD remained depressed despite a goodish pickup in the US bond yields.
A positive mood around equity markets does little to ease the bearish pressure.
Traders now eye second-tier US economic releases for some short-term impetus.
The USD/CHF pair tumbled to over three-week lows in the last hour, with bears now looking to extend the downward momentum further below the 0.9900 handle.
The pair extended this week’s rejection slide from the vicinity of the key parity mark and remained under some heavy selling pressure for the second consecutive session amid the prevalent US Dollar selling bias.
Weighed down by persistent USD selling bias
Despite a strong intraday turnaround in the US Treasury bond yields, the USD bulls remained on the defensive in the wake of firming market expectations that the Fed will cut interest rates again later this month.
The ongoing intraday slide to the lowest level since September 25 seemed rather unaffected by a positive mood around equity markets, which tend to undermine the Swiss Franc’s perceived safe-haven demand.
Thursday’s sharp downfall could further be attributed to some technical selling on a sustained break below a two-month-old ascending trend-channel support, paving way for a further depreciating move.
Hence, some follow-through weakness, possibly towards testing September 24-25 swing lows support near the 0.9850-45 region, now looks a distinct possibility amid absent top-tier economic releases from the US.
The US economic docket features the release of Philly Fed Manufacturing Index, along with housing market data and industrial production figures, which seems unlikely to provide any immediate respite to the USD bulls but might still produce some short-term trading opportunities.
- Breaks through 0.6755-60 supply zone on upbeat Aussie employment details.
- The intraday set-up seems in favour of bullish traders, though warrant some caution.
The AUD/USD pair got a strong boost during the Asian session on Thursday and rallied back closer to the 0.6800 handle in reaction an unexpected downtick in the Aussie unemployment rate.
Given the overnight late rebound from weekly lows, a sustained move beyond a confluence resistance near the 0.6750-55 region was seen as one of the key triggers for bullish traders.
The pair now seems to have found acceptance above 50% Fibonacci level of the 0.6895-0.6671 recent slide and seems poised to build on the momentum further beyond weekly tops.
This coupled with the fact that technical indicators on 4-hourly/daily charts have again started gaining bullish momentum further reinforces the intraday constructive set-up.
However, oscillators on the 1-hourly chart are already flashing slightly overbought conditions and might turn out to be the only factor holding investors from placing aggressive bullish bets.
Hence, it will be prudent to wait for some consolidation or a modest pullback before traders again start positioning for any further appreciating move towards 0.6840 supply zone.
Meanwhile, any meaningful slide now seems to attract some dip-buying interest and help limit the downside near the mentioned resistance breakpoint – around mid-0.6700s.
AUD/USD 1-hourly chart
- Bulls failed to capitalize on the overnight late bounce from two-week lows.
- Set-up warrants some cautions before placing any aggressive directional bets.
The NZD/USD pair failed to capitalize on the overnight late rebound from two-week lows and seesawed between tepid gains/minor losses through the Asian session on Thursday.
The pair seemed struggling to extend the attempted recovery further beyond 200-hour SMA, around the 0.6300 handle, which should now act as a key pivotal point for intraday traders.
Meanwhile, oscillators on the 1-hourly chart have been gaining positive momentum and have also recovered from the bearish territory on the 4-hourly chart, suggesting some gains.
However, technical indicators on the daily chart have just started drifting into the negative territory and warrant some caution for bullish traders before placing any aggressive bets.
Having said that, the pair is likely to witness some intraday short-covering bounce on a sustained move beyond the 0.6300 handle and move back towards the 0.6330-35 supply zone.
On the flip side, immediate support is now pegged near the 0.6260 region, which if broken might turn the pair vulnerable to slide back towards multi-year lows – near the 0.6200 mark.
- The market attempting to base near term, testing 21-DMA.
- Dips lower to find support at the 55-day ma at 118.32/28.
Now testing the 21-day moving average and a 61.8% Fibonacci confluence, overcoming the 6-month downtrend at 118.77 and rising from 116.58/115.87 recent lows of late, the cross is now up to test the above the 120.00/05 (recent high and 38.2% Fibonacci retracement) and bulls are well on their way to the June lows at 120.79/96 which comes before the 121.38 late July high and the 200-day moving average of 122.32.
“The market is possibly attempting to base near term and the close above 120.05 adds weight to that view. Dips lower will find support at the 55-day ma at 118.32/28 ahead of the 117.45 uptrend,” analysts at Commerzbank argued. On the downside and wide, bears can target 115.87 ahead of the 2017 low at 114.86.
- Gold created an inside bar candle on Wednesday, signaling indecision in the market.
- A break below the candle’s low of $1,477 would put the bears in a commanding position.
Gold is currently trading at $1,488 per Oz, representing 0.13% losses on the day, having hit a high of $1,493 at 00:45 GMT.
The metal has come under pressure despite the signs of risk aversion in the global markets. The US stocks declined on Wednesday with the Dow Jones Industrial Average falling by 22.82 points. As of now, Asian stocks are also reporting marginal losses.
The International Monetary Fund (IMF) on Wednesday revised the 2019 global growth forecast lower by 0.2 percentage points to 3% – the lowest forecast since the 2008 financial crisis. Even so, the yellow metal is not drawing haven bids.
Technically speaking, the immediate outlook is neutral, as the market is looking indecisive, according to Wednesday’s inside bar candlestick pattern.
A drop below the inside bar’s low of$1,477 would mean the period indecision has ended with a downside break. That could be followed by a sell-off to Oct. 1’s low near $1,460.
The outlook would turn bullish if and when the metal rises above $1,520, invalidating the bearish lower highs setup.
Trend: Cautiously bearish
- Risk aversion keeps supporting the safe-havens, Swiss Franc (CHF) is among them.
- Doubts over the US-China trade deal grow amid political tension between the two.
- Swiss Trade Balance in the spotlight, Brexit/trade headlines remain as the key catalysts.
With increasing uncertainties over the global economic environment supporting traditional safe-havens, USD/CHF declines to a fresh one-week low of 0.9930 amid initial Thursday trading.
Among the key drivers of present risk-off mood, Brexit and the US-China trade headlines are occupying the top. Both phases show a lack of clarity over the crucial problems faced by the underlying economies and their impacts on global counterparts.
The European Union’s (EU) nearness to allow the Brexit deal to the United Kingdom (UK) is less likely to reduce hardships for the British Prime Minister (PM) Boris Johnson as Parliamentary approval in the short time becomes a tough game to play when there are many opponents, including some Tory rebels.
On the other hand, the US-China political tussle keeps growing. Initially, both the economies were at loggerheads over the Hong Kong issue while the United States’ (US) stipulations for the Chinese diplomats seem to be the latest argument point. In case of the trade deal, latest comments from the US Treasury Secretary mentions the wait for an invitation from the dragon nation to put forward some tensed topics.
Moving on, September month Trade Balance, 1,588M prior, becomes the immediate catalyst on the economic calendar to watch while keeping an eye over the trade/Brexit headlines.
Despite breaking a nine-week-old rising trend line, USD/CHF needs to break 100-day Exponential Moving Average (EMA) level of 0.9885 in order to visit late-September lows nearing 0.9845/40. During the pullback, prices can keep being on the back foot unless breaking 1.0000 mark on the daily closing basis.
The overnight Brexit optimism turned out to be rather short-lived.
The UK government was said to be downbeat on chances of a deal.
Reviving safe-haven demand for the JPY added to intraday selling bias.
The intraday selling pressure around the British Pound picked up the pace in the last hour and dragged the GBP/JPY cross to fresh session lows, farther below the 138.00 handle.
The cross witnessed some aggressive selling on Wednesday and eroded a part of the previous session’s strong gains to the highest level since late May amid fading optimism of a possible Brexit agreement. According to a UK official, the government was downbeat on chances of a Brexit deal while the Democratic Unionist Party was said to be unlikely to support anything that is negotiable.
Brexit headlines continue to influence
Given that the UK PM Boris Johnson will need support from DUP, the incoming headlines dampened prospects for any Brexit deal at the upcoming EU Summit starting this Thursday and exerted some heavy downward pressure on the British Pound. This coupled with reviving safe-haven demand for the Japanese Yen further collaborated to the pair’s sharp intraday slide to sub-138.00 levels.
As investors await further developments, Wednesday’s release of UK consumer inflation figures for September seems unlikely to provide any impetus or produce meaningful trading opportunities, rather pass unnoticed amid a flurry of incoming Brexit-related headlines.
EUR/USD moves higher on German stimulus rumour.
The Greenback rebounds from earlier weekly lows.
US Retail Sales, Beige Book next of relevance.
After attempting another test of monthly highs in the 1.1060 region, EUR/USD run out of steam and it has receded to the 1.1030 area.
EUR/USD propped up by German news
The pair has managed to gather extra upside traction after news agency Bloomberg said German officials has hinted at the likelihood that the government could pump in some fiscal stimulus measures in case the economic outlook deteriorates further.
The up move, however, was short-lived, as bulls failed to push spot further north of monthly peaks in the 1.1060/65 band.
Also adding to the somewhat downbeat sentiment in the pair, the Greenback has rebounded from weekly lows on the back of fading optimism of a breakthrough in the Brexit negotiations, as per latest news from Number 10.
Data wise in Euroland, final September CPI figures are unlikely to move the sentiment dial among investors. Across the pond, instead, all the attention will be on the publication of September’s Retail Sales along with Business Inventories, the NAHB index, TIC Flows and the release of the Fed’s Beige Book.
What to look for around EUR
The corrective upside remains well in place for the time being although well capped by the 1.1060 region amidst alternating mood in the risk trends and a steady performance from the Greenback. Looking at the broader picture, the relentless slowdown in the region does nothing but justify the ‘looser for longer’ monetary stance by the ECB and the bearish view on the single currency in the longer run. On another front, the Brexit process and its impact on the risk-associated complex is also affecting the price action around the pair while sporadic rumours of German fiscal stimulus also add volatility to the market.
EUR/USD levels to watch
At the moment, the pair is gaining 0.03% at 1.1036 and faces the next barrier at 1.1062 (monthly high Oct.11) seconded by 1.1109 (monthly high Sep.13) and finally 1.1139 (100-day SMA). On the flip side, a break below 1.0984 (21-day SMA) would target 1.0879 (2019 low Oct.1) en route to 1.0839 (monthly low May 11 2017).
In opinion of FX Strategists at UOB Group, USD/JPY is now targeting the 109.30 area in the near term.
24-hour view: “USD traded mostly sideways yesterday before suddenly surging to a high of 108.89 during NY hours. The rapid rally is running ahead itself and while USD could edge above the strong 109.00 level, the August’s peak near 109.30 is not expected to come into the picture, at least for today. Support is at 108.60 followed by 108.40”.
Next 1-3 weeks: “We highlighted on Monday (14 Oct, spot at 108.35) that “while the advance appears to be running ahead of itself, the risk is for further USD strength to 109.00”. USD soared to 108.89 yesterday (15 Oct) before ending the day on a solid note at 108.84. The positive outlook is still clearly intact and if USD were to break above 109.00, the next level to focus on is at the August’s peak near 109.30. In view of the overbought conditions, USD could ill afford to dither as a consolidation at these elevated levels would quickly increase the risk of a shortterm top. On the downside, a break of 108.10 (‘strong support’ level previously at 107.50) would indicate the current upward pressure has eased”.