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Technical Analysis for 06/09/2016

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Technical Analysis for 06/09/2016

Technical Analysis for 06/09/2016
September 06
09:00 2016

EUR / USD – Euro US Dollar

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The main event of the day will become the release publication on the business activity in the US service sector in August. The non-production sector accounts for about 65% of the US GDP and in this regard the ISM report always causes an increased interest from investors. Will we see today the strong data that support the dollar? In my opinion, the chances for such an outcome are sufficiently small. Firstly, last week ISM published a very negative report on the business activity for the manufacturing sector: the index fell below 50%, which indicates a decline. The final figure of 49.4% has become the lowest level for the last five months. It should be noted that the indicators of ISM Manufacturing and ISM Non-Manufacturing have a close direct correlation. In this regard, today it is possible to expect the reduction of the business activity in the services sector. Secondly, the labor market report for August, which was published on Friday, also indirectly points to the weak data release: the employment growth rate in services has slowed. On the eve the US securities were not traded as the national holiday was celebrated in the United States. Against this background, we have received only the yield differential of 10-year government bonds of Germany and the UK, which showed the growth rate by 0.03% that has been marginally positive for the single European currency.

Against this background, during the day Buy positions should be opened on the reduction of quotations in the area of 1.1145 / 1.1115 and it is necessary to fix the profit at the level of 1.1200.

GBP / USD – British Pound Dollar

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The course of the trading today will be determined by two key factors. Firstly, a possible volatile dynamics of  the business activity indicators in the services sphere of the United Kingdom and the United States will support the British currency. On the eve Markit reported about the growth of the non-manufacturing PMI for the UK by 52.9% against 47.4% in the previous month. As noted earlier, ISM index for the services sector can go out worse than expected. This will help to reduce the spread of British and American figures to the lowest level since January this year. This dynamics is traditionally perceived positively by investors, and it is usually seen an increase in pairs in the short term. Another positive factor for the British currency is the stabilization of the black gold market. On Monday the Ministers of Energy of the Russian Federation and Saudi Arabia signed an agreement on cooperation.  In the opinion of A. Novak it is a historical event. Both sides have expressed a desire to develop a set of measures to maintain the current level of quotations. However, Saudi Arabia’s Energy Minister said that currently there was no need to limit the production growth. It was also noted that the oil market situation was improving day by day. Thus, this is a positive signal for the short term. But, since there is no need to freeze the oil production and if to take into account that oil shale mining companies in the US will increase the volume (such statements were made in August), the quotations of oil will go down again in the near future.

Against this background, during the day Buy positions should be opened on the reduction of quotations in the area of 1.3280 / 1.3250 and it is necessary to fix the profit at the level of 1.3335.

USD / JPY – US Dollar Japanese Yen

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At present a mixed background is being formed. On the one hand, the output of the weak macroeconomic data from the United States will cause a reduction in the yield differential of 10-year government bonds of the USA and Japan. This will reduce the attractiveness of investments in the US assets and leave the dollar without strong support. On the other hand, an increase in “risk appetite” was observed at the leading stock exchanges on Monday. This traditionally has a positive impact on the quotes couples as the volume of trade operations CARRY TRADE through the Japanese currency increases. On the eve the positive dynamics was demonstrated by the funds which were investing in Emerging Markets, which is a good leading indicator of the demand for risky assets. On the eve the stocks markets in the USA were closed on the occasion of the state holiday. And if investors on the NYSE today support the positive trend of their foreign counterparts, the pair may reach new highs.

Against this background, during the day the flat can be expected within the range of 102.80 -104.10.

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