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Technical Analysis for 07/09/2016

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Technical Analysis for 07/09/2016

Technical Analysis for 07/09/2016
September 07
09:00 2016

EUR / USD – Euro US Dollar

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During the day we should expect the quotations growth of the single European currency. After the publication of the weak data on the ISM index for the US services the yield differential on 10-year German and the US government bonds began to show the growth, which is a positive factor for the euro. It should be noted that it is the first time when the European PMI index for the euro zone service sector on the results of August this year has outrun the US similar figure. At such times investors are tending to reduce the proportion of the US currency in their portfolios at least in the short term. Since today the important macroeconomic statistics is not expected from the euro zone and the US, investors will build up long positions in the direction of the figure 13.

Against this background, during the day Buy positions on the reduction of quotations should be opened within1.1235 / 1.1200 and it is preferable to record profits at the level of 1.1300.

GBP / USD – British Pound Dollar

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During the day we should expect the continuation of an upward trend for three reasons. Firstly, the release on the business activity in the US services sector, which was published on the eve, has disappointed investors because of the extremely weak data. ISM index has fallen to its lowest level since February 2010. The spread of the PMI indicators of the UK and the US has gone into the positive area for the first time over the year. Traditionally, the traders perceive this dynamics positively. It should be noted that all of the key articles in the ISM report showed a decline compared to the previous month. If we add the fact that on 1 September the business activity in the manufacturing sector dropped below 50%, then we can say with confidence that the US Federal Reserve will not raise interest rates at the meeting on 21 September. ISM indexes are defining indicators of the GDP and this negative trend indicates that the economic growth will be fairly sluggish. The fact that the FOMC will not change the monetary policy in two weeks is a positive factor for the bulls regarding the pound. Secondly, the dynamics of credit markets also indicates an upward trend for the British currency: the yield of 10-year UK government bonds is growing in relation to their analogues from the United States and Germany, which increases the attractiveness of investments in British assets. Thirdly, in the afternoon we can expect the moderately positive rhetoric of the financial authorities of the United Kingdom with respect to the inflation outlook. The labor market shows an upward trend (the growth of employment and average earnings), which traditionally contributes to the growth of consumer price index. Also, a sharp drop of the pound rate after the announcement of the results of the British referendum on the EU membership has been the inflation factor for the economy.

Against this background, during the day the Buy positions on the reduction of quotations should be opened within 1.3410 / 1.3370 and it is preferable to record profits at the level of 1.3480.

USD / JPY – US Dollar Japanese Yen

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At present a mixed background is being formed. On the one hand, a strong reduction of the yield spreads of the United States and Japan government bonds will reduce the attractiveness of investments in the US currency and have a positive impact on the value of the yen. On the other hand, the US stock market is not going to fall. This is happening despite the weak macroeconomic statistics of the last days regarding the labor market and business activity in the manufacturing and services sectors. But on the contrary, we see that investors are actively repurchase drawdowns and gradually move the index $ & P500 up. It should also be noted that on the eve the Russian MICEX stock index updated its historical maximum once more. This dynamics indicates that the risk appetite is still at a high level, which in its turn puts pressure on the Japanese yen as a funding currency. The day before the couple showed a decline of 1.3%, so the current levels have been attractive for the opening of the Buy positions as in the middle of the month the Bank of Japan may announce about new stimulus measures, which traditionally contribute to the couple growth.

Against this background, during the day the flat can be expected within the range of 101.60 – 102.90.

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