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Technical Analysis for 15/09/2016

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Technical Analysis for 15/09/2016

Technical Analysis for 15/09/2016
September 15
12:26 2016

EUR / USD – Euro US Dollar

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During the day Sell positions should be opened for two reasons. Firstly, today we can expect moderately positive data on retail sales in the United States for August, which will support the dollar. In August the consumer confidence index from the Central Bank reached the maximum level over the past ten months, which indicates an increase in consumer spending. However, don’t count on strong data today amid the falling of car sales, since this component accounts for about 25% of retail sales. Secondly, on the eve quotes of black gold slipped by 2.3% after the publication of the data on stocks of crude oil from the US Department of Energy. The data showed the production increase to 8.49 million barrels per day, which has been the highest level for the last three weeks. Last week the consumption of oil fell by 200 thousand barrels per day. Thus, we see that the growth of the number of drilling rigs leads to the increase in the production of oil. In my opinion, this is just the beginning of a trend. Today, we can expect the further decline in quotations because the world is experiencing the capital escape from risky assets, which include oil. The fall in oil prices traditionally provides the support to the US currency as the raw material is quoted in dollars.

Against this background during the day Sell positions on the growth of quotations should be opened within 1.1260 / 1.1290 and it is preferable to take profit at the level of 1.1200.

GBP / USD – British Pound Dollar

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The main event of the day will become the decision of the Bank of England regarding the monetary policy. Since the last meeting of the Central Bank on August 4, the yield on 2-year UK government bonds, which is closely correlated with the discount rate, has increased by 0.05%, which does not imply the policy change. At the last meeting the regulator announced a rate cut before the end of the year. And now the question is when to expect the realization of this scenario. The US Federal Reserve meeting will take place on December 14. At the meeting the investors expect the increase in interest rates. So, it is likely that the Bank of England will not cut rates at the meeting on 15 December because it can cause panic sales of the pound and the capital escape from British assets. It turns out that we are left with two meetings: on 13 October and 3 November. A quarterly release on inflation will be published at the November meeting. I think that the monetary authorities will take new incentives on that day. Preparing the report on inflation, the management of the Bank of England will have all the necessary information to make the right decision. It should be noted that the decrease in the discount rate on August 4 was also held in the period of the release publication on the inflation. Brexit was announced on June 24, but the monetary authorities did not start to launch the stimulus package at the meeting on July 14 and took a break to obtain the necessary statistics. Today, Mark Carney and his colleagues will note the positive effect of the fall of the pound value for the trade balance and inflation in the medium term. Thus, today we can expect the moderate demand for the British currency, because there won’t be surprises at the market.

Against this background during the day Buy positions on the reduction of quotations should be opened to 1.3200 / 1.3160 and it is preferable to take profit at the level of 1.3300.

USD / JPY – US Dollar Japanese Yen

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Reducing the “appetite for risk” is the main driver for strengthening the Japanese currency today. The world’s leading stock markets are still be in fever: Asian, European and American markets have finished the third trading day in the “red zone”. The securities of the banking sector, especially European ones, have been decreasing for the second consecutive day. Quotes of highly profitable cross-rates also show a drop, which confirms the elimination of carry trade positions. As it was noted earlier, the Bank of England will not make any changes in the monetary policy, which leaves the UK stock market without a good support. New incentives from the Bank of England would certainly have a positive impact on quotations of the pair USD / JPY, however we cannot count on this now. It is impossible to ignore the dynamics of the credit market: the yield differential on the 10-year US and Japanese government bonds is being decreased, which reduces the attractiveness of investing in the US assets. In the afternoon we can expect the release of the data on the US retail sales better than the median forecast, which will support the dollar and therefore, we can expect an upward correction.

Against this background, during the day Sell positions on the growth of quotations should be opened in the area of 102.50 / 102.80 and it is preferable to take profit at the level of 102.00.

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