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Technical Analysis for 20/09/2016

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Technical Analysis for 20/09/2016

Technical Analysis for 20/09/2016
September 20
09:00 2016

EUR / USD – Euro US Dollar

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During the day, the euro should be sold on the growth of quotations for two reasons. First, a report that was published on the eve regarding the euro zone balance of payments came out much worse than the market had expected: 21 billion euros against the consensus forecast of 27.2 billion. In annual terms, the current account surplus declined by 7% in July, that has been the highest drop for the last four months. You cannot ignore the strong growth of euro quotations against the pound, which reduces the competitiveness of European products on the UK market. In this regard, if the euro demonstrates strengthening, the surplus will decrease more rapidly. In order to maintain the positive trend, the monetary authorities are interested in the range of 1,08-1,12. Secondly, today we can expect the moderately positive data on the construction sector in the US for August, which will support the dollar. The growth of the Consumer Confidence Index( CCI) to the maximum for the last ten months let  count on an increase of the business activity in the construction industry.

Against this background, during the day Sell positions on the growth of quotations should be opened within 1.1185 / 1.1208 and it is preferable to take profit at the level of 1.1125. 

GBP / USD – British Pound Dollar

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In the first half of Monday the British currency was trying to demonstrate the growth of quotations, but the sellers were actively shortening the pound. In my opinion, it is needed to join this trend and also open Sell positions. The main driver for the drop in prices is a change of the inflation differential in the UK and the US. Large market participants are traditionally closely monitoring this indicator and in the case of strong changes they never miss an opportunity for speculation. Judged by results of August this figure has increased from 0.2% to 0.5%, which is a sufficient change for speculation in the short term. As noted earlier, today in the afternoon we can expect the positive macroeconomic statistics from the US that will cheer up the bears to build short positions. You cannot ignore the pessimism in the market of black gold: oil quotes are showing weakness, which in its turn will increase the pressure on the pound sterling.

Against this background, during the day Sell positions on the growth of quotations should be opened within 1.3050 / 1.3100 and it is preferable to take profit at the level of 1.2970.

USD / JPY – US Dollar Japanese Yen

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The meeting of the Bank of Japan will take place tomorrow. In my opinion, new stimulus measures will be announced there. The monetary regulator can no longer procrastinate, since the inflation expectations are very low. Furthermore, the high exchange rate of the yen starts to put a spoke in wheels of the industrial sector, which can lead to a strong imbalance of exports and imports. You cannot ignore the possible risks from the medium-term decline in hydrocarbon prices amid the record oil production by the OPEC countries and Russia. Taking into account the current situation of the black gold market we can expect the decline in the level of Brent quotes to 40 $ / barrel in the next two months. In its turn this decline will put pressure on consumer prices and lead the economy further into a deflationary spiral. Thus, the current levels are attractive to build long positions.

Against this background, during the day Buy positions on the reduction of quotations should be opened within 101.90 / 101.55 and it is preferable to take profit at the level of 102.50.

 

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