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Technical Analysis for 28/09/2016

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Technical Analysis for 28/09/2016

Technical Analysis for 28/09/2016
September 28
09:00 2016

EUR / USD – Euro US Dollar

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During the day the euro should be sold against the background of possible positive comments from the US Federal Reserve. Today D. Yellen will speak in the Congress that she can claim to raise the interest rate at any of the two remaining sessions. The indicator of the 4-week curve of the applications for unemployment benefits is showing the strong positive dynamics that allows counting on the output of strong employment data next Friday. Moreover, the basic inflation has been higher than 2% for nine consecutive months. This is the first signal for an increase of the inflation expectations and, in its turn, for the growth of interest rates. On the eve the FOMC member Fisher expressed his concern about the extremely low interest rates. Thus, we are coming to the period when the raise of interest rates by the Fed is only a matter of time. It is impossible to ignore the speech of the head of the OPEC on Tuesday, where it was pointed out that all the world’s largest oil storage tanks were full and if the demand didn’t grow in the near future, it would be a hard blow for the black gold. If you look at the dynamics of the world’s GDP, the demand will not increase on the horizon of the next 6 months. Falling oil prices traditionally put pressure on the exchange rate of the pair EUR / USD.

Against this background, during the day Sell positions on the growth of quotations should be opened within 1.1230 / 1.1250 and it is preferable to take profit at the level of 1.1180.

GBP / USD – British Pound Dollar

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In my opinion, the upward corrective movement in the currency pair has ended and today it is possible to build up short positions. Firstly, the yield on 10-year UK government bonds is being reduced at the credit markets in relation to their counterparts from the United States and Germany, which reduces the attractiveness of investments in British assets. Secondly, the day before we saw strong sales of black gold after comments of Saudi Arabia’s Minister of Energy that the question of reducing production levels wouldn’t be discussed at the meeting in Algeria. An agreement among the participants to freeze the current production level can become the maximum outcome of the summit. However, many players in the market do not believe even in such an outcome and they have claimed that it is needed to raise the issue at the OPEC summit in Vienna on 30 November. Today is the last day of the International Energy Forum in Algeria and we will get the official press release of the informal meeting of OPEC +. I consider that no decision will be made and we will see a new wave of Brent and WTI crude oil sales, which, in its turn, will have a positive impact on the dollar because oil is quoted in the US currency.

Against this background, during the day Sell positions on the growth of quotations should be opened within 1.3010 / 1.3040 and it is preferable to take profit at the level of 1.2950.

USD / JPY – US Dollar Japanese Yen

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At present, a mixed background is being formed. On the one hand, the US stock market closed the trade in the “green zone” on the eve that indicates an increase in “risk appetite” and has been a positive factor for the pair. On Tuesday high yield cross- rates also were in demand, which confirms the growing interest in carry trade transactions through the yen as a funding currency. The media were quick to attribute the trend to Hillary Clinton’s victory in the first TV debate of presidential candidates.  Could this factor really play a strong role? In my opinion, no, it couldn’t.  If we look at the time span of the last 45 years, we can see that the stock market was growing for 75% of the time under the Democratic president and for 72% under the Republican president. I do not think that the difference of 3% is very significant. It turns out that the stock market does not care about the president, but the media make us believe otherwise. In general, both parties receive financial support from Wall Street and the financiers are ready for any outcome of the elections. Now it is difficult to say what we can see on the graph of S & P500 index: turning up or correction after two-day drop. Let’s be careful and speak about the correction. VIX Fear index was decreasing on the eve and Nasdaq Index was the leader of the growth, which allows counting on a moderate growth of stock markets today, especially in the morning. On the other hand, the yield differential of 10-year US and Japanese government bond is being reduced at the bond market, thus, it leaves the dollar without a strong support.

Against this background, during the day we can expect the flat within the range of 100.20 -101.20.

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