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Technical Analysis for 27/10/2016

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Technical Analysis for 27/10/2016

Technical Analysis for 27/10/2016
October 27
09:00 2016

EUR / USD – Euro US Dollar

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The external background for the pair is still negative. Firstly, on the eve the States published good data on sales of new buildings, which confirms the growth of the consumer activity. Why is it important for us? The increase in consumer spending contributes to the growth of GDP, which in its turn causes inflation. If the inflation raises, the Fed moves to the process of raising rates, thus, there will be the demand for the US dollar.

The yield on the 2- year US Treasury bonds, which is closely correlated with the expectations regarding the Fed rate, has increased by 0.05% this week and is close to the maximum level over the past 5 months. In my view, taking into account the above trends, today we will see a positive release on orders of durable goods for September, which also plays into the hands of “bears”. Secondly, we cannot ignore the dynamics of the commodity market. On Wednesday we watched sales on energy and metals, which will positively affect the value of the dollar, since the raw material is quoted in the US currency.

We are opening Sell positions at 1,0910 / 1,0945 and taking profit at 1,0865.

GBP / USD – British Pound Dollar

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The publication of the data on the UK GDP will become the main event of the day. Leading indicators point to the slowdown of the economic growth, and today, we can get the data in the framework of the consensus forecast. The decline in the services sector and the construction industry have been registered in the third quarter, while there was an increase in the manufacturing sector against the background of the strong devaluation of the British currency. At its September meeting the Bank of England pointed to the level of 0.3%, which coincides with the current consensus forecast.

In this regard, the market reaction to this event will be insignificant. We expect a moderate growth of quotations in the morning on the background of positive dynamics in the credit markets: the yield on the 10-year UK government bonds is increasing in relation to their counterparts from the United States and Germany, which increases the attractiveness of investments in British assets and, thus, have a positive impact on the value of the British currency. However, there is also a negative factor for the pound: black gold have been experiencing a decline of quotations for the last two days and this trend may continue on the background of the increase in the US oil production to the highest level in the last 4 weeks.

We expect the flat within 1,2160-1,2260.

USD / JPY – US Dollar Japanese Yen

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The uptrend in the pair is still in the priority and reduction of quotations should be used to build positions for purchase. The yield on the US Treasury bonds is steadily moving up, forcing investors around the world to buy the US currency, as the bonds can only be bought for dollars. Now the volume of bonds with a negative yield in the world is more than 10 trillion dollars and when debt securities of the economy begin to show a steady growth of the profitability, then the number of those who wish to purchase such tools is increasing every day. You cannot ignore the new round of sales of currencies in the Asian region, which was observed on Wednesday. In this context, the key level for the pair is 104.87 (maximum of the 25 October). Just after the overcoming of the barrier, the way to 105.50 opens. On Friday we will get the data on the inflation in Japan for September and, taking into account the negative expectations of market participants, we can see this level tomorrow.

We are opening Buy position at 104,25 / 103,95 and taking profit at 104,70.

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