Technical Analysis for 14/09/2016
EUR / USD – Euro US Dollar
The pair has been in the narrow flat market for the last few days. So, today we can expect the re-development of the side trend. In the morning we can see the growth of quotations of the single European currency due to the reduction of the “risk appetite” of investors. Since the euro together with the Japanese yen is a funding currency in the carry trade transactions, investors will generate the demand for both currencies. On the other hand, we can see a decrease in quotations for two reasons with the opening of the US trading session. Firstly, the credit markets are experiencing the yields drop on 10-year government bonds of Germany in relation to their counterparts from the US and the UK, which reduces the attractiveness of investments in European assets. Secondly, at 17.30 MSK you can expect a release of negative data on crude oil stocks in the United States, which can cause a decline in oil prices and support the dollar.
Against this background, during the day we should expect the flat within the range of 1.1160 -1.1260.
GBP / USD – British Pound Dollar
During the day Sell positions should be increased for two reasons. Firstly, the earlier published release on the inflation in the UK in August did not justify the optimistic expectations of investors and in this regard today we can count on a report on the labor market within the median forecasts. Now the Consumer Confidence Index, CCI, which is closely correlated with the dynamics of the labor market, is showing negative results (the minimum level since January 2014). So, in this background, today we expect the release of data on unemployment and average earnings, which are better than the median forecast. In my opinion, once more we will see the expansion of the negative differential of the yields on 10-year government bonds of the UK and the US that will support the US currency. Secondly, the massive sales in the commodity market will also have a positive impact on the dollar quotations, as raw material costs are denominated in the US currency. We should not forget about the today’s release from the US Department of Energy on crude oil reserves. Since force majeure (bad weather in the Gulf of Mexico) intervened in the report last week, now this factor has been leveled out. Today we will see the growth of stocks that will put pressure on the quotes of black gold. On the eve Brent lost 2.4%, and today we can again expect a repetition of the downward trend. It should be noted that there is a direct historical correlation between the pair GBP / USD and oil, and in this regard the pound will get one more hit.
Against this background during the day Buy positions on the reduction of quotations should be opened in the area of 1.3215 / 1.3255 and it is preferable to take profit at the level of 1.3150.
USD / JPY – US Dollar Japanese Yen
Let’s open Sell positions because the financial markets are experiencing the escape of the capital out of risky assets once again. Tuesday was a key day for the global stock markets. This means that if investors were willing to take risks, they should actively build long positions on the correction. However, stock markets in Europe and North America closed the trade in the “red zone”. The securities of the banking sector suffered most of all: UniCredit quotes fell by 4,2%, Banco Santander- by 2.7%. On the eve ETF-funds, which invest in developing markets, lost 2.5% of its value. The negative trend is being observed in the sector of the high-yield cross-rates. Thus, investors are scaling down carry trade operations, and will go into safe assets. In this regard, today it is possible to expect the strengthening of the Japanese yen and gold. However, the government bond market points to the fact that today we will not see a strong drop in prices of the pair USD / JPY: the yield spread on 10-year treasuries of the US and Japan, continues to expand moderately, which is a positive factor for the bulls in regard to the dollar.
Against this background during the day Sell positions on the growth of quotations should be opened in the area of 102.50 / 102.90 and it is preferable to take profit at the level of 101.60.