Technical Analysis for 03/10/2016
EUR / USD – Euro US Dollar
During the day you should sell the euro for two reasons. Firstly, the yield differential on 10-year government bonds of Germany and the US is being reduced at the credit markets, which is favorable for the bears. A report from the ISM for the manufacturing sector will be published during the US trading session today. On the background of the report it is possible to expect positive data against the growth of the producers’ price index and the increase of factory orders. According to the reports from the company Baker Hughes, the increase in the production capacity is also being observed in the oil and gas sector. This also allows you to count on good data today. In this regard, the yield spread may even be reduced, which will have a positive impact on the US currency. Secondly, there is a growing “risk appetite” at the financial markets, which will put pressure on the euro as a funding currency. On Friday the fear index for the US and the Russian market decreased by 5.2% and 2.7% respectively, which indicates the capital inflow into risky assets and will support the stock markets today.
Against this background, during the day Sell positions on the growth of quotations should be opened within 1.1255 / 1.1285 and it is preferable to take profit at the level of 1.1200.
GBP / USD – British Pound Dollar
On Monday a mixed background is being formed. On the one hand, on the debt market the yield on 10-year UK government bonds is being reduced in relation to their counterparts from the United States and Germany. This reduces the attractiveness of investments in British assets and will put pressure on the sterling exchange rate. Such dynamics was observed on Friday after the close of the London session. On the other hand, the oil market has ignored the negative release from the oil company Baker Hughes, which indicates the presence of a large number of buyers in the market. In its term, these buyers will push up oil quotes, which will positively affect the cost of the British currency. According to Baker Hughes, last week the number of drilling oil platforms in the US, Canada and Mexico increased by 7, 7 and 1 point, respectively.
Against this background, during the day we can expect the flat within the range of 1.2920 -1.3020.
USD / JPY – US Dollar Japanese Yen
The strengthening of the yen against the background of the weak macroeconomic statistics from Japan is expected during the Asian trading session. Today the negative dynamics of the index of producers’ prices and industrial PMI does not allow counting on a good indicator of the index ‘Tankan’ for large enterprises of the industrial sphere for the 4th quarter. In this context, we will see a decrease in quotations on the Tokyo Stock Exchange, which in its turn will contribute to the inflow of the capital into the yen as a funding currency. However, this reduction must be used to build the “Longs” and there are two reasons for this. Firstly, at the end of the last trading week there was the expansion of the yield spread on the 10-year US and Japanese bonds after the publication of a negative report on the inflation in Japan. Japan has been experiencing the deflation for five months in a row; and investors are counting on the fact that the Cabinet of Ministers together with the Central Bank will take measures to eradicate this problem. Secondly, the world’s leading stock markets finished the last trading day of the week in the “green zone”, which indicates the growth of the “risk appetite” and traditionally supports the pair.
Against this background, during the day Buy positions on the reduction of quotations should be opened within 101.10 / 100.70 and it is preferable to take profit at the level of 101.70.