Technical Analysis for 04/10/2016
EUR / USD – Euro US Dollar
The main pair of the market has already been in a fairly narrow flat of 1,1122-1,1278 the fourth week in a row .Taking into account the today’s absence of the important macroeconomic statistics from the US and the euro zone, we will again experience the sluggish trade. On the one hand, the pair can demonstrate the growth against the strengthening of the upward trend in the cross-rate EUR / GBP: traders are increasing long positions waiting for new stimulus from the Bank of England next month. The yield spread on 10-year bonds of Germany and the UK significantly increased at the debt market on Monday. It is impossible to ignore the dynamics of the black gold market: oil has been finishing the bidding in the “green zone” for four consecutive trading days, which is negative for the dollar. On the other hand, the demand for cash dollars has increased at the London interbank lending market, which usually is a signal for increasing the “shorts”. The media began to actively spread the information that this high demand was being warmed up by Deutsche Bank, which had a big problem with the balance. Only the time will show if it is true. But one thing is really accurate. It is the fact that there is demand for dollars in London and it favors the bears.
Against this background, during the day we can expect a flat within the range of 1,1170-1,1270.
GBP / USD – British Pound Dollar
During the day the British currency should be sold against the growth of quotations for two reasons. Firstly, on the eve the investors ignored the positive report on the PMI manufacturing sphere for September in the UK. The report indicates the presence of a large number of strong sellers in the market. The index has grown to its highest level since November 2015 against the background of production volume increasing on the domestic market as well as due to the increase in export orders because of the pound devaluation. In this regard, the British economy is able to demonstrate a good economic growth in the medium term, which should encourage the traders to buy the pound sterling. The pound grew up after the publication of the data, but the strengthening of the pound was quite weak and the pair reached the new daily lows during the US trading session. The traders have ignored the positive background from the black gold market. Secondly, 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 and, thus, will put pressure on the pound.
Against this background, during the day Sell positions on the growth of quotations should be opened within 1.2880 / 1.2920 and it is preferable to take profit at the level of 1.2810.
USD / JPY – US Dollar Japanese Yen
We are building up long positions on pullbacks. Published on the eve macroeconomic statistics on the business activity in the industrial sector of the US and Japan, showed mixed trends in favor of the States. Tankan index came below the median forecast, while ISM pleased traders with the positive data. In general, this is not surprising, since low inflation expectations in Japan together with the high yen, have a strong negative impact on the industrial sector. Against this background, there is a differential expansion of the yield on 10-year government bonds of the USA and Japan, which will support the US currency.
Against this background, during the day Buy positions on the reduction of quotations should be opened within 101.40 / 101.00 and it is preferable to take profit at the level of 101.85.