Technical Analysis for 06/10/2016
EUR / USD – Euro US Dollar
Let’s continue to build short positions in anticipation of much more strengthening of the American currency. What are such expectations built on? In the first half of the week the United States has pleased the traders with strong data on the business activity in the manufacturing and non-manufacturing sectors as well as on the trade balance. Tomorrow we’ll get the main report of the month and, in my opinion, we can expect the release of strong employment data, which, in its turn, heats the rumors about the raise of the FED discount rate once again. It is impossible to ignore the growing “appetite for risk”, which is also negative for the euro as a funding currency. On Wednesday the US stock market confidently closed the trading in the green zone while VIX fear index lost more than 4%.
Against this background, during the day Sell positions on the growth of quotations should be opened within 1.1215 / 1.1250 and it is preferable to take profit at the level of 1.1175.
GBP / USD – British Pound Dollar
The US statistics, which was published on the eve, indicates that the short positions on the growth of quotations should be increased. Firstly, in August the negative trade balance fell by 8.7% / y / y to the level of 40.7 billion dollars. It is worth noting that in July the figure fell by 1% y / y. Traditionally, reducing the trade deficit has a positive impact on the US currency. Secondly, the composite ISM index for the non-productive sphere pleased the traders with the strong report: absolutely all the key figures regarding the service sector showed the increase, which indicates the acceleration of the economic growth. The value of PMI at the level of 57.1 in September corresponds to the growth of GDP by 3.2%. Since the beginning of the week the yield on 2-year treasury bonds, which is closely correlated with the rate of the US Federal Reserve, has risen by 0.08% – strong statistical data contribute to the expectation growth of tighter FOMC monetary policy.
Against this background, during the day Sell positions on the growth of quotations should be opened within 1.2770 / 1.2810 and it is preferable to take profit at the level of 1.2705.
USD / JPY – US Dollar Japanese Yen
The upward trend in the currency pair is gaining momentum and, therefore, it is not worth to trade against the trend. After corrective pullbacks you should increase purchasing in the direction of the September maximum (104.31). In my opinion, the pair may test this level on Friday, after the release of the labor market data. The ISM release on the employment, which was published on the eve, pleased investors with the strong data: the indicator has risen to its highest level since November 2015. As this is a key indicator for determining the Non-Farm, then on Friday you can expect good employment data, which, in its turn, will increase the demand for the dollar. On the eve the yield differential on the10-year US and Japanese government bonds grew to the highest level over the last 4 months at the bond market, which increases the attractiveness of investing in the US assets.
Against this background, during the day Buy positions on the reduction of quotations should be opened within 103.10 / 102.70 and it is preferable to take profit at the level of 103.70.