Technical Analysis for 11/10/2016
EUR / USD – Euro US Dollar
In the morning you should pay attention to the release on the business activity in Germany from the institute ZEW, which may please the investors with the positive data. The ultra-soft monetary policy of the ECB is bearing fruits. Inflation expectations in the leading economy of the Old World are intensifying and the trade balance surplus is growing up. In September the inflation was 0.7% y / y, which has become the highest level since May 2015. The trade balance surplus in August increased by 13.2% compared to the same period of 2015. In this context, the euro may show the short-term growth of quotations, which should be used for building Sell positions. I expect the strengthening of the dollar against the background of the growing “risk appetite”, which will put pressure on the euro as a funding currency. In addition, the yield on 10-year German government bonds has significantly dropped at the debt market in relation to the securities from the UK, which should cause a decrease in the cross-rate EUR / GBP.
Against this background, during the day Sell positions on the growth of quotations should be opened within 1.1160 / 1.1200 and it is preferable to take profit at the level of 1.1125.
GBP / USD – British Pound Dollar
At present a mixed background is being formed. On the one hand, the pair can demonstrate the growth of quotations on the background of positive dynamics in the credit markets. On the eve the US Treasury bonds were not being traded because of the weekend in the United States. In this regard, we could only watch the changes in the yield spread on 10-year bonds of the UK and Germany, which has been extending for three consecutive days and has increased by 0.136% over this period. On the other hand, despite the euphoria of the oil market, the British currency cannot gain weight – investors are actively selling the pound after a slight rise in quotations. In this connection, it is possible to draw conclusions about the presence of a large number of sellers in the market, which in turn will not allow the sterling to strengthen greatly. On the eve Brent quotes updated yearly highs, while the GBP / USD could not even reach the area of Figure 25, despite a significant oversold after the crash on Friday, October 7 during the bidding process in Asia.
Against this background, during the day we can expect the flat within the range of 1.2300 -1.2450.
USD / JPY – US Dollar Japanese Yen
On Monday the world’s leading stock markets finished the bidding in the “green zone”, while the fear indices in Europe and North America showed a decline based on the results of the day. This decline indicates the presence of “risk appetite” of investors. At such moments it is necessary to increase the Buy positions on the short-term decrease in quotations, because the upward trend in the pair will gain momentum. On the eve the government bond market in the two countries was closed due to the public holidays, so we have no information about the mood of investors in this pair. We will focus on the demand for risky assets, which will bring the pair to new highs.
Against this background, during the day Buy positions on the reduction of quotations should be opened within 103.50 / 103.30 and it is preferable to take profit at the level of 104.00.