Technical Analysis for 14/10/2016
EUR / USD – Euro US Dollar
On the eve the index of the dollar basket USDX sagged by 0.4% but, in general, the upward trend is still relevant and I assume that this movement is being a correction, not a reversal. The present day, in my opinion, will give a strong support to the dollar against the background of the statistics from the United States. According to the Michigan Institute and the CB, the report on retail sales may please the investors with the strong data on the background of the consumer activity growth. It should also be noted that in September the sales of the cars increased by 4.4% m / m, and this component accounts for about 25% of the retail sales. The release of the producer price index can also make a pleasant surprise on the background of the rising commodity prices. In this connection, we can expect an expansion of the yield differential on the 10-year US and German government bonds, which will increase the demand for the dollar.
Against this background, during the day Sell positions on the growth of quotations should be opened within 1.1060 / 1.1090 and it is preferable to take profit at the level of 1.0980.
GBP / USD – British Pound Dollar
Today the pound can get the bounce from a stronger dollar. Today there are two reasons for the bears that can be used to open Sell positions. Firstly, it is the dynamics of the credit markets, where the yield on 10-year UK government bonds is being reduced in relation to their counterparts from the United States and Germany, which reduces the attractiveness of investments in British assets. Secondly, as noted earlier, in the afternoon we can expect the release of the positive data from the US, which will also support the greenback. The report on the US oil market, which was published on the eve, showed the stocks growth by 4.85 million barrels, while the Department of Energy recorded a drop in the oil production by 17 thousand barrels / day for a week. In Alaska the production has grown up by 19 thousand barrels / day; in other States it has decreased in the amount of 36 thousand barrels / day. The production in Alex begins to approach to the level of a year ago and we can expect that the same dynamics will be observed in other States, as oil prices are now quite comfortable for producers. On the eve the French bank Societe Generale reported that its clients were actively selling Call options and buying Put options, wishing to insure against a possible fall in prices for black gold. In this regard, if today’s Brent quotes fall below the yesterday’s low (51.27), then the pressure on the pair will intensify as there is a strong historical correlation between oil and GBP / USD.
Against this background, during the day Sell positions on the growth of quotations should be opened within 1.2250 / 1.2300 and it is preferable to take profit at the level of 1.2140.
USD / JPY – US Dollar Japanese Yen
The yield on the US treasury bonds begins to adjust downwards, which is a negative factor for the pair. However, I think that this is a temporary trend, as investors have no choice but to buy the pair on pullbacks. This week the Fed official has spoken about the inevitability of tightening the monetary policy in the current year. Despite the fact that the yield spread on the 10-year government bonds of the USA and Japan has decreased but still remains at the five-month high, this implies the growth of quotations from current levels by 300-400 points.
Against this background, during the day Buy positions on the reduction of quotations should be opened within 103.60 / 103.35 and it is preferable to take profit at the level of 104.35.