Technical Analysis for 24/10/2016
EUR / USD – Euro US Dollar
The European single currency has been under pressure for the last three bidding weeks and on Friday the quotes fell to the lowest level since March 11 this year. In my opinion, today we will see a sideways trend in the pair. On the one hand, there are two reasons for the quotes growth today. Firstly, in the credit markets the yield on the 10-year German government bonds increased on the last trading day of the past week in relation to their counterparts in the US and the UK, which may cause demand for the euro.
Secondly, in the midst of the European trading session, Markit will publish a release on the business activity in the manufacturing sector in Germany, where you can expect the release of the data at the level of the median forecast against the background of the increase in factory orders. On the other hand, we have a strong upward trend on the index of the dollar basket and the investors will use the growth of quotations to build short positions in the pair EUR / USD, where the first target may be 1.0821 area. In this regard, today I do not recommend to buy the pair, while it is too early to sell. We prefer a wait-and-see approach and re-enter after the correction of the trend, i.e. sell.
We expect the flat within the range of 1.0850 -1.0940.
GBP / USD – British Pound Dollar
Today we expect the development of the sideways trend against the background of the lack of important macroeconomic statistics. On the one hand, the pound can test the minimum level of Friday 21 October (1.2170) against the background of the negative dynamics of the debt market. The yield on the 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.
On the other hand, today the oil can demonstrate the moderate growth, which can have a positive impact on the pair GBP / USD. According to the index of the dollar, we are witnessing the development of a 3-week uptrend and very often after such dynamics there is a rollback on the first trading day of the fourth week. This is a common technical correction and nothing more. As there is a historical inverse correlation between the USDX and oil, the quotes of the black gold may be supported by this factor.
We expect a sideways trend within the range of 1,2170-1,2270.
USD / JPY – US Dollar Japanese Yen
We expect the continuation of the upward trend in the pair, which began on 27 September. Amid the lack of the important macroeconomic statistics from the US and Japan, the demand for risky assets will be a driver for the growth of quotations, which in its turn will put pressure on the yen as a funding currency №1 in carry trade operations. The United States has ended the second week of the corporate reporting season, which was quite positive. Last week we told about the strong quarterly releases from Morgan Stanley and Microsoft Corporation.
Also, we would like to note the positive reports from McDonald’s, Bank of NY Mellon, American Express, and Goldman Sachs. The fear index VIX ended the last trading week with a decrease by 17.2%, which implies the growth of stock prices on the US stock market. You cannot ignore the strong growth of the Japanese stock market last week.
We are opening Buy positions at HBC Broker within 103,75 / 103,45 and I am taking profit at 104,30.