Technical Analysis for 25/10/2016
EUR / USD – Euro US Dollar
Today you can expect a moderate growth of the euro against the background of positive news. Firstly, IFO Institute may please the investors with the positive data on the Business Climate Index in Germany while the European trading session. On Monday, we received strong data from Markit, which allows counting on good output data due to the correlation of both indicators.
The Eurozone composite PMI has risen to its highest level in the last 33 months. Secondly, the CB index of consumer confidence in the US can be negative due to the similar weak data from the Institute of Michigan. In October Reuters / Michigan index has fallen to its lowest level in the last 12 months. Thus, the statistics supports the euro but at the debt market the yield differential on 10-year government bonds of Germany and the United States is being reduced again, which declines the attractiveness of investments in European assets. I conclude that the growth of the pair EUR / USD today will be local and corrective in nature; and large investors will use this growth in order to build short positions.
I am opening Buy positions at HBC Broker within 1,0870 / 1,0850 and I am taking profit at 1,0899.
GBP / USD – British Pound Dollar
During the day you should sell the pound for two reasons. Firstly, at the credit markets 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. Secondly, as noted earlier, today we can expect the positive data from the institute IFO, Germany, which in its turn will cause the growth of quotations of the EUR / GBP cross-rate and have a negative impact on the cost of the British currency.
It should be noted that the index of the dollar basket maintains a steady upward trend, and the nearest strong resistance is located at the area of 99.95, which implies the fall of the sterling price to 1.2050. Will we see such an outcome? We think, yes, we will. The only question is time. Perhaps, it will be this week, possibly-the next one.
I am opening Sell positions at HBC Broker within 1,2240 / 1,2265 and I am taking profit at 1,2185.
USD / JPY – US Dollar Japanese Yen
The upward trend is gaining momentum, and the reduction of quotations should be used for building Buy positions. Now there is enough positive dynamics of key factors. The appetite for risk persists at financial markets, which is negative for the yen as a funding currency. Shares at the world’s leading stock markets and high-yield cross rates are in the steady demand among the investors.
The spread on the 10-year US and Japanese bonds is being expanded at the credit market, which is also positive for the US dollar. In my view, we can expect the growth of quotations to 105.40 till the end of the month, since investors are expecting the weak inflation data in Japan on Friday, 28 October, which will increase the pressure on the yen.
We are opening Buy positions within 104,05 / 103.75 and I am taking profit at 104,60.