Technical Analysis for 26/10/2016
EUR / USD – Euro US Dollar
Multidirectional economic statistics from the eurozone and the US, which was published on the eve, today can support the single European currency in the first half of the day. On Tuesday, investors were scared of the weak report on the consumer confidence in the US from the Conference Board: the final index fell below 100 points that the American media considered as a signal that consumer spending would be reduced and the Fed would not raise rates.
Yesterday we saw a strong decline in the dollar index during the US trading session ostensibly because of that. In my view, there was nothing wrong in yesterday’s report from the CB; and the decline of the dollar is a common technical correction after the strong growth. Indeed, the figure has fallen to its lowest level in two months. But is it so critical? If we compare this report with the year-ago data, the consumer confidence has declined only by 0.5%. The yield differential on the 10-year government bonds of Germany and the US has grown a little bit, which is positive for the euro. Today, however, we expect that we will again see a change of mood in the credit markets in favor of the US assets.
The report on the sales of new buildings for September can please market participants with strong data on the background of the increase in the volume of mortgage lending as well as due to the income growth. The release on the car sales, which showed an increase of 4.4% in September, also indicates positive data. Real estate and automobiles are among the expensive purchases and have a direct correlation in terms of sales.
We are opening Sell positions within 1,0905 / 1,0935 and I am taking profit at 1,0855.
GBP / USD – British Pound Dollar
On the eve the pound dropped to 1.2081, which is the lowest level since October 7, when the sterling collapsed for no apparent reason by 1000 points in the Asian trading session. We can conclude that investors still do not want to buy the British currency and use the short-term growth of quotes to build positions for selling. And if so, then we, the ordinary traders, need to act in the same format. As noted earlier, today in the afternoon we can expect the release of positive data on property sales in the US primary market for September, which will positively affect the value of the dollar. It is impossible to ignore the report on crude oil inventories from the US Energy Department. According to the release of Baker Hughes, the number of oil rigs has increased by 11 units, to the level of 443, which is the highest since February 12 this year. Since October the number of horizontal installations has increased by 38 units, indicating the gradual increase of the production volume. In this regard, one can expect the output of negative data, which will put pressure on both the oil and the pair GBP / USD.
We are opening Sell position within 1,2200 / 1,2230 and taking profit at 1,2140.
USD / JPY – US Dollar Japanese Yen
On the eve the pair updated the high of October 13, but it was unable to fix at this level, and we observed a decrease in prices. In my opinion, this trend is corrective in nature and in the near future we will see an upward trend again. All major currencies of the Asian region are now under pressure against the US dollar. The Chinese yuan feels worst of all; it has tested the six-year minimum this week. The currency of China is being reduced on the background of the slowing economic growth because the exporters suffer from the expensive yuan. Japan has a similar problem.
The yen is still very expensive. This is bad for the economy as a whole (it has been experiencing the deflation for the last six months), and for corporations that are export-oriented, in particular (because there is a decrease in revenue and a reduction in orders). Taking into account today’s positive data on the sales of new buildings in the US, we can expect strengthening of the US currency, and it is necessary to use the correction to build long positions.
We are opening Buy positions within 104,15 / 103,85 and taking profit at 104,63.