Market Overview September 1-5


USD: The U.S. Dollar opened mixed in Asian trading this morning, trading higher against the Euro, the Yen and the Swiss Franc but losing ground against Sterling, the Aussie, the Kiwi and the Loonie, with the U.S. Dollar Index trading up +0.038 or +0.05% to 82.7860.  Traders are looking ahead for rate decisions from four central banks this week: the RBA on Tuesday, the BOC on Wednesday and both the ECB and the BOE on Thursday. Today’s trading is expected to be somewhat light due to banking holidays in both the United States and Canada.

EUR: The Euro is selling off against the Dollar and other majors this morning due to market expectations of a dovish rate statement at this Thursday’s ECB rate decision and the possibility that the central bank might begin quantitative easing measures before the end of the year. This morning’s European data include German Final GDP (-0.2%), Spanish Manufacturing PMI (53.4) and Italian Manufacturing PMI (51.0).

GBP: Sterling is trading mildly higher this morning ahead of UK Manufacturing PMI (55.1), Net Lending to Individuals (+2.4B) and Mortgage Approvals (66K).

CHF: The Swiss Franc is under pressure against the U.S. Dollar this morning with SVME PMI (53.4) Switzerland’s only major release later today.

JPY: The Japanese Yen is under pressure this morning after Japanese Capital Spending increased +3.0% q/y versus a consensus of a +3.8% increase.

AUD: The Aussie is trading higher after opening weaker this morning as Australian Company Operating Profits showed a decline of -6.9% q/q, significantly lower than the anticipated decline of -1.8% that was expected. Also out were the AIG Manufacturing Index, printing at 47.3 versus a previous reading of 50.7, and the MI Inflation Gauge, showing a flat reading versus a previous print of +0.2%.

NZD: The Kiwi firmed this morning against the Greenback after the New Zealand Overseas Trade Index increased +0.3% q/q, significantly lower than the expected decline of -3.5%.

Highlighted Chart of the Day: EUR/USD

EURUSD September 2014 technical chart for currency trading forex

A chart of the EUR/USD currency pair appears above showing the recent downwards gap, a pronounced medium term declining channel in red, and its significant divergence from its falling 200 day Moving Average shown in green. Its oversold 14 day RSI appears in blue in the indicator box. See additional technical analysis in the section below.

Technical Analysis for the Majors

EUR/USD: The Euro made a new recent low at the 1.3118 level in early trading and remains under pressure. The rate remains well below its falling 200 day MA now at 1.3634.  Its 14 day RSI is still in oversold territory at the 22.1 level, but it failed to confirm today’s new low, indicating a loss of downside momentum. Resistance is seen at 1.3151 and in the 1.3220/41 region, while support appears at 1.3118 and below that at 1.3104. Outlook is bearish in the near and medium terms. (See highlighted chart above.)

USD/JPY: USD/JPY against gapped up over the weekend, but it has failed to make a new recent high yet, only trading up to 104.20 in the Asian session — just ahead of good resistance seen at 104.26. The rate remains above former significant resistance turned support at the 104.12 level, with additional support noted in the 130.49/55 region. The rate’s 14 day RSI has almost corrected its strongly overbought condition, currently reading slightly overbought at 71.2. Also, USD/JPY remains above its flat-sloped 200 day MA now at 102.34. Outlook is near term bullish and neutral turning bullish medium term.

GBP/USD:  Cable was mixed in weekend, trading inside a corrective upswing that is coming precariously close to exceeding the upper trend line of an important short term declining channel currently drawn at 1.6618. The lower channel trend line currently supports the rate at 1.6437. The rate is narrowing its position below its flattening 200 day MA now at 1.6753, and its 14 day RSI has recovered from its former oversold state to read at the 35.2 level. Near term resistance appears in the 1.6597/1.6622 region and at 1.6656, with key support seen at 1.6534.Outlook isbearish near term, but neutral turning bearish medium term.

USD/CHF:  The Swissy moved higher over the weekend to hit a new recent high at 0.9194 in the Asian session this morning. The rate’s 14 day RSI lies just under overbought territory at 69.5, but it has not been supporting the recent rally. Its 200 day MA is now situated comfortably below the rate at the 0.8936 level with an increasingly positive slope. Outlook remains bullish in the near and medium terms.

AUD/USD:  The Aussie gapped slightly lower over the weekend, falling to find support at 0.9322 before rallying in this morning’s session to 0.9341. The rate remains firmly within a well-established 0.9201 to 0.9538 medium term trading range. Its 14 day RSI remains in central neutral territory at the 53.7 level, and the rate is still trading above its rising 200 day MA now at the 0.9210 level. Support is seen at 0.9322 and 0.9291, with resistance noted in the 0.9322/45 region and above that at 0.9373. Outlook has turned bullish in the near term and bullish turning neutral in the medium term.

USD/CAD:  The Loonie seems to be forming a near term top in the 1.0985/96 region, with an intervening neckline at 1.0859 that saw considerable follow on selling when it was recently broken. A sustained downside break would target 1.0733. Its 14 day RSI lies at 49.4 in central neutral territory, and the rate has broken below its flattening 200 day MA now at 1.0937. Outlook is bearish in the near term and neutral in the medium term.

NZD/USD: The Kiwi opened lower over the weekend, but when it failed to drop below support at the 0.8345 level touched last Friday, the rate rallied notably and has thus far risen as far as the 0.8375 level this morning.  It has been consolidating within a near term triangle pattern that is getting very close to breaking the falling upper trendline of its recent medium term decline, now drawn at the 0.8376 level.  Its 14 day RSI has corrected higher from oversold territory and now reads at the 39.3 level.  The Kiwi is still trading below its flattening 200 day MA now at 0.8515 that still has a mildly positive slope.  Support is seen in the 0.8330/46 region and at 0.8309, with resistance noted in the 0.8388/96 and 0.8406/29 regions. Outlook is now neutral near term, and neutral turning bearish medium term.

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About Author

Jay Hawk of Orbex enjoyed a twelve year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Jay Hawk personally leased seats and traded as a specialist market-maker with a broker/dealer license on major U.S. trading floors. He also ran stock and options broking desks with hundreds of retail and professional accounts, and I actively managed trading portfolios for private clients as large as $30 million both on and off the trading floors. In addition, Jay started a professional options stock exchange brokerage to provide brokerage services on to floor market-makers and upstairs traders located in New York and Chicago. Jay also gave option seminars as both a consultant and educator and helped start the exchange traded currency options market.

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