USD weakened against a number of its counterparts yesterday as risk sentiment improved after positive comments made about the US-Sino relationships. US President Trump stated that he and his Chinese counterpart Xi, had a good conversation about trade and that talks are “moving along nicely”. The two of them are to meet in Argentina at the sidelines of the G20 meeting, however analysts point out that the two parts are still a long way from an agreement. Risk sentiment was improved and as a result, stock markets marked some gains while the USD lost ground in its role as a safe haven. Volatility for USD is expected to continue today, as the US employment report for October is due out.
AUD/USD rallied yesterday breaking all resistance lines (now turned to support) and tested the 0.7240 (R1) resistance line. It should be noted that despite the steep rise of the pair, the current bull’s market may be put to the test today, as US Employment report for October is due out later. Also please note that the RSI indicator in the four hour chart has surpassed the reading of 70, implying a rather overcrowded long position. Should the bulls continue to dictate the pair’s direction, we could see the pair breaking the 0.7240 (R1) resistance line and aim if not break the 0.7280 (R2) resistance hurdle. Should the bears take over we could see the pair, breaking the 0.7200 (S1) support line and move lower.
Pound rises on Brexit hopes
Cable had one of its highest rallies in 2018 yesterday, as Brexit hopes increased, while the BoE also provided support for the pound. BoE remained on hold as expected yesterday at +0.75% unanimously and hinted slightly faster future rate hikes in case of a soft Brexit. BoE governor Carney, stated that a no deal, no transition scenario may be remote but the bank must prepare for it. Analysts point out, that the BoE appears more hawkish than the market, as other central banks seem to be heading on the same direction. Volatility for GBP pairs could continue either way today, depending on further Brexit news.
Cable rallied yesterday, breaking the 1.2850 (S2) and 1.2920 (S1) resistance lines (now turned to support) and tested the 1.3015 (R1) resistance level. We could see the pair continuing to trade in a bulls market, however the pair could prove sensitive to any further headlines regarding Brexit, as well as the US employment report for October due out later today. Please be advised that the RSI indicator in the 4 hour chart, remains still above the reading of 70, underscoring the overcrowded long position for the pair. Should the pair find fresh buying orders along its path, we could see cable, breaking the 1.3015 (R1) resistance line and aim if not break the 1.3075 (R2) resistance level. Should the market favour the pair’s short positions we could see it breaking the 1.2920 (S1) support line aiming lower.
In today’s other economic highlights:
In the European session today, we get from the Germany the final release of the Manufacturing PMI for October and from the UK the Construction PMI for October. During the American session, the US employment report with its NFP figure is due out, as well as the US factory orders growth rate for September. From Canada we get the employment data for October and the trade balance figure for September.
AUD/USD H4
Support: 0.7200(S1), 0.7160 (S2), 0.7115 (S3)
Resistance: 0.7240 (R1), 0.7280 (R2), 0.7315 (R3)
GBP/USD 4H
Support: 1.2920 (S1), 1.2850 (S2), 1.2780 (S3)
Resistance: 1.3015 (R1), 1.3075 (R2), 1.3160 (R3)
