USD Remains Soft, Yet US Stockmarkets Rise

Oct 15 21, 08:36 GMT

The USD remained rather stable but soft against its counterparts yesterday while US stockmarkets tended to gain substantially. On the other hand, gold’s price had some limited gains as well. It’s characteristic that all three main US indices gained as market participants saw past the inflationary worries for the US economy and tended to concentrate on the earnings season. The banking sector delivered strong results including Morgan Stanley, Bank of America, and Citigroup, which beat market estimates. It should be noted that the weekly initial jobless claims figure dropped below the psychological barrier of 300k, reaching a new post pandemic low. Attention today turns to the NY Fed Manufacturing index for October, the US retail sales for September and the preliminary University of Michigan consumer sentiment for October.

Dow Jones continued to rise yesterday aiming for the 35075 (R1) resistance line. We maintain our bullish outlook for the index as long as it remains above the upward trendline incepted since the 13th of October. Please note that the RSI indicator below our 1-hour chart has surpassed the reading of 70, confirming the bullish sentiment, yet at the same time may imply that the index is overbought and ripe for a correction lower. Should the bulls actually maintain control over the index, we may see it breaking the 35075 (R1) resistance line thus paving the way for the 35500 (R2) level. Should a correction lower be performed and the bears find a chance to take over we may see the index reversing course, breaking the prementioned upward trendline and take aim or even breach the 34700 (S1) support line.

Turkish Lira reaches new record lows

The Lira has been weakening for the past few days, reaching new record lows against the USD. The situation is highlighted by the Central Bank of Turkey (CBRT) interest rate decision, which is expected to be released on Wednesday. The bank refuses to start tightening its monetary policy and even proceeded with a rate cut of 100 basis points for its one-week repo rate, from 19% to 18%, in its last meeting. It should be noted that inflation has reached almost 20% on a year-on-year level in September. The bank’s dovish policy seems to be a result of President Erdogan’s pressure on the bank. It’s characteristic that the Turkish President dismissed three of the banks’ policymakers, two of which were mentioned as to have opposed the last rate cut performed by the bank. The bank was expected to reverse its previous decision in the coming meeting, yet after the overhaul of the Bank’s board, such a scenario is being highly doubted.

USD/TRY continued to be on the rise yesterday breaking the 9.1500 (S1) resistance line, now turned to support. We maintain our bullish outlook for the pair as long as it remains above the upward trendline incepted since the 8th of October. It should be noted that the pair is at new record high levels and the RSI indicator below our 4-hour chart has surpassed the reading of 70, confirming the buying interest for the pair, yet at the same time may imply that the pair is overbought. Should buyers continue to guide the pairs’ price action, we may see it aiming if not breaching the 9.3500 (R1) level. Should on the other hand the market say enough is enough and a selling interest be displayed for the pair, we may see USD/TRY reversing course and breaking the 9.1500 (S1) line, the prementioned downward trendline and taking aim of the 8.9500 (S2) level.

Today’s events and expectations

Today during the European session we get France’s final HICP rate for September. In the American session, we get NY Fed manufacturing index for October, the US retail sales for September and the preliminary University of Michigan consumer sentiment for October. On the monetary front we note the speeches of BoJ’s Deputy Governor Amamiya, St. Louis Fed President Bullard and NY Fed President Williams. During Mondays’ Asian session we highlight China’s GDP rate and New Zealand’s CPI rates for Q3.

US30 Cash H1 Chart

Support: 34700 (S1), 34400 (S2), 33060 (S3)