USD Tends To Gain, Yet Has Not Escaped Its Sideways Motion

Oct 19 21, 08:37 GMT

The USD remained relatively stable on Friday yet had some gains during today’s Asian session against some of its counterparts, as inflation rates tend to be on the rise on a global scale and the market has priced in the possibility of Fed rate hikes by next September. It should be noted that US yields tend to remain at rather high levels for the time being and should they gain more ground, we may see the greenback getting further support. Besides fundamentals USD traders are expected to keep an eye out also for the release of the US industrial production for September due out later today in the American session. Looking at the global markets, it should be noted that China’s GDP for Q3, dropped below the psychological barrier of 5% yoy and has reached a one year low. The power crunch in combination with supply shortages tend to bite and its characteristic of growth issues which the global economy faces as it tries to rebound. On the commodity currencies front, the CAD has strengthened against the USD on Friday as oil prices continue to climb while Loonie traders focus on Canada’s Housing starts for September. Characteristically WTI prices maintained their upward motion reaching new multiyear record highs and are currently aiming for $83 per barrel, as expectations for increased demand and tight supply seem to guide the market. On a more exotic note, TRY reaches new record lows against the USD as concerns for a possible rate cut on Wednesday from the Central Bank of Turkey continue to be present and have an adverse effect on the Lira’s value. As for the US equities, we note the gains marked by the major three US Stockmarkets on Friday as the market’s focus turns towards earnings releases this week and we note among many Netflix on Tuesday, Tesla on Wednesday, Unilever on Thursday, American Express on Friday and the dividends of Caterpillar on the same day.

The USD index is currently testing the 94.10 (R1) resistance line, threatening to escape its past sideways motion to the upside. For our sideways bias to be abolished, we would though require for the index to clearly break above the 94.10 (R1) resistance line and aim higher. Should the bulls take over, we may see the index breaking the 94.10 (R1) resistance line and aim for the 94.60 (R2) level. Should the bears take over, we could see the index reversing course taking aim if not breaching the 93.70 (S1) support line.

USD/CAD seemed to correct higher after failing to substantially threaten the 1.2160 (S1) support line. The pair’s price action is currently testing the downward trendline guiding it since the 29th of September and should the downward trendline be broken we would switch our bearish outlook for the pair technically, initially for a sideways bias. If the buyers are in charge USD/CAD could break clearly the prementioned downward trendline, the 1.2425 (R1) line and aim for the 1.2500 (R2) level. If the pair succumbs to the trendline’s orders, we may see it breaking the 1.2330 (S1) line and aim for the 1.2250 (S2) level.

Today’s events and expectations

Today we get from the US the industrial output and from Canada the Housing starts both for September.

As for the rest of the week

On Tuesday, we highlight the release of RBA’s October meeting minutes. On Wednesday we get Japan’s trade data, UK’s CPI rates and Eurozone’s final HICP rates as well as Canada’s CPI rates all being for September. On Thursday, we get UK’s CBI industrial trends for orders for October, from Turkey CBRT’s interest rate decision, from the US the Philly Fed Business index for October and the weekly initial jobless claims figure, while from the Eurozone the preliminary consumer sentiment for October. On Friday we get Japan’s CPI rates for September, UK’s retail sales for September, Canada’s retail sales for August and most importantly the preliminary PMI readings of October for Japan, France, Germany, Eurozone, UK and the US.

USD Index H4 Chart

Support: 93.70 (S1), 93.20 (S2), 92.75 (S3)