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The EUR/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.16035
Open: 1.16251
% chg. over the last day: +0.16
Day's range: 1.16163 – 1.16429
52 wk range: 1.0571 – 1.2557

The EUR/USD currency pair is consolidating. Financial market participants took a wait-and-see attitude before the ECB meeting. It is expected that the regulator will leave the key interest rates unchanged. At the moment, the local support and resistance levels are: 1.16150 and 1.16450, respectively. We recommend opening positions from these marks.

The news feed on 2018.09.13:

Key interest rate decision at 14:45 (GMT+3:00);

Core consumer price index in the US at 15:30 (GMT+3:00).

Indicators do not send accurate signals: 50 MA has started crossing 200 MA.

The MACD histogram is in the positive zone, but below the signal line, which gives a weak signal to buy EUR/USD.

Stochastic Oscillator is located near the oversold zone, the %K line has crossed the %D line. There are no signals at the moment.

Trading recommendations

Support levels: 1.16150, 1.16000, 1.15800
Resistance levels: 1.16450, 1.16850, 1.17000

If the price fixes above the resistance level of 1.16450, the EUR/USD quotes are expected to grow. The movement is tending to 1.16850-1.17000.

An alternative may be the decrease of the EUR/USD currency pair to 1.15700-1.15300.

The GBP/USD currency pair

Technical indicators of the currency pair:

Prev Open: 1.30213
Open: 1.30379
% chg. over the last day: +0.08
Day's range: 1.30262 – 1.30528
52 wk range: 1.2361 – 1.4345

Last trading sessions, the GBP/USD currency pair is moving in flat. A unidirectional trend is not observed. Investors expect the Bank of England decision on monetary policy. It is expected that the regulator will keep the interest rate at the previous level of 0.75%. We recommend paying attention to the comments of the Central Bank representatives. At the moment, the GBP/USD quotes are consolidating in the range of 1.30000-1.30500. The positions should be opened from these marks.

At 14:00 (GMT+3:00), the Bank of England will announce its decision on the interest rate.

Indicators do not send accurate signals. The price is testing 50 MA, which is a strong dynamic support.

The MACD histogram is located in the positive zone, but below the signal line, which gives a weak signal to buy GBP/USD.

Stochastic Oscillator is in the neutral zone, the %K line has crossed the %D line. There are no signals at the moment.

Trading recommendations

Support levels: 1.30000, 1.29700, 1.29000
Resistance levels: 1.30500, 1.30850, 1.31000

If the price fixes above the resistance level of 1.30500, the GBP/USD quotes are expected to rise. The movement is tending to 1.31000-1.31250.

An alternative may be the decrease of the GBP/USD currency pair to 1.29700-1.29500.

The USD/CAD currency pair

Technical indicators of the currency pair:

Prev Open: 1.30654
Open: 1.29927
% chg. over the last day: -0.50
Day's range: 1.29926 – 1.30183
52 wk range: 1.2059 – 1.3795

The USD/CAD currency pair continues to show negative dynamics. During yesterday's trading, the loonie added more than 80 points against the US dollar. Demand for the Canadian currency is at a fairly high level. At the moment, the USD/CAD currency pair is consolidating in the range of 1.29850-1.30200. The trading instrument has the potential for further reduce. Positions should be opened from the key levels.

The news feed on the economy of Canada is calm.

Indicators signal the power of sellers: the price has fixed below 50 MA and 200 MA.

The MACD histogram is in the negative zone, but above the signal line, which gives a weak signal to sell USD/CAD.

Stochastic Oscillator has started moving out the overbought zone, the %K line is below the %D line, which indicates the bearish sentiment.

Trading recommendations

Support levels: 1.29850, 1.29500, 1.29200
Resistance levels: 1.30200, 1.30500, 1.30750

If the price fixes below the local support of 1.29850, the USD/CAD quotes are expected to fall. The movement is tending to 1.29500-1.29200.

Alternative option. If the price fixes above 1.30200, it is necessary to look for entry points to the market to open long positions. The target movement level is 1.30500-1.30750.

The USD/JPY currency pair

Technical indicators of the currency pair:

Prev Open: 111.590
Open: 111.259
% chg. over the last day: -0.38
Day's range: 111.115 – 111.508
52 wk range: 104.56 – 114.74

Yesterday, the bearish sentiment prevailed on the USD/JPY currency pair. At the moment, the trading instrument is moving in flat. The technical pattern is ambiguous. The USD/JPY quotes are testing local support and resistance levels: 111.200 and 111.500, respectively. The positions should be opened from these marks. We recommend paying attention to the news feed on the US economy.

The publication of important economic reports from Japan is not planned.

Indicators do not send accurate signals: the price has crossed 50 MA.

The MACD histogram is located near the 0 mark.

Stochastic Oscillator is in the neutral zone, the %K line has crossed the %D line. There are no signals at the moment.

Trading recommendations

Support levels: 111.200, 110.900, 110.700
Resistance levels: 111.500, 111.750, 112.000

If the price fixes above the resistance level of 111.500, the USD/JPY quotes are expected to rise. The movement is tending to 111.750-112.000.

Alternative option. If the price fixes below the level of 111.300, we recommend looking for entry points to the market to open short positions. The target movement level is 111.000-110.700.

Turkish Lira is hammered by President Tayyip Erdogan's comments today, just ahead of CBRT rate decision. Erdogan decried high interest rates as a "tool of exploitation". And defying common logic, he said "if you say inflation is the cause and interest rates are the result, you don't know this business." On the other hand, he insisted that "interest is the cause, inflation is the result."

In addition, he described the depreciation of Lira as an economy as it's experience "fake volatility" as result of manipulations. Erdogan also pledged to implement measures to solve Lira volatility issues.

According to a Reuters poll, CBRT is expected to hike the benchmark interest rate by between 225 to 725 basis points. Seems like the markets are setting up themselves for disappointments.

USD/TRY hit as high as 6.5514 after the comments and it's now up around 2%.

NZDUSD has finally reversed slightly to the upside in the short term following the rebound on the more than two-and-a-half-year low of 0.6500 on Monday. Momentum indicators in the 4-hour chart though are currently supporting that positive momentum is likely to strengthen. Specifically, the MACD is picking up speed near zero line and the RSI continues to hold above the threshold of 50.

Should the price decisively close above the 0.6570 resistance level, bulls could extend the current bullish sentiment towards the 0.6615, reached on September 6. Further advances above this level, could then target the area around the medium-term descending trend line, around 0.6640.

A clear dip below the 20- and 40-simple moving averages (SMAs) would bring the pair lower until the multi-month low of the 0.6500 handle. Such a dip may carry more downside extensions and may open the path towards the next support of 0.6345, marked by the low of January 2016.

In the medium-term, NZDUSD has been trading bearish in the past four months after the pullback on the 0.7390 hurdle.

EUR/USD

Current level - 1.1618

The market is in a consolidation mode due to today's ECB  meeting and I favor a downswing, towards the lower range boundary at 1.1530.

USD/JPY

Current level - 111.46

The reversal below 111.80 led to a corrective leg to 111.15 support and the outlook is bullish, for a violation of the mentioned hurdle, towards 112.60.

GBP/USD

Current level - 1.3040

It is unclear if the bullish bias has been renewed, but I favor another downswing towards 1.2950 before breaking higher, for 1.3250.

Near-term action holds in the upper part of thick daily cloud on Thursday and heads towards cloud top (111.58) after repeated rejection here and subsequent dip on Wednesday.

Bullishly aligned daily techs maintain bullish bias, but cloud top marks very strong obstacle and the pair continues to range within the cloud and looking for a catalyst to eventually break out.

Cloud top (111.58), recent upside rejections (111.75/82) and Fibo 61.8% of 113.17/109.77 descend (111.87) mark a cluster of barriers that need to be broken to signal continuation of bull-phase from 107.77 (21 Aug low).

Converged 10/55SMA’s mark initial support at 111.22 which contained Wednesday’s / today’s downside attempts, followed by converged 20/30 SMA’s (111.04) loss of which would turn near-term bias lower for fresh attack at daily cloud base (110.76).

Res: 111.58, 111.75, 111.87, 112.15
Sup: 111.22, 111.04, 110.76, 110.60

Recovery from new 2 ½ year low at 0.7085 picks up and extends on Thursday, following previous day’s strong bullish acceleration.

Strong Australian jobs data in August, released overnight, helped fresh bulls to break above initial barrier at 0.7166 (falling 10 SMA) and currently pressuring pivotal barriers at 0.7198/0.7202 (Fibo 38.2% of 0.7381/0.7085 bear-leg / former low of 15 Aug).

Break and close above here would generate bullish signal for extension of recovery leg towards 0.7242 (falling 20SMA) and 0.7268 (Fibo 61.8% / falling 30SMA).

News about new round of trade talks between the US and China could be supportive for Aussie’s recovery.

Conversely, bearish signal could be expected if recovery rally fails to clear pivotal 0.7200 zone.

Res: 0.7202, 0.7242, 0.7268, 0.7311
Sup: 0.7173, 0.7138, 0.7085, 0.7022

Brent oil holds in red on Thursday and pulls back from previous day's high at $80.10 (the highest since 22 May). Rising concerns about slowdown in global energy demand on growing trade tensions between two largest oil consumers, the US and China and turmoil in emerging markets, offset positive impact from much stronger than expected fall in US crude inventories. Daily techs suggest that pullback could extend as RSI turned lower after touching overbought zone border, daily slow stochastic is overbought, while 14-d momentum heads lower after forming bear-cross and bearish divergence. Today's strong close in red would complete reversal pattern on daily chart and signal further weakness towards pivotal supports at $77.98 (rising 10SMA) and $77.71 (bull-trendline drawn off $70.39 (16 Aug low). Holding above the latter would signal that larger bulls are correcting and positioning for fresh upside and would reduce immediate downside risk. However, strong barriers lay at $80.00/50 zone, where broader recovery from 2016 low was repeatedly rejected, keep so far upside attempts limited and another failure here would risk deeper pullback on sustained break below $75.63 (06 Sep trough/100SMA).

Res: 79.69, 80.10, 80.48, 81.00
Sup: 78.74, 78.39, 77.98, 77.71

A collective sigh of relief across financial markets and investors has been noticed following the latest reports that the United States has proposed fresh trade talks with China. This shortly followed headlines that the United States and Canada were moving closer to an agreement on trade, which has encouraged the Dollar to dip lower against its counterparts.

Trade tensions have long been seen as the motivator behind a stronger Dollar, and the indications that the Trump administration are not as aggressively pushing for trade tensions as feared is seen as negative for the Greenback. The Chinese Yuan has edged higher on the news that Washington is engaging with Beijing to resume trade talks, with a range of other EM currencies in Asia benefiting from increased risk appetite.

While this is not the first time there has been optimism around negotiations between Washington and Beijing, which have later escalated to further trade tensions, investors will want to remain optimistic that an agreement over this long-standing issue will eventually be made. The talks are overall a positive step that both sides are willing to diffuse tensions between the two largest economies in the world.

Another driver that might be encouragingsoftness in the Dollar is the disappointing PPI data weakening expectations over a potential U.S. interest rate increase in December. The major driver for the Dollar over the medium to longer-term will however remain as trade tensions. Any future indications of optimism over trade would be seen as encouraging for renewing risk sentiment, and specifically prompting investors to reduce their safe-having holdings on the Dollar.

Away from the prolonged trade headlines, Central banks will take center stage today, with the Bank of England, European Central Bank and Turkish Central Bank under the spotlight.

Although the ECB is widely expected to leave monetary policy unchanged in September, markets are speculating a potential downgrade in growth forecasts amid global trade tensions. The potential downgrade might not be enough to derail the ECB from tapering QE, but it could weigh on the eventual goal of the ECB raising EU interest rates before the end of 2019.Market players will be paying very close attention towards the ECB president’s press conference this afternoon for further insight into rate hike timings and thoughts on the latest global trade developments.

In the United Kingdom, the Bank of England is poised to maintain status quo on interest rates as Brexit talks build momentum. Investors will closely scrutinize the policy statement for clues on when the central bank plans to raise interest rates again. Although the stronger-than-expected wage growth has illustrated an encouraging picture of the UK economy, this is unlikely to alter the BoE outlook for monetary policy. The Bank of England is far more likely to remain on standby until the cloud of uncertainty created by Brexit disperses. It might even note some concern that Brexit itself remains very uncertain despite there only being six months until the United Kingdom is supposedly going to be leaving the European Union.

The Turkish Central Bank is expected to raise interest rates today in an effort to resuscitate the battered Lira. A rate hike does appear to have been priced in by investors over recent weeks. There is a high risk however that even if the central bank does act today as expected, that investors could sell the news that interest rates are still not high enough to prevent the ongoing risks that the Turkish economy is set to face.

The toxic combination of political instability, skyrocketing inflation, a deepening current account deficit and questions over central bank independence will remain as stumbling blocks for the Lira. The Turkish Lira itself has been attacked from all directions this year and with key fundamental themes unlikely to go away, there are still risks ahead for the currency.

Hang Seng Index

After a positive start during the morning trading session, the index was showing a few signs of wobbling at the afternoon open on the heavily subscribed HSI. Don’t mistake a short covering rally for a reverse in negative sentiment as this market is far from bullish on Asia risk. Despite positive developments on the US-China trade front, the playbook remains unchanged, and it would be a total surprise for many market participants if the Trump administration didn’t follow through with 200 billion in tariffs.

Currency Markets

Much of today’ price action, outside of the Australian Dollar, could be a function of paring risk ahead of the hugely busy day with BOE, ECB, German, French and US CPIs to navigate. But everyone across the currency world is also watching to see just how definitive a signal the Turkish Central Bank will deliver to quell emerging markets bloodletting.

Australian Dollar

Positions are much cleaner now after the short squeeze on the back of last night CNH move, and today stable domestic jobs report. While there is interest to sell between .7190-7200 levels, in the absence of greater participation, we could set into a consolidation pattern ahead of the critical US CPI data. However, .7200 AUDUSD a desirable standard for Aussie bear and ultimately they will re-engage as longer-term interest rate differentials will continue to weigh on AUD and eventually led to a convincing break of .7100 level

The Euro

Participation was meagre again in Asia, but if Draghi sounds all the right dovish tones ahead of the politically contentious Italian budgets, and with the Feds on Dot Plot autopilot given the run of robust US economic data, the Euro bears could be rewarded. Its way too quiet and something has to give on the Euro post.

The Chinese Yuan

CNY fixing at 6.8488, slightly lower than market expectation.

Traders were buying the overnight dip as there remains a high-level uncertainty that any progress will come from these possible trade negotiations. The market was pricing in the US midterm election as a likely timeline for development on the US-China trade front, so the overnight move does look like the unwinding of long USD hedges may have exacerbated it and compounded by stop loss triggers. Fundamentally, the CNH remains, and we could see some topside follow through on a stronger than expected CPI print later this evening.

Canadian Dollar

The market is not making to much of a meal of this headline.

There was some news on the NAFTA front that Minister Freeland want to be attending Thursday trade discussion but reinforce the notion that the intent is to work towards a deal there was no ‘stalemate’. It’s not even registering on my pessimistic ire monitor that would sound alarms if this was a case of where their smoke there’s fire. But until there is a breakthrough in these negotiations the Canadian dollar ” permabears” will put up a good defence around 1.3000. And trust me after cutting my chops trading the CAD on Bay Street back in the day, most CAD traders are Fairweather players at best!!

Oil markets

Despite the favourable convergence of bullish near-term signals, Iran sanctions and sinking US crude inventories, which should keep oil prices supported for the remainder of the week. Oil markets continue to trade rather poorly in Asia.

Asia risk continues to wane as traders remain acutely focused on possible trade fall out, which could weigh negatively on regional crude demand. Brent and WTI have slipped throughout today’s Asia trading session despite the US offering an olive branch by formally inviting China to resume trade discussion.

Southeast Asia risk is an entirely different kettle of fish and one look at the weakening currency profile of one of South East Asia major crude importers, India, does suggest the weaker Rupee could dent Oil demand as real fuel cost factored directly through the seriously weaker currency supply loop chain.

Here are the latest developments in global markets:

FOREX: The US dollar index is slightly higher on Thursday (+0.08%), recouping some of the losses it posted in the previous session as safe-haven bets on the currency were scaled back, following news the US and China are set to hold new trade talks. The risk-sensitive aussie surged, while the loonie also advanced after Mexico’s economy minister played up the prospect of a US-Canada trade deal. Elsewhere, the euro and sterling were little changed, ahead of the BoE and ECB policy meetings today.

STOCKS: Wall Street had a mixed session on Wednesday, with optimism for a fresh round of US-China trade talks being counterbalanced by a broader retreat in the tech sector. The Dow Jones (+0.11%) and the S&P 500 (+0.04%) managed to post some gains, though the tech-heavy Nasdaq Composite (-0.26%) fell, being weighed by giants like Facebook (-2.37%) and Apple (-1.24%). Asia traded on a more cheerful note on Thursday, with nearly every major index being in the green. In Japan, the Nikkei 225 (+0.96%) and the Topix (+1.11%) recovered some of their recent losses, as did the Hang Seng in Hong Kong (+2.05%). In Europe, futures tracking all the major indices are pointing to a relatively flat open today, with the only exception being the Italian FTSE MIB, which is expected to open lower.

COMMODITIES: Oil prices pulled back on Thursday, giving back the gains recorded in the previous session after the weekly EIA inventory data showed a larger-than-expected drawdown in US crude stockpiles. WTI is lower by 0.68% at $69.81 per barrel today, while Brent lost 0.44% to trade at $79.38/barrel. In precious metals, gold is fractionally lower (-0.03%) at $1,204 an ounce. The dollar-denominated metal rose yesterday, as a retreat in the US currency rendered it more appealing for investors using foreign currencies. That said, price action remains within a narrow range between $1,214 and $1,189, and a break in either direction is needed to determine the short-term bias.

Major movers: Dollar tumbles, Aussie bounces amid hopes for US-China trade talks

The US dollar retreated against all its major peers on Wednesday as market participants unwound some of their safe-haven exposure on the greenback, following reports that the US government has proposed another round of trade negotiations with China. In an environment where investors were anticipating a fresh round of tariffs between the two to be announced at any moment, this news likely helped to ease some concerns around further escalation, and possibly brought the prospect of a negotiated solution back on the radar.

Major US stock indices jumped on the news, but pulled back in the following hours amid a rout in tech stocks. Meanwhile, the Aussie – which has been acting as the barometer for trade tensions given Australia’s dependence on exports – surged, distancing itself from the 2 ½-year lows it touched last week against the dollar. The currency also got a lift from robust Australian employment data released overnight. Meanwhile, the safe-haven Japanese yen spiked lower on the trade-talk news as risk appetite improved, but still managed to hold onto some of its prior gains to end Wednesday’s session higher against most of its counterparts.

In NAFTA-land, the Canadian dollar was back in the spotlight, posting gains across the board amid renewed optimism that a trilateral trade accord may be agreed soon. The move came after the Mexican economy minister Guajardo said he sees a “high chance” of a US-Canada deal, boosting speculation for such an outcome and hence reducing the NAFTA risk-premium on the loonie. The negotiations will continue today in Washington, and as usual, the loonie will remain ultra-sensitive to any fresh headlines.

Elsewhere, movements in the FX market were relatively muted, with investors appearing reluctant to initiate major new positions on the euro or sterling before they receive updated guidance from the Bank of England and the European Central Bank later today (see below). In emerging markets, the Turkish lira could attract interest today, as the nation’s central bank is expected to deliver a sizeable rate increase to help stabilize the battered currency and rein in double-digit inflation.

Day ahead: ECB, BoE and Turkish central Bank decide on policy; US CPI due; trade deliberations eyed

The European Central Bank and the Bank of England will be concluding their meetings on monetary policy on Thursday. Beyond policy decisions, US inflation data as gauged by the consumer price index (CPI) will be released, while deliberations revolving around trade will also be monitored.

On the trade front, news that the US is seeking a fresh round of talks with China are boosting sentiment. Meanwhile, discussions for a new NAFTA deal between the US and Canada are set to continue today.

Both the Bank of England and the European Central Bank are expected to keep their policies unchanged when they complete their meetings today at 1100 GMT and 1145 GMT respectively. The focus will thus turn to their guidance. Will the former maintain its view for “gradual and limited” rate increases, or will it deviate from that position? Brexit commentary by the Bank will also be closely watched, as well as any developments for a UK-EU deal of course.

Turning to the ECB, new economic projections will be eyed, with sources indicating the Bank will lower its economic growth forecasts even as it plans to scale down on stimulus, ending its asset purchases by year-end. A press conference by ECB President Draghi will follow at 1230 GMT; the ECB chief does not tend to shy away from market-sensitive comments. It is worthy to note that the euro has declined after every single ECB meeting so far this year, even as the Bank announced plans to move in a more hawkish direction in recent gatherings; it will be interesting to see whether or not this pattern continues today.

Elsewhere, in the EM-space, which is seen as posing threats to developed markets lately, Turkey’s central bank will also be making a policy decision today at 1100 GMT. The Bank is expected to hike rates, though there’s uncertainty as regards the magnitude of the move. The more hawkish the central bank, the greater appreciation is to be anticipated in the lira, with the opposite holding true as well. It should also be taken into account though, that a sharp rise in rates is likely to weigh on economic activity later on.

Out of the US, headline CPI due at 1230 GMT is forecast to come in at 0.3% m/m in August, from July’s 0.2%. This would put the annual pace of growth at 2.8%, slightly below the 2.9% experienced in the two previous months, this being a high last seen in early 2012. Core CPI that excludes volatile items is projected to remain constant at 2.4% y/y. A data beat could be seen as more conclusively putting on the table two more rate increases by the Fed in 2018, hence supporting the dollar, and vice versa. It is of note that yesterday’s data on August factory inflation as measured by the producer price index (PPI) negatively surprised. Lastly, weekly jobless claims data out of the world’s largest economy are due at the same time.

Atlanta Fed President Raphael Bostic (voting FOMC member in 2018) will be talking on the US economic outlook and monetary policy at 1700 GMT.

Technical Analysis: EURUSD looking neutral in the short-term

EURUSD is trading around 30 pips below Wednesday’s one-week high of 1.1649. The RSI is largely moving sideways, projecting a mostly neutral picture in the short-term.

An upbeat ECB relative to market expectations will likely lift the pair. Resistance to gains may come around yesterday’s one-week high of 1.1649, with the area around it encapsulating another peak from the recent past at 1.1658. Further above the 1.17 round figure would be eyed, with the late August one-and-a-half-month high of 1.1733 lying not far above.

Conversely, a relatively downbeat ECB is expected to lead to a falling EURUSD. Immediate support to losses seems to be taking place around the current levels of the 100- and 50-period moving average lines at 1.1617 and 1.1601 correspondingly. Steeper losses would turn the attention to the zone around the three-and-a-half-week low of 1.1525 from September 10.

CPI data out of the US can also move the pair.