The Dollar Moving Down
Amid the latest economic reports, the American currency is losing
positions against all major currencies.
The dollar fell sharply against all major currencies after the
labor market data release in the US, which was worse than expected.
As reported by the US Department of Labor, last month 156,000 jobs
were created, which is below the projected 180,000. The indicator
for July was revised downwards from 209,000 to 189,000. The
unemployment rate rose to 4.4%, instead of the previously
forecasted 4.3%. All of this indicates a worsening of the situation
on the labor market. The report also shows the average hourly rate
grew by 0.1% in August, compared to the expected growth of 0.2%.
One of the main indicators of inflation, the Core PCE, has
decreased to 1.4%, while at the beginning of the year it was above
1.8%. Such statistics practically leaves no chance for another
increase in the discount rate this year.
Federal Reserve representatives have expressed their concerns about
the low dynamics of consumer prices over the recent months and its
impact on the future monetary policy of the US Central Bank. Soon
after the US statistics release, information from the ECB suddenly
appeared. Sources in the European Central Bank, quoted by
Bloomberg, declared that the plan for ending the quantitative
easing program could be ready no earlier than December. "The
politicians of the European Central Bank may not be ready to
curtail the quantitative easing program until December," the
sources said.
After the release of US statistics, the EUR/USD rose 0.5% to
1.1970, approaching a two-and-a-half-year high on Tuesday (1.2069),
but after a verbal intervention by the ECB, it returned to 1.1900.
Earlier the euro surrendered its position after reports about the
increasing number of ECB officials who are concerned about the
recent strengthening of the European currency.
USD/CHF Technical Analysis & Daily
Chart
With the recent development we see a potential for further growth
in the USD/CHF rate.
Today we direct our attention to the USD/CHF currency
pair.
The USD/CHF managed to rise above its support level at 0.9558
yesterday and mark new highs near 0.9670. We expect that this
movement above the support would persist for a while. The price is
approaching the nearby resistance level of 0.9693. If it manages to
overcome that, we can see it grow further to the second resistance
at 0.9725. As long as the pair moves above the support level at
0.9558, we hope to see a continuation of the bullish movement from
yesterday.
In terms of trading this pair well today, we should expect it to
move within about 90 pips, based on the USD/CHF’s previous behavior
on the market. Any buy positions should be placed above the pivot
of 0.9558, with a first target at the resistance at 0.9693, and a
second target at the next resistance level at 0.9725, which is
likely the best candidate for a T/P order, as it is unlikely that
the pair will be able to overcome it and would likely drop after
testing it. However, this strategy is only suitable if the pair
remains above 0.9558; if it drops below, we should close these
positions.
As of the moment of this article’s publication, the USD/CHF is
trading around 0.9595 and technical indicators agree on a strong
buy recommendation.
USD/SEK: Review & Forecast
The SEK achieved its level from November 2014 thanks to the
weakened USD.
The steady downward trend continues, but at the moment the rates
have consolidated in the range SEK 7.908 - 8.0. The market hasn't
received any economic statistics or news from Sweden which would
have affected the Swedish Krona, but the stable economic situation
in the Eurozone isn't putting pressure on its value.
Since the end of August the rates have been influenced by the
unstable political situation in the United States, the escalation
of the conflict between the US and North Korea, and disappointing
economic statistics in the United States. As a result, the value of
the SEK has reached the level from November 2014, and the downward
trend became more rapid. Falling to the minimum for many years
began on August 25 when the FED Chairman Janet Yellen did not make
any statements related with the country's monetary policy during
the symposium in Jackson Hole, which confirmed investors' doubts of
a further increase of the interest rate. Then the geopolitical
factors, unemployment growth by 4.4%, a reduced volume of
manufacturing production in July in 3.3% contrinuted to negatively
affecting the USD value.
At the same time it is likely that the minimum has already been
achieved and the current phase of consolidation can be the
beginning of a flat trend. However, today the dollar can get some
support from the release of new economic statistics: the market is
waiting for the data on trade balance, and the PMI indices of
business activity. Next week we also expect data about retail sales
and consumer price indices.
At the moment volatility is very low. The MACD and RSI oscillators
do not give us any signals for trading positions. In this situation
it's necessary to pay attention to the entry points SEK 7,908 and
8.0, the achievement of which would indicate the completion of the
consolidation phase. Now, the most effective course would be the
deals to Buy in medium-term trading.
NZD/USD: Short Review & Analysis
We expect the pair to move in a slightly bearish way
today.
Today we would look at the NZD/USD currency pair.
For some time now the pair has been moving in a bearish manner
below 0.7217, down from 0.7247 previously. The level of 0.7217
actually proves to be an insurmountable resistance level for the
NZD/USD at this moment that the pair is simply incapable of
overcoming. The NZD/USD seems to be inching closer to the nearby
support at 0.7174, so we need to stay alert and be patient until
the sideways price channel is fully formed.
Quite on the contrary, Wednesday saw the pair attempting to make
new gains, trading above the first resistance and climbing towards
the second one at 0.7290. After it failed to overcome it, it
retreated to the type of movement we see today. It is not very
likely that we would see the pair climb to the second resistance,
since the first one is proving to be quite challenging. Therefore,
we can wait and see if the NZD/USD will actually drop further down
and provide us with a good opportunity to trade on a more
pronounced bearish trend.
In the current scenario it would be best if we took sell positions
below the resistance at 0.7247, placing our first target at the
nearby support level at 0.7174. If the NZD/USD drops further down,
our second target would be 0.7144.
Currently the pair is trading around 0.7198, above the support
levels. All technical indicators are unanimously giving us a strong
sell signal.
The North Korean Crisis
Tensions continue to rise as North Korea's Independence Day looms
around the corner.
One could hardly go through this week without hearing about what is
shaping up to be the biggest global issue right now: North Korea.
The isolated communist state came under the spotlight three weeks
ago when North Korea leader Kim Jong Un announced his intention to
launch an attack on Guam, a territory under the jurisdiction of the
United States. What ensued was a series of threats between Trump
and Kim Jong Un, which led to a tense situation on the global
financial markets. The stress began to ease off last week, but on
Sunday the world awoke in chaos again, as North Korea performed a
successful test of a hydrogen bomb in the ocean, which resulted in
an earthquake felt in neighboring South Korea and Japan.
Even though there were no casualties, this strike was quite
significant. For one thing, many countries had speculated that
North Korea did not have the technology to successfully mount such
a destructive bomb on a missile, nor to aim it properly. Since the
country lives under a self-imposed isolation from the rest of the
world, their development has been hampered by a lack of exchange of
technologies. It has also been very difficult for the rest of the
world to evaluate the readiness and conditions for war in North
Korea due to the lack of information (or, rather, the state
propaganda that is broadcast instead of information, which many
suspect is inaccurate). However, this strike proved that North
Korea is much farther ahead in its nuclear program than previously
assumed – a power on which Kim Jong Un’s regime relies. The North
Korean leader has repeatedly ignored the condemnation of the United
Nations regarding his nuclear weapons – and from his perspective,
as someone who faces many enemies and might have to protect his
position with force, it makes sense that he wants to hold on to his
weapons.
It is also important to add that while hydrogen bombs are not
talked about as often as atomic ones, they are in fact more
dangerous. The test that North Korea performed had five-six times
the magnitude of what the USA used in the devastating World War II
attacks on Hiroshima and Nagasaki in Japan. If North Korea does
have the means to send these missiles across the globe to attack
North America, the destruction will be unprecedented.
To try to mitigate the crisis before the irreversible occurs, the
United Nations again spoke about sanctions against North Korea. The
United States, arguably the loudest voice in the argument, has
suggested a ban on exporting oil to North Korea. Without fuel, the
country would definitely be forced to reconsider its policies, but
it might also cause a serious economic crisis in the country where
the living standard is already reportedly poor enough.
Even if an oil embargo could success in theory, we might not see it
in practice. North Korea trades with two countries: Russia and
China, both of which are members of the UN Security Council and
could veto the embargo. Even though both have spoken against North
Korea’s recent actions, it is unlikely that they would support
anything too harsh. China, in particular, does not wish to lose its
position of importance in North Korea. Russia too is protecting its
interests by supporting the claim that an oil embargo will endanger
the civilian population more than it would neutralize the military
program of North Korea. The United Nations Security Council is yet
to vote on any measures against North Korea.
Meanwhile, amid the geopolitical tensions we saw the financial
markets in disarray. Stocks moved up and down, as did currencies.
The dollar lost some of its positions against major currencies, and
the EUR/USD was able to pass the psychological threshold at $1.20.
We should note, however, that the American dollar also suffered for
other reasons – the destruction caused by hurricane Harvey hasn’t
been fully documented yet, and the US southern coast is again in
danger of another hurricane, Irma.
The big winner this week has without a doubt been the gold, which
reached its highest level in a year. As a safe haven asset, gold is
attractive to traders who find other instrument too insecure at the
moment. Now the markets are holding their breath as tomorrow North
Korea celebrates its independence and there might be another attack
to “commemorate” the day. As long as the tensions continue, we are
likely to see this trend stick around.
GBP/NZD: Technical Outlook before UK Bank Rate
The GBP/NZD is ahead of 1.8360 after breaking through the
resistance area.
If you want to be successful in Forex trading, you have to follow
your rules and your trusted analysis, especially if you use
classical methods of analysis. In our last report about the GBP/NZD
pair we recommended buying the pair for several reasons: lthe pair
had reached further than 61.8% Fibonacci and was trading above the
ascending trend line, and there also was a double bottom
pattern, all of which are signs which told us to buy the pair. This
is why we bought it at 1.7700 - we have taken our profit at 1.7850.
Then we bought the pair again after breaking the neckline at 1.7885
and the prices hit our target today at 1.8230.
The pair is now trading around 38.2% Fibonacci in a series of
impulse waves, after it reached 1.7500 - close to the upside trend
line. The pair has a resistance area at 1.8362 which the pair is
expected to reach in the next few days. That is in case the pair is
still trading above the support area at 1.7906 and the moving
average 50. The Stochastic indicator started giving us a sell
signal, which is a sign that the pair will make a downward
correction movement.
The Next Few Days
From this classical analysis of the pair we can’t take any
positions now at the current level. We can buy the GBP/NZD at the
support level 1.7906 or sell at the resistance level 1.8362, but we
prefer the buying scenario for the next trading days. In effect, we
can take a buy position now with a small volume and keep our target
at 1.8362.
This week the market has some hot news from the UK like the CPI and
the official bank rate next Thursday.
What will happen to the dollar index after "Irma" and
"Harvey"
The calculation of losses from natural disasters is out.
Hurricane Irma has almost calmed down and now it’s time to assess
the damage. After Harvey's passing about $ 12 billion were already
paid for insurance payments. Of course, losses, in this case, were
incurred by insurance companies. The fact is that as of June 20,
2016 in Harris County, a region that includes Houston, only 15% of
the property was insured against floods. Also there is a National
Flood Insurance Program. The program pays damages to those who do
not have flood insurance, and often borrows from the Treasury
Department to fulfill their claims obligations.
We will be able to observe after a full assessment of the damage
from natural disasters, a surge of activity related to the need to
restore the affected regions. This means activity in the real
estate and employment market, which can help the dollar strengthen
its position.
On the other hand, these are internal costs that will be covered by
the state. Therefore, experts differ in their judgments, how this
will affect the economy and where the dollar index will
go.
At the moment, the index continues its downward movement after
yesterday's slight increase and at the moment is 91.78.
AUD / CAD technical analysis
At the moment, the pair is trading in a downtrend and is between
23.6 and 0.00 Fibo levels with a daily chart.
Since recently some reliable enough data came from Canada, we see
further strengthening of the Canadian currency.
The indices of RSI and Stochastic also confirm the downward
movement after a small correction of 75 points.
At the moment, the pair is also under our Moving Average with a
period of 28 and tends to a resistance level lying at 0.00 Fibo
level (0.9655).
Tomorrow a number of important news will be released in Australia,
at 2:15 (GMT +3) the speach of the Deputy Head of the Reserve Bank
of Australia Debbel will take place, and at 4.30 (GMT +3) the
changes in the level of employment for August will be published.
This may slightly increase the volatility of our pair at the time
of the news release.
By day trading, we are now seeing a downward movement, so there is
an opportunity to take short positions. With take-profit and stop
loss at the levels of 0.0 and 23.6 by Fibo, respectively. We also
have a twice tested resistance level of 0.9690, on which it is also
possible to fix profits and look for further fluctuations of the
pair.
The intersection of our gliding (28) body with a candle and the
subsequent fastening of the next candle by the body will highlight
a possible reversal.
Support and resistance levels:
0.9655, 0.9690, 0.9745, 0.9805, 0.9870, 0.9900, 09975,
1.0050
The GBP/CAD is ahead of 1.6611 and 1.6850 after breaking the
channel.
In our recent report about the GBP/CAD currency pair we recommended
selling the pair and the prices already hit our first target at
1.5927 to make a profit of +220 pips, then the pair returned back
to break the price channel and the resistance level last
Thursday.
The price channel which we were trading inside was strong because
it has 5 tops and 4 bottoms, so when the prices broke upwards from
it, the pair rose more on Friday to trade now around 1.6525. The
prices recorded the highest level on Friday at 1.6574, close to the
resistance level at 1.6611. We expect the price to reach the
resistance and make new highs but we have to be careful in case the
pair makes a price action pattern on the resistance area. The MACD
indicator gave us the buy signal last week.
The Next Few Days
After we saw the prices break up the price channel we should only
think of buy orders, as there are no sell opportunities anymore in
these levels. We can take a buy position now at the current level
1.6523 and keep our first target at 50% Fibonacci at 1.6850, and
the second one at 1.7050. We can take another buy order if the pair
declined to the moving average 50 on the daily chart.
Bank of England governor Carney will speak today at the Central
Banking Lecture hosted by the International Monetary Fund in
Washington, DC and we have the retail sales from the UK on
Wednesday, in addition to the CPI and retail sales from Canada on
Friday, so we have to be careful due to the news this
week.
CAD / JPY technical analysis
At the moment, on the chart of H4, we see the return of prices in
the framework of the rising channel. Drawn for 28 days.
Given the recently published positive statistics for Canada, we can
assume that our upward movement will continue and at the moment we
are seeing a correction and revision of the positions by bulls that
decided to fix the profit.
On the daily chart, we have not yet seen the figures of absorption
and the reversal pattern. But on the chart H4 appeared "shooting
star", which can signal us about a possible correction. And the
ability to draw a "head and shoulders" figure, with a shoulder
level in the area of 88.90.
But looking at the overall schedule and considering the overall
movement, the recommendation is to look for points to enter the
long position at support levels.
Support and resistance levels
87.72
88.35
88.89
89.50
90.10
90.90
GBP/EUR Technical analysis
The pair is moving within a downward trend.
At this moment the pair is trading in a down trend, slowing down
near its resistance levels. We can also note that against the
backdrop of strong data, the pair can quickly overcome the nearby
resistance levels, as it happened after the press conference of the
Bank of England, against which the pound sharply increased its
quotes.
Today at 4.30 pm (GMT +3), ECB President Mario Draghi is expected
to speak at a press conference. It is necessary to closely monitor
the investor sentiment, as many feel that the euro will be
pressured and our pair will continue the downward
movement.
Our advice for you is to set medium goals and small stop-loss
orders.
Support and resistance levels:
0.8880
0.8825
0.8780
0.8715
