JPY Firmed Against USD While CAD Gained Ground

Fundamental Currency Analysis

USD: The US dollar index is currently down -0.0980 or -0.12 percent to 84.6540 after opening at 84.6740 in the Asian session earlier today. In an interview yesterday, New York Federal Reserve President William C. Dudley said, “If the dollar were to strengthen a lot, it would have consequences for growth.” He continued saying, “We would have poorer trade performance, less exports, more imports, and if the dollar were to appreciate a lot, it would tend to dampen inflation. So it would make it harder to achieve our two objectives. So obviously we would take that into account.” Yesterday’s Existing Home Sales missed expectations, showing only +5.05M homes sold in August compared to the +5.21M expected. Today’s calendar has speeches by FOMC members Powell and Kocherlakota.

EUR: The euro rose against the U.S. dollar yesterday after testimony on monetary policy by ECB President Mario Draghi before the European Parliament's Economic and Monetary Committee in Brussels that mentioned the ECB’s new covered bond purchase program (CBPP3). The German Bundesbank also released its Monthly Report yesterday that highlighted a robust German economy. Today’s Eurozone economic numbers include: French Manufacturing PMI (47.1), German Flash Manufacturing PMI (51.3), French Flash Services PMI (50.2), German Flash Services PMI (54.6), Eurozone Flash Services PMI (53.2), and Eurozone Flash Manufacturing PMI (50.6).

GBP: Sterling continued trading higher against the U.S. dollar today, extending yesterday’s gains. No UK data was released Monday, with BBA Mortgage Approvals (+42.9) and Public Sector Net Borrowing (+10.3B) due out later today.

JPY: The Japanese Yen firmed against the U.S. dollar today adding to yesterday’s gains. This week’s Japanese economic calendar is relatively sparse, with no economic data to be released until Wednesday.

CHF: The Swiss Franc is up moderately against the U.S. dollar today, with no Swiss economic data releases out yesterday or due out later today.

AUD: The Aussie reversed direction, gaining against the U.S. dollar today in the wake of the release of the Chinese HSBC Flask Manufacturing Purchasing Managers Index at 50.5, which improved significantly upon the 50.0 expected and indicated the Chinese economy is reacting favorably to stimulus. China is Australia’s largest trading partner, so strong Chinese economic numbers typically benefit the Aussie. Australia had no economic releases scheduled either on Monday or later today.

CAD: The Loonie gained ground against the U.S. dollar on Monday in the absence of any significant economic releases out of Canada yesterday. Today’s releases include Canadian Core Retail Sales (-0.1%) and Retail Sales (+0.4%).

NZD: The Kiwi is trading higher today versus the Greenback this morning, with no significant data expected out of New Zealand until the Trade Balance (-1.125B) is released later today.

Highlighted Chart of the Day: GBP/USD

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A daily candlestick chart of the GBP/USD currency pair appears above showing the rate hovering just below its medium term down trend line drawn in red that it briefly exceeded in volatile trading last week. A near term up trend line is also drawn to indicate the likelihood of a near term breakout, and nearby Fibonacci retracement levels are drawn in orange. In addition, the rate is approaching from below its falling 200 day Moving Average shown in green, and its 14 day RSI drawn in blue in the indicator box has been rising lately within neutral territory after it confirmed the most recent high. (See additional technical analysis in the section below.)

Technical Analysis for the Majors

EUR/USD: The euro rose modestly yesterday and again this morning after making a new recent low at the 1.2815 level late yesterday. Its declining 200 day MA now lies at 1.3570, and its 14 day RSI remains in lower neutral territory to read at the 33.13 level after failing to confirm yesterday’s new low. Resistance is seen at 1.2867/83 and 1.2908, with support noted in the 1.2815/34 region. Its outlook is bearish near term and medium term.

USD/JPY: USD/JPY fell yesterday and this morning to the 108.59 level, as it corrects lower off its recent six year high at 109.45 seen last week. Additional support is noted at 107.39. Its 14 day RSI is moving lower within overbought territory and now reads at 80.66 after confirming the recent 109.45 high. The rate is now well above its rising 200 day MA currently at 102.68. Its outlook is bearish near term but bullish medium term.

GBP/USD: Cable rose yesterday and this morning as far as the 0.6390 level, but it has not yet exceeded its recent high at 1.6524 made last week. The rate remains just below resistance seen at its falling medium term downtrend line now at 1.6385, with support noted at its short term up trend line drawn at 1.6296. The rate is trading between the 38.2% Fibonacci retracement level of its rise from 1.4812 to 1.7190 at 1.6282 and the 23.6% Fibo level at 1.6629. The rate’s 200 day MA lies at 1.6736 with a gentle negative slope, and its 14 day RSI reads in central neutral territory at the 49.06 level. Its outlook is bullish near term but bearish medium term. (See highlighted chart above.)

USD/CHF: The Swissy came off to the 0.9378 level this morning, as it corrects lower off its recent high at the 0.9432 level seen last week. Good support is noted in the 0.9299/0.9336 region, and resistance is seen at 0.9420 and 0.9432. The rate’s 14 day RSI is in upper neutral territory at the 62.58 level, and the rate is situated well above its rising 200 day MA now at the 0.8966 level. Its outlook is neutral near term but bullish medium term.

AUD/USD: The Aussie fell to a new recent low at 0.8851 yesterday but then bounced as high as 0.8922 this morning. The downside break of its former 0.9201 to 0.9504 medium term trading range has now met its 0.8898 target. Resistance seen at 0.8922/26 and 0.8993/99, and the rate remains below its flattening 200 day MA now at 0.9239. Its 14 day RSI lies just above oversold territory at the 30.95 level and failed to confirm yesterday’s low, thereby showing bullish regular divergence while oversold. Its outlook is bullish in the near term but bearish medium term.

USD/CAD: The Loonie rallied sharply yesterday and early today to peak at 1.1048 before retracing some of its gains by falling to 1.1018, as it remains above its recent low of 1.0886 seen last week. Its 14 day RSI reads in central neutral territory at the 56.17 level, and the rate is recovering after briefly dipping below its virtually flat 200 day MA now situated at 1.0932. Its outlook has turned bullish near term and remains bullish medium term.

NZD/USD: The Kiwi continued to consolidate this morning, as it trades within a near term triangular pattern above its recent low of 0.8075 below its subsequent 0.8228 reaction high. This pattern lies inside a medium term down channel with an upper resistance line now at 0.8211 and a lower support line at 0.7972. Its 14 day RSI reads in lower neutral territory at the 36.51 level and failed to confirm the recent 0.8075 low. The rate remains below its virtually flat 200 day MA now at 0.8510. Support is seen at 0.8075 and 0.8101/21, with resistance noted at 0.8168/76 and 0.8228. Its outlook remains neutral near term but bearish medium term.