Temporary Stabilization Before Strengthening USD
Airat Sattarov | Oct 12, 2018 10:14AM ET
The trading on Thursday can be considered an attempt by traders to weaken the US dollar artificially. This kind of view on the market is based on the ongoing process of accumulating technical analysis signals of a corrective nature. Besides that, as a result of the strengthening of the world's leading currencies against the dollar, the quotes came to significant levels (support or resistance, depending on the base currency in the pair with the us dollar). The separation of the current price dynamics from the emerging fundamental picture may be a precursor of subsequent strong price movements. What event can serve as a trigger, today we can only guess: the approach of the “X” hour for Brexit, the election to the US Congress, the possible declaration of China as a “currency manipulator”. Each of these events will have a strong impact on the markets. At the same time, the observed decline in US stock indices is only the first link in the chain and indicates a high probability of a strengthening US dollar.
Today, the release of significant news on economic statistics is not expected. It may be noted that strong statistics on China’s trade balance for September showed up at night, which led to stabilization of Asian stock indices after a significant decline in previous trading sessions. In addition, in the middle of the day, the August data on the volume of industrial production in the Eurozone is released, which, in my opinion, will only have a local impact on prices.
Next week, the focus of players will be data on consumer inflation in the Eurozone and the UK. The actual values of the indicators are important for understanding further actions of regulators to change monetary policies. In addition, special attention will be drawn to the data on China's GDP for the third quarter, which will answer the question about the degree of influence on the dynamics of the Chinese economy, which makes the trade confrontation between this country and the United States and also will have a significant impact on the general mood in the markets.
The course of trading on Friday will be quite calm. At the end of the day, a slight strengthening of the US currency will be recorded.
EUR/USD
In the morning hours of Friday, the EUR/USD quotes reached the level of 1.1600, helped by the continued weakening of the US currency on world markets. However, the fact that the yield on 10-year US government bonds after the update of the maximum values over the past few years, began to decline, indicates a high probability of the beginning of the dollar-strengthening period. Today, against the background of the absence of significant statistics, neutral price movements are predicted. Quotes of the pair are unlikely to overcome the resistance zone in the area of 1.1630-1.1650, in which the maximum prices for October are located. Moreover, the observed weakening of the dollar in recent days increases the desire of a number of players to take profits at the end of the week, which may lead to the cessation of positive dynamics.
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The support zone today is the area 1.1550-1.1570.
Resistance is in the range of 1.1630-1.1650.
GBP/USD
The technical picture of the GBP/USD pair continues to form a number of signals indicating an increasing probability of stopping the price growth and the beginning of a corrective movement. The achievement of the area of 1.3240-1.3250 this morning led to another divergence between the highs of prices and the corresponding values of the RSI and MACD indicators. Based on this, a point of view is expressed about the beginning of a decline in quotations. The goal of negative dynamics is the region 1.3110-1.3130, through which the 200-period MA passes on the H1 time frame and in which the starting point of the divergence formation is located on October 5.
The support zone today is in the area of 1.3110-1.3125 (green oval).
The resistance zone is still present in the range 1.3255-1.3275 (red oval).
USD/JPY
The strengthening of the Japanese yen in the pair with the US dollar observed in the previous days is the result of the players' reaction to the increasing turbulence in the world markets and a decrease in investors' appetite for risk.
Today, the cessation of negative dynamics is predicted, which can be considered as a local stabilization. The probability of such a scenario is indicated by the convergence formed on the H1 timeframe chart between the price lows and the corresponding values of the MACD indicator (highlighted with a yellow marker). The goal of local correctional growth is the area of minimum prices of the first half of the current week, located just below the 113.00 mark.
For the next week is predicted the resumption of the strengthening of the Japanese yen and the reduction of quotations to the level of 111.00, which was mentioned in previous reviews.
The support zone is the range 112.00-112.10 (green oval).
The resistance zone is located in the area of 112.80-112.90 (red oval).
USD/CHF
The technical picture of the pair USD/CHF has not changed. The quotes are clamped in the range between the resistance around 0.9900 and the area around 0.9865-0.9875, formed by a set of 200-periodic MA on the H1 time frame and a well-traded area, which in the previous weeks and months has repeatedly acted as support. Today, it is projected to maintain neutral price dynamics.
The support zone is located at 0.9870-0.9880 (green oval).
The resistance is in the range 0.9910-0.9920 (red oval).
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