Market Analysis: 26 October 2016

Market Analysis: 26 October 2016

by Christala Parmaxi

Overview

US CB Consumer Confidence

Americans aren’t as confident in their economic activities as it was expected: the Conference Board Consumer Confidence Index was released yesterday at 98.5 against expectations of 101.

US Consumer Confidence Index

The publication of the index pushed the greenback to fall and it ended up closing the day mixed against most of its major counterparties although it had opened the day higher against most of them. The winner of the day was the Aussie which closed the day 0.45% against the greenback while the biggest looser against the US Dollar was the Canadian Dollar, having closed the day -0.47%.

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ECB Mario Draghi

The ECB President Mario Draghi said yesterday that the ECB succeeded in keeping Europe away from deflation but the credit growth still ‘subdued’ to Eurozone. The President did not refer to any specific timing of QE further easing; he instead mentioned that they will exit their policies when they hit their inflation targets. He also stated that they would certainly prefer not to have to keep interest rates at such low levels for an excessively long time, since the unwelcome side-effects may accumulate. No significant change was recorded on Euro during the speech since investors were expecting to hear timeframes about QE and monetary policy.

BoE Mark Carney

The Governor of the Bank of England Mark Carney stated yesterday that there are limits to willingness to look past inflation overshoots but they will see the effect of the British Pound depreciation on inflation. He also stated that the BoE is not indifferent to the exchange rate level and the impact of the rapid depreciation of the Sterling could encourage him to vote against any further interest rate cuts or further monetary easing. Moreover, the Governor foresees inflation at 1.5%-1.8% by next spring. Considering that the Bank is having the next monetary policy meeting next week, investors bought the Pound and raised it sharply from the low point of 1.208 that it reached yesterday to 1.22.

Australian CPI

During the early Asian session today, the Aussie rose sharply on the publication of the better than expected inflation data. The Australian Consumer Price Index for the third quarter of 2016 rose to 0.7% beating expectations of 0.5%. This is the higher CPI rate since Q2 2015 and it will play a significant role in the Reserve Bank of Australia next monetary policy decisions.

Economic Calendar

Today’s European session is quiet with no significant economic releases. During the US session, at 17:00 server time, September’s New Home Sales of the US will be published and they are expected at 600K against the 609K of the previous month. During tomorrow’s early Asian Session the New Zealand Trade Balance will be release and it is expected YoY at -3,113M and MoM at -1,123M.

Technical View

EURUSD

Euro has been moving to the upside for the past two days reaching the level of 1.093 today. The main pair was not able to break this level to the upside yet but it could be worth giving it some time to decide on his direction by breaking this resistance level or moving again to the downside. However, the indicators on the hourly chart shifted to bullish levels while ADX indicates positive directional movement. Upon a confirmation by price by crossing 1.093 to the upside, the next valid bullish target becomes the resistance level of 1.096. On the other hand, the short-term valid support levels are near SMA100 at 1.089, SMA50 at 1.087 and the lowest level of 1.085.

EURUSD

EURUSD

On the other hand, the daily timeframe is still on a long-term downtrend with MAC, RSI and Stochastic to confirm the bearish direction. The only indication against the bears is ADX which is on extreme negative levels at a figure of 60 points. SMA50 has crossed SMA200 to the downside and SMA100 is moving to the downside as well.

EURUSD

EURUSD

USDJPY

The Gopher appreciated yesterday reaching the 3-months’ high level of 104.85 and later it lost some of its strengths reaching the level of 104. However, the pair did not manage to break the psychological support of 104, neither the uptrend line.  Average Directional Index indicates positive direction while RSI and MACD are both sloping upwards. We keep out bullish view on USDJPY unless the uptrend line is penetrated to the downside. The valid support levels are near 104 and 103.5 while the main resistance is close to 104.8.

USDJPY

USDJPY

 

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