Market Analysis: 4 November, 2016
by Christala Parmaxi
US Dollar Weakness
The markets are getting ready for the US Election Day, reflecting the updates regarding the nominees and the US Economy on the daily basis. The major currencies have taken advantage of Dollar’s weakness, especially the British Pound and Euro. The below chart illustrates the change of the US Dollar against the G7 for the last week, i.e. from last Friday, October 28th , to yesterday, November 3rd , end of day. The only currency that remained unchanged against the greenback is the Canadian Dollar due to the oil depreciation which drove the Loonie to a trading range for the last 7 trading days. On the other hand, the Kiwi surged against the Dollar by almost 3%, the Sterling by 2.4% and all the rest from 1% to 2.2%. The Dollar needs a miracle to recover from all these losses and we doubt that this miracle will come before the US Election Day.
Bank of England
The Bank of England holds interest rates unchanged at 0.25% with all of the voting members having voted against a rate cut. Moreover, the Bank made no changes to its QE program while the Governor said that they are ready to tighten or ease the monetary policy according to inflation developments in the future. Thus, investors are going to look at UK’s inflation updates with a great interest. The British Pound did not gain too much ground during the announcement since it had already strengthened before during the whole week. At the moment, the Cable is trading at the level of 1.246 which is almost 1-month high after Pound’s Flash Crash.
US Non-Farm Payrolls
The analysts are expecting an average of 175K NFP increase in October against the disappointing addition of just 156K new jobs back in September. The economic and employment data releases so far for October have not been supportive for a big NFP figure. The Consumer Confidence Index was released at a 5-month low figure, the ADP Non-Farm Employment change was released at 3-year low, the 4-weeks average jobless claims were increased by 5K, University of Michigan Consumer Sentiment Index decreased to 1-year low and ISM Non-Manufacturing PMI dropped by 2 units. On the flip side, Continuing Jobless Claims dropped by 18K while ISM Manufacturing Employment rose by almost 3 units.
The Gopher topped the previous week at 105.5 and since then it is falling to the downside. The pair found support 3 units lower at the level of 102.55 and it is consolidating between 103.35 and 102.85. A cross above 103.35 would open the doors for bullish positions up to the next valid resistance of 104 while a cross below 102.85 would trigger more bearish positions targeting the support of 102.6 and then the psychological level of 102. The indicators also indicate neutral stance at the moment of writing confirming the trading range of the last day.
The Kiwi had an extraordinary upside rally up to 0.734, reaching a 6-week high. The resistance level of 0.734 seems to be strong, however the momentum of the pair is still bullish and there are no clear signs of reversal yet. The pair bottomed down to Bollinger’s Lower Band and at the time of writing it is moving to the upside again. From a technical point of view, the next bullish target is again the top of 0.734 and the next one the resistance of 0.738. On the flip side, the risks lie near the supports of 0.7275 and 0.716.
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