Market Analysis: 9 September, 2016

Market Analysis: 9 September, 2016

By Christala Parmaxi

Overview:

ECB

The European Central Bank has decided to leave its interest rates unchanged, as it was widely expected. Therefore, the deposit facility rate remains at -0.4% while interest rate lays at 0%. The Bank expects the key rates to remain at present or lower levels for an extended period of time, giving a dovish tone to the current policy. Mario Draghi stated that there was no need for extra stimulus “for the time being”, and that rates had to stay low for the sake of recovery. The President confirmed that the monthly asset purchasing program, with the purchase of EUR80 billion, was intended to run until the end of March 2017 as scheduled and “beyond if necessary”. Mario Draghi assured the public of Central Bank’s commitment and ability to act “if needed”. Furthermore, the ECB has adjusted its growth and inflation projections by raising the GDP growth forecast for 2016 by 10 points up to 1.7% but cutting the forecasts for 2017 and 2018 to 1.6%. With regards to inflation, the Bank expects to see a rate of 1.3% in 2017 and 1.5% in 2018. Euro surged right after the announcement of the steady key rates and kept growing during Draghi’s speech, correcting in some cases during the Asian morning session. However the overall view of Euro remains bullish.

Economic Calendar

Today at 15:30 server time (GMT+3) we are awaiting an announcement of the Canadian Employment Change of August, which is expected 15K against July’s significant negative figure of -31.2K.

There are two speeches scheduled from Fed members today during the US morning session. The President of the Federal Reserve Bank of Boston and FOMC voting member Eric Rosengren is about to deliver his latest speech “Exploring the Economy’s Progress and Outlook” at 14:45 server time. Later, at 16:30 server time, we are looking for Federal Reserve Bank of Dallas President Robert Kaplan to speak.

Technical View

USDCAD

The sharp downward rally of the Canadian Dollar found support at the price level of 1.282, after which the USDCAD moved higher up to 1.2955. The price is retracing downwards at the time of writing, for a possible correction down to Fibo 38.2% level. If the price does not break the level on a closing basis, then we would expect the pair to test the significant level of 1.2955 again. MACD is rising in an attempt to cross its signal, while Stochastic and RSI are slopping downwards. However, we need to keep an eye on the employment change release later today; in case the figures are as good as expected, the pair may fall sharply due to Canadian Dollar becoming stronger. The targets to the upside are near the resistance level of 1.2955, and once it’s reached, we are expecting the psychological level of 1.30. On the flip side, the risks to the downside lie within the psychological level of 1.29 and upon its penetration we are looking at the level of 1.2855.

USDCAD

USDCAD

EURGBP

The pair surged yesterday to new highs following the ECB policy meeting. ADX indicates a healthy positive directional movement while both MACD and RSI are slopping upwards. We are looking for a move up to 0.8495; the risks are near the support level of 0.8441. The second near-term support and resistance are near the levels of 0.842 and 0.8525 respectively. A correction near the support of 0.8456 is possible before the pair moves to new highs.

EURGBP

EURGBP

 

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