Weekly Outlook — US Q3 GDP Ahead

Last week’s currency trading review

The Dollar managed modest gains throughout the week with some ‘risk off’ trading sessions and a full pricing in of the QE2 helping to lift the struggling USD. The G20 meeting over the weekend finished with some commitments to keep FX rates stable and an expansion of Asia’s role in the IMF, both seen as positive for markets this week. US Weekly Jobless Claims were stable at 452k and housing data came in at expectations.  The Euro dipped with the rest of the market on Tuesday night falling over 2 big figure as the Dow Jones fell 200 points. The rest of the week saw a rebound back to the 1.4000 level and the Euro was able to finish roughly unchanged. German IFO improved once again in October to 107.6 vs. 106.8 previously. The EUR/USD fell -0.16% closing at 1.3953, after opening the week at 1.3975.

The Japanese Yen was relatively stable in a 100 pip range throughout the week with support under Y81 holding for the time being. Most of the movement was on the crosses with risk aversion sending CAD/JPY and AUD/JPY lower. The BOJ meet this week and will be watched for any further easing announcements. The USD/JPY fell -0.11% closing at 81.36, after opening at 81.45. The GBP fell on Tuesday and was unable to recover even as stocks rebounded later in the week. Crosses remain weak with EUR/GBP breaking medium term downtrends to threaten 0.8900 and potentially the critical 0.9000 soon. The market is cautious on the GBP given the Bank of England’s potential for further expansion of the Asset Purchase Program. The GBP/USD gained -1.96% closing at 1.5683 after opening at 1.5990. The AUD fell sharply as the heavily overbought commodity currency tracked Gold and stock market’s lower. Buyers remain however and as long as the central bank threatens to raise rates then support is expected to be found. China’s surprise rate hike on Tuesday spooked the market but strong GDP on Thursday helped the Aussie recover.  The AUD/USD fell -0.81% closing at 0.9825 after opening at 0.9905.

The Forex Trading Week Preview

In the States; On Monday, September Existing Home Sales are forecast at 4.1% vs. 7.6% previously. On Tuesday, CB Consumer Confidence is forecast at 49.5 vs. 48.5 previously. Also released, August House Prices forecast at 2.15% y/y vs. 3.18% previously. On Thursday, Weekly Jobless Claims are forecast at 453k vs. 452k previously. On Friday, Q3 Advance GDP is forecast at 2.0% vs. 1.7% Q/Y. October Final UoM Confidence is forecast at 68 vs. 67.9 previously.   We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone; On Tuesday, German GFK Consumer Confidence is forecast at 5.1 vs. 4.9 previously. On Wednesday, German CPI is forecast at 1.3% y/y. On Thursday, German Unemployment Rate is forecast at 7.4% vs. 7.5% previously. On Friday, EU Unemployment Rate is forecast at 10.1% vs. 10.1% previously. In the UK, Tuesday Q3 GDP is forecast at 0.4% vs. 1.2% previously Q/Q. On Thursday, October Consumer Confidence Survey is forecast at -22 vs. -20 previously. We will provide our previews and reviews of these data releases in the daily summary.

In Japan; On Thursday, BOJ Rate announcement forecast to remain at 0.1%. Also released, September Industrial Production forecast at -0.6% vs. -0.5% previously. In Australia; On Wednesday, Q3 CPI is forecast at 0.8% vs. 0.6% Q/Q. On Thursday, Reserve Bank of New Zealand is forecast to hold rates at 3.0%. On Friday, September Private Sector Credit is forecast at 0.3%. We will provide our previews and reviews of these data releases in the daily summary.

TECHNICAL COMMENTARY

Euro – 1.3935

Initial support at 1.3637 (Oct 5 low) followed by 1.3560 (Sept 30 low). Initial resistance is now located at 1.4159 (Oct 15 High) followed by 1.4373 (76.4% retrace of 1.5144-1.1877)

Yen – 81.35

Initial support is located at 80.85 (Oct 20 low) followed by 79.75 (All time low, 1995). Initial resistance is now at 82.01 (Oct 13 high) followed by 83.03 (Oct 7 high).

Pound – 1.5675

Initial support at 1.5606 (61.8% retrace of 1.5297-1.6107) followed by 1.5503 (Sept 21 low). Initial resistance is now at 1.5879 (Oct 20 high) followed by 1.6107 (Oct 15 high).

Australian Dollar – 0.9830

Initial support at 0.9662 (Oct 19 low) followed by the 0.9542 (Oct 5 low). Initial resistance is now at 1.0004 (Oct 15 high) followed by 1.0166 (0.8067 plus 0.618 of 0.6009-0.9406).

Gold – 1332

Initial support at 1312 (Oct 5 low) followed by 1283 (Sept 28 low). Initial resistance is now at 1349 (Oct 21 High) followed by 1387 (Oct 14 high).

Oil – 81.70

Initial support at 81.00 (Intraday Support) followed by 80.00 (Intraday Support). Initial resistance is now at 82.50 (Intraday Resistance) followed by 84.00 (Intraday Resistance).

Written by Anthony Darvall

Written by Easy-Forex

Related Reading:

• Daily Outlook – Fresh Highs on EURO and Pound
• Confidence in the US economy is likely to remain fragile
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• Daily Outlook – Euro Bank Stress Tests Released
• Daily Outlook – Optimism Returns, Risk Trades Back On