Another Quiet Day on the Economic Calendar Leaves the FED and Risk Sentiment in the Driving Seat

Earlier in the Day:

It was a relatively quiet start to the day on the economic calendar this morning, with the China markets closed today. The Kiwi Dollar was in action in the early hours, however.

Later this morning, the RBA meeting minutes will also draw interest as the markets look to assess the impact of the latest lockdown measures on policy.

For the Kiwi Dollar

Consumer sentiment figures were in focus.

In the 3rd quarter, the Westpac Consumer Sentiment Index fell from 107.1 to 102.7.

According to the Westpac survey,

  • Confidence took a hit, with the index falling by 4.4 points as a result of the latest nationwide lockdown.
  • The decline was more modest, however, than the fall seen back in 2020.
  • While households remain secure about their personal financial situation, global supply chain disruption weighed on spending appetites.

The sub-components:

  • The Present Conditions Index fell by 2.7 points to 95.6, with the Expected Conditions Index down 5.5 points to 107.4.
  • 1-year economic outlook tumbled by 10.0 points to -5.6, with the “Good time to buy” sub-index falling by 7.2 points to -5.2.
  • 5-year economic outlook fell by 6.2 points to 11.5, while the current financial situation sub-index rose by 1.8 points to -3.6.
  • Expected financial situation saw a modest 0.6 point decline to 16.1.

The Kiwi Dollar moved from $0.70293 to $0.70260 upon release of the figures. At the time of writing, the Kiwi Dollar was down by 0.26% to $0.7009.

Elsewhere

At the time of writing, the Japanese Yen was up by 0.05% to ¥109.390 against the U.S Dollar, with the Aussie Dollar up by 0.06% to $0.7256.

The Day Ahead

For the EUR

It’s a particularly quiet day ahead on the economic calendar. There are no material stats due out of the Eurozone to provide the EUR with direction.

The lack of stats will leave the EUR in the hands of market risk appetite and sentiment towards FED monetary policy.

At the time of writing, the EUR was flat at $1.1726.

For the Pound

It’s a relatively quiet day ahead on the economic calendar. CBI Industrial Trend Orders for September are due out later today. With little else for the markets to consider, we can expect influence. The impact will be limited, however, with the Pound on the defensive ahead of Thursday’s policy decision.

At the time of writing, the Pound was up by 0.01% to $1.3658.

Across the Pond

It’s also a relatively quiet day ahead. Housing sector numbers for August are due out later in the day. With the markets focused on the FED, however, the stats are unlikely to have an impact on the day.

On Monday, the U.S Dollar Spot Index rose by 0.09% to end the day at $93.276.

For the Loonie

It’s a quiet day ahead for the Loonie. House price figures for August are due out later in the day.

We don’t expect the numbers to provide the Loonie with direction, however. Market risk sentiment will and crude oil prices will remain the key drivers on the day.

At the time of writing, the Loonie was up by 0.05% to C$1.2815 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

September 21st 2021: EUR/USD Eyes H1 Prime Resistance at $1.1767-1.1776 After $1.17 Support

Charts: Trading View

EUR/USD:

(Italics: previous analysis)

Technical studies reveal movement hovering north of prime support at $1.1473-1.1583 on the weekly timeframe. Gleaning additional technical confluence through a 100% Fib projection at $1.1613 and 1.27% Fib extension at $1.1550, this base remains a key watch, long term. With respect to trend on the weekly chart, the market has largely been bullish since the early 2020.

Meanwhile, a closer reading of price on the daily timeframe reveals Monday spiked to within a stone’s throw of Quasimodo support at $1.1689. Albeit sponsoring a late August bid (black arrow), action from $1.1689 failed to find approval north of late July tops at $1.1909; therefore, this ranks $1.1689 as perhaps frail support. Assuming bearish leadership on the daily, the $1.1612 and $1.1602 (September/November 2020) lows signify downside support targets, followed by Fibonacci support between $1.1420 and $1.1522 (glued to the lower side of the weekly timeframe’s prime support at $1.1473-1.1583).

Charted a pip ahead of the daily Quasimodo, the $1.1690-1.1705 decision point put in an appearance on Monday, encouraging H4 sellers to dial back and hand the baton to buyers. Quasimodo support-turned resistance at $1.1742 is now in range on this timeframe, with subsequent bullish interest to perhaps take aim at Quasimodo resistance from $1.1771.

Intraday action on Monday was interesting. The US dollar, in addition to other safe-haven currencies such as the Japanese yen and Swiss franc, gained traction Monday, elevated amidst clear-cut risk-off sentiment. Europe’s single currency, however, reclaimed a large slice of lost ground, aided (technically) not only by the H4 decision point mentioned above at $1.1690-1.1705, but also $1.17 on the H1. At the time of writing, H1 resistance at $1.1728 is active; rupturing the latter paves the way to $1.1742 on the H4, a level shadowed by H1 prime resistance coming in at $1.1767-1.1776, joined by supply at $1.1762-1.1774.

Observed Levels:

Extending recovery gains on short-term charts may have sellers move in on prime resistance at $1.1767-1.1776 on the H1 and supply from $1.1762-1.1774, which dovetails with H4 Quasimodo resistance at $1.1771. However, prior to this, sellers might engage with Quasimodo support-turned resistance at $1.1742 on the H4.

An alternative scenario to be mindful of is a whipsaw south of $1.17 on the H1 to daily Quasimodo support parked at $1.1689. $1.1689 bids feeding off sell-stops below $1.17 could be enough to chalk up a bullish wave.

AUD/USD:

(Italics: previous analysis)

Latest out of the weekly timeframe has AUD/USD touching gloves with prime support at $0.6968-0.7242. Since printing a two-week recovery in late August, the currency pair has been fighting to entice fresh bullish interest. Failure to command position from $0.6968-0.7242 opens up support at $0.6673. Buyers regaining consciousness, nevertheless, has prime resistance at $0.7849-0.7599 to target. Trend studies on the weekly scale show we’ve been higher since early 2020. Consequently, the response from $0.6968-0.7242 could STILL be the beginnings of a dip-buying attempt to merge with the current trend.

The daily timeframe’s technical landscape informs traders bids are perhaps thin within weekly prime support, at least until price shakes hands with Fibonacci support at $0.7057-0.7126. Those who follow the relative strength index (RSI) will note the value journeyed through the 50.00 centreline last week and had Monday dip a toe below 40.00. This highlights a bearish atmosphere until making contact with oversold territory.

Price action on the H4 timeframe came within touching distance of a half-hearted decision point at $0.7200-0.7218 on Monday. To the upside, two resistances are on the radar at $0.7281 and $0.7317.

Lower on the curve, a H1 decision point at $0.7269-0.7259 elbowed into the spotlight, an area formed in the early hours of Monday which saw price tunnel through demand at $0.7248-$0.7259. Continued interest to the downside has $0.72 to target.

Observed Levels:

Each timeframe analysed underlines a bearish energy.

Weekly prime support at $0.6968-0.7242 appears vulnerable due to the daily timeframe exhibiting scope to approach Fibonacci support at $0.7057-0.7126. This, on top of the H1 timeframe’s decision point at $0.7269-0.7259 making a show, implies a short term move to $0.72 (H1) could be in the offing (note $0.72 aligns with the lower band of the H4 decision point at $0.7200-0.7218).

USD/JPY:

(Italics: previous analysis)

Since mid-July, ¥108.40-109.41 demand has failed to stir much bullish energy on the weekly timeframe. Nevertheless, recognising the area derives additional backing from neighbouring descending resistance-turned support, extended from the high ¥118.61, an advance could eventually emerge to familiar supply at ¥113.81-112.22.

The uninspiring vibe out of weekly demand is demonstrated by way of a consolidation on the daily timeframe between prime support at ¥108.96-109.34 and resistance from ¥110.86-110.27. Range support, as you can see, is currently in the frame. In the event price deviates from range extremes, Quasimodo resistance at ¥111.11 is seen, along with a concealed Quasimodo support at ¥108.43. Based on the relative strength index (RSI), the value is confined to a consolidation surrounding the 50.00 centreline, between 40.87 and 56.85.

Broad declines observed in major US equity indexes elevated demand for the safe-haven JPY Monday. USD/JPY downside swings technical curiosity to the H4 double-top pattern’s (¥110.44) profit target around ¥108.71—sharing chart space with a 1.618% Fibonacci projection at ¥108.86 and a 1.272% Fibonacci projection at ¥108.72. However, in order to reach the aforesaid pattern target, the lower edge of the daily range support highlighted above at ¥108.96-109.34 must be taken.

Heading into early US trading on Monday, H1 crossed swords with Quasimodo resistance-turned support at ¥109.45, and clocked a ¥109.65 top before changing gears and heading towards Quasimodo support at ¥109.31. Territory below the latter reveals support at ¥109.11.

Observed Levels:

In keeping with the H4 timeframe, booking additional losses is possibly on the cards until the double-top pattern’s (¥110.44) profit target around ¥108.71. Still, to reach the aforementioned profit target, sellers must marginally defeat the daily timeframe’s range support at ¥108.96-109.34 and take on any bullish interest from weekly demand at ¥108.40-109.41.

Should we nudge through H1 Quasimodo support at ¥109.31, this could be an early sign of bearish muscle making an entrance, and with this, additional selling might take shape.

GBP/USD:

(Italics: previous analysis)

In the shape of a hammer candlestick formation (bullish signal), supply-turned demand at $1.3629-1.3456 on the weekly timeframe stepped forward in July. The aforementioned zone remains active, welcoming an additional test mid-August. Yet, pattern traders will also note August’s move closed south of a double-top pattern’s neckline at $1.3669, broadcasting a bearish vibe. Conservative pattern sellers, however, are likely to pursue a candle close beneath $1.3629-1.3456 before pulling the trigger.

Sterling kicked off the week on the ropes, clocking one-month lows versus the US dollar. GBP/USD remains comfortable beneath the 200-day simple moving average at $1.3831 and is within reach of Quasimodo support at $1.3609. Previous analysis underlined the daily chart has communicated a rangebound environment since late June between a 61.8% Fib retracement at $1.3991 and the noted Quasimodo support. Momentum, according to the relative strength index (RSI) value, extended position below the 50.00 centreline and scraped through 40.00 on Monday. This informs traders that momentum to the downside is increasing in the form of average losses exceeding average gains.

Yesterday’s bearish presence established a decision point at $1.3750-1.3721, an area forming a decision to tunnel through Quasimodo support from $1.3693 (currently serving as resistance). Daily Quasimodo support mentioned above at $1.3609 calls for attention as a downside objective also on the H4 scale.

From the H1 timeframe, mid-way through London on Monday clipped the lower side of $1.37 and also brought in resistance at $1.3689—a previous Quasimodo support level drawn from 26th August. Further softening places Quasimodo support at $1.3618 and the $1.36 figure in sight.

Observed Levels:

Having noted scope for the daily timeframe to test Quasimodo support at $1.3609, retesting either H4 resistance at $1.3693 or the H4 decision point at $1.3750-1.3721 could stir a bearish theme. Adding weight to $1.3693 is H1 resistance coming in at $1.3689 and the $1.37 figure.

The H1 Quasimodo support at $1.3618 forms a reasonable downside target, arranged just north of the noted Quasimodo support on the daily timeframe.

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Analysis: Why the Fed Might Welcome a Bond Market Tantrum

Persistently low yields are a feature of bond markets across the developed world, with central banks mostly in no hurry to raise interest rates and a global savings glut that keeps debt securities in constant demand.

But it is in the United States that the contradiction between economic recovery and bond yields is starkest.

Even with growth tipped to surpass 6% this year and a “taper” in sight for the Fed’s bond-buying programme at the end of this year, 10-year yields are still stuck at just above 1.3%..

The Fed probably rejoiced at low yields in the initial stages of the economic recovery, but now needs bonds to respond to the end of pandemic-linked recession, said Padhraic Garvey, head of research for the Americas at ING Bank.

Current pricing, analysts say, looks more consistent with heightened economic uncertainty, whereas higher yields would align markets more with the signals coming from central banks.

“To facilitate that, we argue that there needs to be a tantrum. If the Fed has a taper announcement … and there is no tantrum at all, that in fact is a problem for the Fed,” ING’s Garvey said.

Analysts say a bond market tantrum would involve yields rising 75-100 basis points (bps) within a couple of months.

The original “taper tantrum” in 2013 boosted U.S. yields just over 100 bps in the four months after then Fed boss Ben Bernanke hinted at an unwinding of stimulus measures.

But that kind of sudden jump in yields looks unlikely right now, given how clearly the Fed has telegraphed its plans to taper its bond-buying. And as 2013 showed, bond market tantrums carry nasty side-effects including equity sell-offs and higher borrowing costs worldwide.

A happy medium, analysts say, might be for benchmark yields to rise 30-40 bps to 1.6-1.8%

FED AND BANKS NEED AMMUNITION

Besides wanting higher yields to better reflect the pace of economic growth, the Fed also needs to recoup some ammunition to counter future economic reversals.

The Fed funds rate – the overnight rate which guides U.S. borrowing costs – is at zero to 0.25%, and U.S. policymakers, unlike the Bank of Japan and the European Central Bank, are disinclined to take interest rates negative.

The Fed won’t want to find itself in the position of the ECB and BOJ, whose stimulus options at the moment are limited to cutting rates further into negative territory or buying more bonds to underwrite government spending.

Jim Leaviss, chief investment officer at M&G Investments for public fixed income, said policymakers would probably like the Fed fund rate to be at 2%, “so, when we end up in the next downturn, the Fed will have some space to cut interest rates without hitting the lower bound of zero quickly”.

Another reason higher yields might be welcomed is because banks would like steeper yield curves to boost the attractiveness of making longer-term loans funded with short-term borrowing from depositors or markets.

Thomas Costerg, senior economist at Pictet Wealth Management, notes that the gap between the Fed funds rate and 10-year yields of about 125 bps now is well below the average 200 bps seen during previous peaks in economic expansion.

He believes the Fed would favour a 200 bps yield slope, “not only because it would validate their view that the economic cycle is fine but also because a slope of 200 bps is healthy for the banking sector’s maturity transformation.”

GRAVITATIONAL FORCE

But even a tantrum might not bring a lasting rise in yields.

First, while the Fed may look with envy at Norway and New Zealand where yields have risen in expectation of rate rises, it has stressed that its own official rates won’t rise for a while.

Structural factors are at play too, not least global demand for the only large AAA-rated bond market with positive yields.

The Fed also, in theory at least, guides rates towards the natural rate of interest, the level where full employment coincides with stable inflation.

But this rate has shrunk steadily. Adjusted for projected inflation, the “longer-run” funds rate – the Fed’s proxy for the natural rate – has fallen to 0.5% from 2.4% in 2007. If correct, it leaves the Fed with little leeway.

Demographics and slower trend growth are cited as reasons for the decline in the natural rate though a paper https://bit.ly/3nVMxMv presented last month at the Jackson Hole symposium also blamed a rise in income inequality since the 1980s.

The paper said the rich, who are more likely to save, were taking a bigger slice of overall income and the resulting savings glut was weighing on the natural rate of interest.

“One lesson from this year is that there is massive gravitational force, a price-insensitive demand which is pressing down on Treasury yields,” Pictet’s Costerg said.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Stefano Rebaudo; Additional reporting by Dhara Ranasinghe in London and Dan Burns in New York; Editing by Sujata Rao and David Clarke)

 

EUR/USD, GBP/USD Analysis & Setups 20 – 21 Sep 2021

The EUR/USD is testing the previous bottom and key decision zone. The GBP/USD seems to be creating a triangle chart pattern if price action makes a bullish bounce.

If you think our videos, analysis, and education can help you become a better trader, then you can ask your own questions via our form and we will answer them in the weekly live webinar every Tuesday.

EUR/USD & GBP/USD Overview

The EUR/USD needs to break above the double top at 1.19 or the 88.6% Fib at 1.17 before a clear bullish or bearish swing can be expected.

The GBP/USD is probably in a triangle pattern unless there is an immediate break, pullback, and continuation below the support line.

Check out the video below for the full analysis and trade plans on 20 – 21 September 2021:

For a look at all of today’s economic events, check out our economic calendar.

Good trading,

Chris Svorcik
CTA

 

GBP/USD Price Forecast – British Pound Slices Through 200 Day EMA

The British pound has gotten hammered during the trading session on Monday, as there was a general “risk off” attitude around the world. Credit contagion issues in China are starting to take front and center with the headlines, and one would not be surprised at all to see the US dollar be a big winner as traders try to get back into bonds for safety. Furthermore, there will be a flood of money coming out of emerging markets, so that in and of itself will help the greenback.

GBP/USD Video 21.09.21

The fact that we sliced through the 200 day EMA and the 1.37 level at the same time suggests there is quite a bit of significant selling pressure, and therefore we could go looking towards the 1.36 handle. The 1.36 handle has been crucial for keeping the market somewhat afloat, and if we were to break down through that level, then I think it opens up a new flood of selling as it will almost certainly kick off a lot of stop losses. At that point, I would not surprise me at all to see this entire trend change again to reach much lower.

Alternately, if we turn around and recapture the 200 day EMA then I would not be surprised to see this market go looking towards the 50 day EMA above, an area that has offered a significant amount of resistance in the past. In other words, we are either going to break down or we are going to bounce back into the same consolidation. That being said, you probably need to pay attention to the fact that we have been drifting lower in general over the last several months.

For a look at all of today’s economic events, check out our economic calendar.

Say Bye-Bye to Major Supports. We May Not See Those Levels for a While

And it happened! The bears were talking about this for a long time and it finally happened; a bearish correction. The price broke the long-term up trendline on the SP500 and is aiming lower. The target for the drop is still far away, so it might be nice to buckle up.

The DAX also dropped like a rock after the breakout of the long-term up trendline and the neckline of the triple top formation. The next target: 14100 points.

Although indices are sliding, gold is not climbing higher. A stronger dollar is definitely not helping.

The GBPUSD came back inside the falling wedge pattern. That’s definitely negative.

The CADJPY is aiming for the 38,2% Fibonacci to test it as a crucial support.

The EURNZD is inside a small sideways trend. A breakout from it, will show us a direction.

The EURJPY has failed to create the inverse head and shoulders pattern and dropped lower.

The USDJPY bounced from the upper line of the triangle and brought us a sell signal with the target being on the lower line of this pattern.

For a look at all of today’s economic events, check out our economic calendar.

GBP/USD Daily Forecast – U.S. Dollar Stays Strong At The Start Of The Week

British Pound Is Under Pressure

GBP/USD is currently trying to settle below the support at 1.3690 while the U.S. dollar is gaining ground against a broad basket of currencies.

The U.S. Dollar Index managed to settle above the resistance at 93.10 and is moving towards the next resistance level which is located at 93.40. In case the U.S. Dollar Index gets to the test of this level, GBP/USD will find itself under more pressure.

There are no important economic reports scheduled to be released in the U.S. and UK today so foreign exchange market traders will focus on general market sentiment and continue to wait for the Fed Interest Rate Decision which will be released on September 22.

Traders will also keep an eye on the developments in China as Evergrande’s problems have already put pressure on markets. The U.S. dollar may benefit from rush to safety due to its safe-haven status.

Technical Analysis

gbp usd september 20 2021

GBP/USD managed to get below the support at 1.3710 and is trying to settle below the next support level at 1.3690. RSI remains in the moderate territory, and there is plenty of room to gain additional downside momentum in case the right catalysts emerge.

In case GBP/USD declines below the support at 1.3690, it will head towards the next support level at 1.3665. A successful test of this level will open the way to the test of the next support at 1.3635. If GBP/USD gets below 1.3635, it will continue its downside move and head towards the next support at 1.3600.

On the upside, the previous support level at 1.3710 will serve as the first resistance level for GBP/USD. A move above this level will push GBP/USD towards the next resistance at 1.3745. In case GBP/USD gets above 1.3745, it will head towards the resistance level near the 20 EMA at 1.3780. A successful test of this level will open the way to the test of the next resistance which is located near the 50 EMA at 1.3800.

For a look at all of today’s economic events, check out our economic calendar.

A Quiet Economic Calendar Leaves the Dollar in the Spotlight

Earlier in the Day:

It was a quiet start to the day on the economic calendar this morning. With the China and Japan markets closed today, there were no material stats for the markets to consider in the early hours.

The lack of stats left the markets to respond to moves through the U.S session on Friday, which had left riskier assets in the red.

For the Majors

At the time of writing, the Japanese Yen was down by 0.05% to ¥109.990 against the U.S Dollar, with the Aussie Dollar down by 0.25% to $0.7261. The Kiwi Dollar was down by 0.17% to $0.7028.

The Day Ahead

For the EUR

It’s a relatively quiet day ahead on the economic calendar. Wholesale inflation figures for Germany are due out later today.

Barring a marked spike, however, we don’t expect the August figures to have a material impact on the EUR.

At the time of writing, the EUR was down by 0.01% to $1.1724.

For the Pound

It’s a particularly quiet day ahead on the economic calendar. There are no material stats due out of the UK to provide the Pound with direction.

The lack of stats will leave the Pound in the hands of market risk sentiment as the markets look ahead to Thursday’s MPC decision.

At the time of writing, the Pound was down by 0.12% to $1.3725.

Across the Pond

It’s also particularly quiet day ahead. There are no material stats due out to provide the Dollar and the broader markets with direction.

The lack of stats will leave the markets to continue to focus on the FOMC and what to expect on Wednesday.

The U.S Dollar Spot Index ended Friday up 0.28% to $93.195.

For the Loonie

It’s a particularly quiet day ahead for the Loonie, however. There are no major stats due out of Canada to provide the Loonie with direction.

The lack of stats will leave the Loonie in the hands of crude oil prices and market risk sentiment.

At the time of writing, the Loonie was down by 0.06% to C$1.2774 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

The Week Ahead – Central Banks back in Focus with the BoE and the FED in Action

On the Macro

It’s a quiet week ahead on the economic calendar, with 37 stats in focus in the week ending 17th September. In the week prior, 62 stats had also been in focus.

For the Dollar:

Prelim private sector PMIs for September will be in focus on Thursday.

Expect the services PMI to be the key stat of the week.

Other stats include housing sector data that will likely have a muted impact on the Dollar and the broader market.

The main event of the week, however, is the FOMC monetary policy decision on Wednesday.

With the markets expecting the FED to stand pat, the economic and interest rate projections and press conference will be pivotal. FED Chair Powell prepped the markets for the tapering to begin this year. The markets are not expecting any hint of a shift in policy on interest rates, however…

In the week ending 17th September, the Dollar Spot Index rose by 0.66% to 93.195.

For the EUR:

It’s a relatively busy week on the economic data front.

Prelim September private sector PMIs for France, Germany, and the Eurozone will draw plenty of interest on Thursday.

While Germany’s manufacturing PMI is key, expect influence from the entire data set. Market concerns over the economic recovery have tested support for riskier assets. Softer PMI numbers would test EUR support on the day.

For the week, the EUR fell by 0.75% to $1.1725.

For the Pound:

It’s a relatively busy week ahead on the economic calendar.

On the economic data front, CBI Industrial Trend Orders and prelim private sector PMIs are due out.

Expect the services PMI for September to be the key stat on Thursday.

While the stats will influence, the BoE’s monetary policy decision on Thursday will be the main event.

Persistent inflationary pressure has raised the prospects of a sooner rather than later move by the BoE. Weak retail sales figures have made things less clear, however.

Expect any dissent to drive the Pound towards $1.40 levels.

The Pound ended the week down by 0.71% to $1.3741.

For the Loonie:

It’s another quiet week ahead on the economic calendar.

Early in the week, house price figures for August are due out. The numbers are not expected to have a material impact on the Loonie, however.

Retail sales figures for July, due out on Thursday, will influence, however. Another sharp increase in spending would deliver the Loonie with much-needed support.

The Loonie ended the week down 0.57% to C$1.2764 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

There are no major stats to provide the Aussie Dollar with direction.

While there are no major stats, the RBA monetary policy meeting minutes on Tuesday will influence. The markets will be looking for forward guidance following the latest lockdown measures.

The Aussie Dollar ended the week down by 1.05% to $0.7279.

For the Kiwi Dollar:

It’s another quiet week ahead.

Early in the week, consumer sentiment figures for the 3rd quarter will be in focus.

Trade data, due out on Friday, will be the key numbers for the week, however.

Away from the economic calendar, however, COVID-19 news updates will also be key.

The Kiwi Dollar ended the week down by 1.03% to $0.7040.

For the Japanese Yen:

It’s a relatively busy week on the economic calendar.

Inflation and prelim private sector PMIs are due out on Friday. We don’t expect the numbers to influence the Yen, however.

On the monetary policy front, the BoJ is in action on Wednesday. We aren’t expecting any surprises, however, as the Delta variant continues to deliver economic uncertainty.

The Japanese Yen rose by 0.01% to ¥109.93 against the U.S Dollar.

Out of China

There are also no major stats due out of China for the markets to consider, with the Chinese markets closed early in the week.

On the monetary policy front, the PBoC is in action. We don’t expect any changes to the Loan Prime Rates, however.

The Chinese Yuan ended the week down by 0.34% to CNY6.4661 against the U.S Dollar.

Geo-Politics

Iran, China, and Russia remain the main areas of interest for the markets. News updates from the Middle East, in particular, will need continued monitoring following recent events in Afghanistan.

Weekly Technical Market Insight: 20th – 24th September 2021

Charts: Trading View

US Dollar Index (Daily Timeframe):

Deprived of resistance, the US dollar pencilled in a second consecutive gain last week, adding 0.7 percent, according to the US dollar index.

Support from 91.78-91.96 has proved persistent since the beginning of July, withstanding three successive downside attempts—the latest being early September.

Dollar bulls, as you can see, entered an offensive phase at the tail end of the week. While it’d be unwise to rule out a retracement at current levels, further buying could emerge as Quasimodo resistance calls for attention at 93.90. Strategically placed north of the 93.73 20th August high, and sharing space with 100% and 1.618% Fibonacci projections at 93.88 and 93.82, respectively, 93.90 delivers reasonably weighty confluence.

With respect to trend, 2020 was disappointing. 2021, nonetheless, has observed a defence off support at 89.69 and, year on year, is 3.7 percent higher.

The relative strength index (RSI), a popular gauge of momentum, retested the 50.00 centreline over the week and is now on the doorstep of trendline resistance (taken from the high 92.41), pinned a short distance below overbought territory.

  • While chart studies, in particular the relative strength index, suggests upside momentum may flatten out this week, Quasimodo resistance at 93.90 delivers technical confluence traders might be drawn to should further buying take shape.

EUR/USD:

(Italics: previous analysis)

Europe’s common currency shed 0.7 percent versus a broadly-bid dollar last week, seating price action within range of prime support on the weekly timeframe at $1.1473-1.1583. Fibonacci enthusiasts will note the 100% Fib projection at $1.1613 and 1.27% Fib extension at $1.1550 circling the upper range of the aforesaid support. Interestingly, long-term stops likely rest south of the $1.1640ish lows, perhaps accommodating enough energy to fill $1.1473-1.1583 bids. With respect to trend on the weekly chart, the market has largely been bullish since the early months of 2020.

The second half of the week witnessed an acceleration to the downside, throwing light on Quasimodo support at $1.1689 from the daily timeframe. Albeit sponsoring a late August bid (black arrow), action from $1.1689 failed to find approval north of late July tops at $1.1909; therefore, this ranks $1.1689 as perhaps frail support this week.

Assuming a bearish leadership on the daily, the $1.1612 and $1.1602 (September/November 2020) lows signify downside support targets, followed by Fibonacci support between $1.1420 and $1.1522 (glued to the lower side of the weekly timeframe’s prime support at $1.1473-1.1583).

Against the backdrop of higher timeframes, price action on the H4 chart passed through Quasimodo support at $1.1742 in strong fashion Friday. With $1.1742 likely to serve as resistance, the $1.1690-1.1705 decision point putting in an appearance should not surprise. Statistically, though, decision points left untested following the immediate move out of the base tend to offer unreliable structure. $1.1690-1.1705 also teams up closely with daily Quasimodo support mentioned above at $1.1689, which you may recall chart studies have labelled fragile.

Through the lens of a simple technical trader, limited support is also evident on the H1 scale until $1.17 (sat within the walls of the H4 timeframe’s decision point at $1.1690-1.1705). Stacked demand is present between $1.1706 and $1.1744 (23rd August), with little inside of this formation revealing that active buyers will show interest. For that reason, $1.17 is a key downside objective this week. However, buyers entertaining the idea of bouncing from August 24th lows around $1.1728 shines the spotlight on a pullback to prime resistance coming in at $1.1767-1.1776, joined by supply at $1.1762-1.1774.

Observed Levels:

Long term:

Weekly prime support at $1.1473-1.1583, coupled with a 100% Fib projection at $1.1613 and 1.27% Fib extension at $1.1550, might welcome price action this week. As underlined above, $1.1473-1.1583 is in a reasonably privileged location: below the $1.1640ish lows. Overturning daily Quasimodo support at $1.1689, therefore, is a possible scenario, targeting daily Fibonacci support at $1.1420-1.1522.

Short term:

In conjunction with the longer-term picture, a bearish energy is present on the lower timeframes this week.

Any pullback, therefore, would be viewed as a sell-on-rally scenario, either from H4 resistance at $1.1742 (previous Quasimodo support) or H1 prime resistance at $1.1767-1.1776 (and supply at $1.1762-1.1774).

The combination of $1.17 on the H1 and its surrounding decision point on the H4 at $1.1690-1.1705 offers a clear downside target.

AUD/USD:

(Italics: previous analysis)

Prime support at $0.6968-0.7242 on the weekly timeframe has been fighting to entice fresh bullish interest since the area powered a two-week recovery in late August. Failure to command position from $0.6968-0.7242 opens up support at $0.6673. Buyers regaining consciousness, nevertheless, has prime resistance at $0.7849-0.7599 to target. Trend studies on the weekly scale show we’ve been higher since early 2020. Consequently, the response from $0.6968-0.7242 could STILL be the beginnings of a dip-buying attempt to merge with the current trend.

The daily timeframe scraping through prime support at $0.7286-0.7355 in the latter part of the week broadcasts weakness. This delivers free rein to Fibonacci support at $0.7057-0.7126, set within the parapets of weekly prime support at $0.6968-0.7242. With the relative strength index (RSI) cementing position below the 50.00 centreline—telling traders that average losses over the 14-day lookback period surpass average gains—this adds weight to a bearish atmosphere.

Although the higher timeframe canvas favours sellers, the H4 timeframe touched gloves with prime support at $0.7236-0.7266 (glued to the upper edge of weekly prime support at $0.6968-0.7242). You may recall this area was made reference to throughout the week—see below from previous writing (italics):

Sellers assuming leadership yesterday hauled the currency pair through stacked demand on the H4 timeframe between $0.7282 and $0.7343, dropping to within a stone’s throw from prime support at $0.7236-0.7266. The latter may interest bullish eyes—a base arranged to receive downside momentum derived from sell-stops below stacked demand.

Recognising $0.7236-0.7266 welcomed price action late Friday, $0.7310 stands in as an initial target early week should buyers stage a recovery.

Meanwhile, out of the H1 chart, early London on Friday responded to trendline resistance, extended from the high $0.7469, hardened by the 61.8% Fibonacci retracement at $0.7319 and a 1.272% Fibonacci projection at similar levels. This led movement under $0.73 heading into US trading hours and concluded within reach of $0.7248-$0.7259 demand (a zone placed within H4 prime support at $0.7236-0.7266).

Observed Levels:

Long term:

Weekly prime support at $0.6968-0.7242 is a key base on the bigger picture, though having noted the daily timeframe’s prime support giving up position at $0.7286-0.7355, a deep dive into the aforementioned weekly zone is a possibility.

Short term:

Focus is on the H4 timeframe’s prime support at $0.7236-0.7266, as buyers potentially gear up to take advantage of selling pressure (sell-stops) below stacked demand. As underlined above, the initial upside goal north of $0.7236-0.7266 sits at $0.7310.

$0.7248-$0.7259 demand on the H1, therefore, could be brought into the fight before a short-term bid arises.

USD/JPY:

(Italics: previous analysis)

Since mid-July, ¥108.40-109.41 demand has failed to stir much bullish energy on the weekly timeframe. Nevertheless, recognising the area derives additional backing from neighbouring descending resistance-turned support, extended from the high ¥118.61, an advance could eventually emerge to familiar supply at ¥113.81-112.22.

The uninspiring vibe out of weekly demand is demonstrated by way of a consolidation on the daily timeframe between prime support at ¥108.96-109.34 and resistance from ¥110.86-110.27. Reluctance to commit outside of these areas toughens the consolidation; range limits, therefore, are likely to remain on the watchlist this week. In the event price deviates from range extremes, Quasimodo resistance at ¥111.11 is seen, along with a concealed Quasimodo support at ¥108.43. Based on the relative strength index (RSI), the value is confined to a consolidation surrounding the 50.00 centreline, between 40.87 and 56.85.

A three-day recovery in the 10-year yield and a muscular USD bid, together with technical support derived from the 1.272% Fibonacci projection on the H4 timeframe at ¥109.14, aided USD/JPY at the tail end of the week. This, as you can see, left the double-top pattern’s (¥110.44) profit target around ¥108.71 (plotted alongside a 1.618% Fibonacci projection at ¥108.86) unchallenged. Continued interest to the upside this week is likely to close in on supply at ¥110.82-110.39 (entertains the noted double-top configuration and shares a connection with daily prime resistance at ¥110.86-110.27).

Price action on the H1 timeframe accommodated ¥110 on Friday, though momentarily explored ground north of the figure ahead of Quasimodo resistance at ¥110.11. Prime support coming in from ¥109.74-109.80 is particularly interesting, stationed beneath intraday lows around ¥109.81.

Observed Levels:

Long term:

Recognising weekly demand is in play at ¥108.40-109.41, joined by the end-of-week rebound from range support on the daily timeframe at ¥108.96-109.34, points to a test of daily range resistance at ¥110.86-110.27 this week.

Short term:

In harmony with the longer-term bullish image, any bearish attempt from ¥110 on the H1 could feed buyer interest from prime support at ¥109.74-109.80. This sets the stage for an initial upside objective at approximately ¥109.90ish.

GBP/USD:

(Italics: previous analysis)

In the shape of a hammer candlestick formation (bullish signal), supply-turned demand at $1.3629-1.3456 on the weekly timeframe stepped forward in July. The aforementioned zone remains active, welcoming an additional test mid-August. Yet, pattern traders will also note August’s move closed south of a double-top pattern’s neckline at $1.3669, broadcasting a bearish vibe. Conservative pattern sellers, however, are likely to pursue a candle close beneath $1.3629-1.3456 before pulling the trigger.

Sterling extended its underperformance against a spirited USD on Friday; the currency pair finished the week lower by 0.7 percent. Despite many desks forecasting an interest rate rise in the UK as early as May, candle action discovered deeper water below the 200-day simple moving average at $1.3829. This raises the possibility of Quasimodo support at $1.3609 presenting itself this week.

It was also aired in recent writing that the daily chart communicates a rangebound environment. Since late June, buyers and sellers have been squaring off between a 61.8% Fib retracement at $1.3991 and the noted Quasimodo support. Momentum, according to the relative strength index (RSI) value, however, is below the 50.00 centreline and on the doorstep of 40.00. This informs traders that momentum to the downside is increasing in the form of average losses exceeding average gains.

Interestingly, H4 prime support at $1.3689-1.3724 was acknowledged heading into Friday’s close. This area may interest those looking at price taking out stops beneath lows around $1.3730 (blue oval), with a primary profit objective set at $1.3765.

For those who read Friday’s technical briefing you may recall the following H1 analysis (italics):

Elsewhere, short-term action based on the H1 chart has the pair circling the lower side of $1.38, as we write. Interestingly, supply at $1.3837-1.3812 lurks directly overhead and could help facilitate what many traders will recognise as a stop-run after the event. Chart space below $1.38 shifts attention to Quasimodo support from $1.3751.

As evident from the H1 timeframe, we can see price did indeed slice through $1.38 and tag supply at $1.3837-1.3812 before plunging lower. Two key Quasimodo supports were taken in the process at $1.3759 and $1.3751 (both now potential resistances), and punctured the $1.3726 8th September low. What’s interesting from a Fibonacci perspective is $1.3726 is accompanied by Fibonacci support between $1.3715 and $1.3732.

Observed Levels:

Long term:

Scope to unearth lower price levels this week is a possibility, both on the weekly and daily timeframes. A reasonable downside target rests with the daily timeframe’s Quasimodo support at $1.3609, which sits within weekly supply-turned demand at $1.3629-1.3456.

Short term:

While higher timeframes eye lower ground, H4 and H1 timeframes imply a pullback could be in the offing early week from H4 prime support at $1.3689-1.3724 and H1 Fibonacci support between $1.3715 and $1.3732. H1 resistances are seen at $1.3759 and $1.3751, though the H4 target resistance is a touch higher at $1.3765.

DISCLAIMER:

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The Weekly Wrap – Economic Data and Policy Jitters Delivered a Boost for the Greenback

The Stats

It was a busier week on the economic calendar, in the week ending 17th September.

A total of 61 stats were monitored, which was up from 42 stats in the week prior.

Of the 61 stats, 21 came in ahead forecasts, with 27 economic indicators coming up short of forecasts. There were 13 stats that were in line with forecasts in the week.

Looking at the numbers, 29 of the stats reflected an upward trend from previous figures. Of the remaining 32 stats, 30 reflected a deterioration from previous.

For the Greenback, upbeat economic data and sentiment towards monetary policy delivered support in the week. In the week ending 17th September, the Dollar Spot Index rose by 0.66% to 93.195. In the previous week, the Dollar had risen by 0.59% to 92.582.

Out of the U.S

Early in the week, inflation figures were in focus.

In August, the annual rate of core inflation softened from 4.3% to 4.0% versus a forecasted 4.2%. While softer than expected, 4% continued to sit well above the FED’s 2% target, leaving tapering on the table.

Mid-week, industrial production and NY Empire State manufacturing figures were market positive.

On Thursday, retail sales, Philly FED Manufacturing PMI, and jobless claims figures were of greater interest, however.

In August, retail sales increased by 0.7% versus a forecasted 0.2% decline. Core retail sales jumped by 1.8% versus a 0.1% decline. In July retail sales had fallen by 1.1% and core retail sales by 0.4%.

Manufacturing numbers were also upbeat, with the Philly FED Manufacturing PMI increasing from 19.4 to 30.7 in September.

Jobless claims figures failed to impress, however, with sub-300k remaining elusive. In the week ending 10th September, initial jobless claims rose from 312k to 332k. Economists had forecast an increase to 330k.

At the end of the week, consumer sentiment improved, albeit moderately. In September, the Michigan Consumer Sentiment Index rose from 70.3 to 71.0, falling short of a forecasted 72.0.

Out of the UK

It was also a busy week. Employment, inflation, and retail sales figures were in focus. The stats were skewed to the positive.

In August, claimant counts fell by a further 58.6k after having fallen by 48.9k in July. In July, the unemployment rate fell from 4.7% to 4.6%.

The UK’s annual rate of inflation accelerated from 2.0% to 3.25 in August, also delivering Pound support.

At the end of the week, retail sales disappointed, however. Month-on-month, core retail sales fell by 1.2% in August, following a 3.2% slide in July. Retail sales fell by 0.9% after having fallen by 2.8% in July. Economists had forecast a pickup in spending.

In the week, the Pound fell by 0.71% to end the week at $1.3741. In the week prior, the Pound had fallen by 0.23% to $1.3839.

The FTSE100 ended the week down by 0.93%, following a 1.53% loss from the previous week.

Out of the Eurozone

Economic data included wage growth, industrial production, trade, and finalized inflation figures for the Eurozone.

Finalized inflation figures for Spain, France, and Italy were also out but had a muted impact on the EUR.

In the 2nd quarter, wage fell by 0.4%, year-on-year, partially reversing a 2.1% increase recorded in the previous quarter.

Industrial production and trade data were positive, however.

Production increased by 1.5%, reversing a 0.1% fall from June, with the Eurozone’s trade surplus widening from €17.7bn to €20.7bn.

At the end of the week, finalized inflation figures for the Eurozone were in line with prelim figures. The Eurozone’s annual rate of inflation accelerated from 2.2% to 3.0% in August.

For the week, the EUR fell by 0.75% to $1.1725. In the week prior, the EUR had fallen by 0.56% to $1.1814.

The CAC40 slid by 1.40%, with the DAX30 and the EuroStoxx600 ending the week with losses of 0.77% and 0.96% respectively.

For the Loonie

Economic data included manufacturing sales, inflation, and wholesale sales figures.

The stats were mixed in the week.

In July, both manufacturing sales and wholesale sales disappointed with falls of 1.5% and 2.1% respectively.

Providing support, however, was a pickup in the annual rate of inflation from 3.3% to 3.5%.

The pickup in inflationary pressure and rising oil prices were not enough to support the Loonie against the Greenback.

In the week ending 17th September, the Loonie fell by 0.57% to C$1.2764. In the week prior, the Loonie had fallen by 1.34% to C$1.2692.

Elsewhere

It was another bearish week for the Aussie Dollar and the Kiwi Dollar.

The Aussie Dollar fell by 1.05% to $0.7279, with the Kiwi Dollar ending the week down by 1.03% to $0.7040.

For the Aussie Dollar

Business and consumer confidence figures were in focus in the 1st half of the week.

In spite of the latest lockdown measures, the stats were skewed to the positive.

The NAB Business Confidence Index rose from -8 to -5 in August.

More significantly, the Westpac Consumer Sentiment Index increased by 2.0% in September. The index had fallen by 4.4% in August.

On Thursday, employment figures disappointed, however.

In August, full employment fell by 68k following a 4.2k decline in July. Employment tumbled by 146.3k, however, versus a forecasted 90.0k decline. In July, employment had risen by 2.2k.

According to the ABS,

  • The unemployment rate fell from 4.6% to 4.5%, with the participation rate declining from 66.0% to 65.2%.
  • Year-on-year, the number of unemployed was down by 298,000.

For the Kiwi Dollar

It was also a mixed week on the economic data front.

2nd quarter GDP numbers impressed, with the NZ economy expanding by 2.8%, quarter-on-quarter. The economy had expanded by a more modest 1.4% in the previous quarter.

On the negative, however, was a slide in the Business PMI from 62.6 to 40.1 in August. The figures reflected the impact of the latest lockdown measures on production, justifying the RBNZ’s decision to leave the cash rate unchanged.

For the Japanese Yen

It was a relatively quiet week, with the numbers skewed to the negative.

According to finalized figures, industrial production fell by 1.5% in July. While in line with prelim figures, this was a partial reversal of a 6.5% jump from June.

In August, Japan’s trade balance fell from a ¥439.4bn surplus to a ¥635.4bn deficit. Exports rose by 26.2%, year-on-year, after having been up by 37% in July.

The Japanese Yen rose by 0.01% to ¥109.93 against the U.S Dollar. In the week prior, the Yen had fallen by 0.21% to ¥109.94.

Out of China

Fixed asset investment and industrial production figures were in focus mid-week.

There were yet more disappointing numbers from China for the markets to consider.

In August, fixed asset investment increased by 8.9%, year-on-year. This was softer than a 10.3% increase in July.

More significantly, industrial production was up by 5.3% in August versus 6.4% in July.

In the week ending 17th September, the Chinese Yuan fell by 0.34% to CNY6.4661. In the week prior, the Yuan had ended the week up by 0.18% to CNY6.4443.

The CSI300 and the Hang Seng ended the week down by 3.14% and by 4.90% respectively.

Dollar Touches Three-Week High, Lifted by Recent Data, Fed Taper View

The dollar index, a gauge of the greenback’s value against six major currencies, rose to 93.220, the highest since the third week of August. It was last up 0.4% at 93.207.

For the week, the dollar index gained 0.6%, its largest weekly percentage rise since mid-August.

The Fed holds a two-day monetary policy meeting next week and is expected to open discussions on reducing its monthly bond purchases, while tying any actual change to U.S. job growth in September and beyond.

“While we doubt that the FOMC will set out a plan for tapering its asset purchases, the new economic projections may shed some light on its reaction function given building cyclical inflationary pressures,” wrote Jonathan Petersen, markets economist at Capital Economics, in its latest research note.

“Our view remains that inflation in the U.S. will stay elevated for longer than the FOMC and investors currently anticipate, in turn supporting higher U.S. yields and a stronger dollar,” he added.

Speculation about a Fed taper this year gathered pace after U.S. retail sales unexpectedly increased in August, data showed on Thursday, rising 0.7% from the previous month despite expectations of a 0.8% fall. A business sentiment survey also showed a big improvement.

In afternoon New York trading, the euro slid 0.3% to $1.1729, after hitting a three-week low of $1.1724 earlier in the session.

The University of Michigan consumer sentiment for September inched higher to 71 versus the final August reading of 70.3, but overall analysts said the rise was nowhere near the improvements seen in the Empire States and Philadelphia Fed manufacturing surveys.

The dollar held gains after the Michigan sentiment report.

Currency markets were generally quiet on Friday with traders reluctant to take on new positions ahead of a clutch of important central bank meetings next week including the Fed, the Bank of Japan and the Bank of England.

The dollar was up 0.5% against the Swiss franc at 0.9320 francs, after earlier hitting a five-month high of 0.9324 francs .

The dollar rose 0.2% to 109.92 yen.

The yen has shown limited reaction to the ruling Liberal Democratic Party’s leadership race, which formally kicks off on Friday ahead of a Sept. 29 vote. The LDP’s parliamentary dominance means the party’s new leader will become prime minister.

The dollar also rose to a two-week high against the offshore yuan and was last up 0.3% at 6.4711. The yuan is being pressured by growing worries about China’s real estate sector as investors fear property giant China Evergrande could default on its coupon payment next week.

The British pound fell 0.4% to $1.3738 as UK retail sales undershot expectations. However, with investors bringing forward forecasts for a Bank of England interest rate hike to mid-2022, sterling remains supported.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Muralikumar Anantharaman, Alex Richardson and Sonya Hepinstall)

GBP/USD Weekly Price Forecast – British Pound Gives Up Early Gains for The Week

The British pound has initially rally during the course of the week but failed at the 1.39 level to turn things back around yet again. The British pound has been all over the place as of late, and it looks to me as if the market is going to continue to see a lot of uncertainty and volatility. The 1.37 level underneath is where the 200 day EMA is on the daily timeframe, so that will attract a certain amount of attention, but what I am focusing on from a longer-term standpoint is there was recent lows that we had formed near the 1.36 handle.

GBP/USD Video 20.09.21

If we were to break down below the 1.36 level, then it is likely that we could see an even bigger flush lower, just as if we can turn around a break above the 1.40 handle, which would open up a move towards the 1.42 handle. At that point, it would be a major selloff of risk appetite, as traders go rushing towards the greenback for safety. Watch the bond markets, because if they continue to attract inflows, that could be reason enough for the British pound to fall. At this point, I think it is much more about the greenback than the British pound.

I would anticipate that this is a market getting ready to build up momentum, but we have not quite had the reason to go in one direction or another. That being said, the market is likely to make a move sooner or later, and right now it looks like we are “tilting” to the downside more than anything else.

For a look at all of today’s economic events, check out our economic calendar.

GBP/USD Price Forecast – British Pound Goes Back and Forth Yet Again

The British pound has gone back and forth during the course of the trading session, suggesting that the market is going to see a lot of choppy behavior. The 50 day EMA sits just above, which in and of itself could offer a little bit of resistance, showing hesitation. This is a market that is starting to try to figure out whether or not we are trying to go higher, or lower. Quite frankly, this is a market that seems to be a bit confused, which makes quite a bit of sense, but you should also take a look at the technicals to give you a little bit of a heads up as well.

GBP/USD Video 20.09.21

To the upside, the 1.39 level will offer resistance, perhaps opening up the possibility of a move towards the 1.40 handle. To the downside, the 1.37 level underneath will offer significant support, as the 200 day EMA sits there, and if we break down below there then it is likely that we could go looking towards the double bottom at the 1.36 handle.

The market breaking down below there would signify a bit of a collapse, perhaps opening up the possibility of a major “risk off” type of situation. On the other hand, if we were to break to the upside, clearing the 1.40 handle would open up the possibility of a move to the 1.42 level, at the very least. After all, the market would have kicked off a major “W pattern” if that does happen. All things been equal, this will have a lot to do with risk appetite more than anything else.

For a look at all of today’s economic events, check out our economic calendar.

GBP/USD Daily Forecast – British Pound Is Mostly Flat After Retail Sales Data

UK Retail Sales Declined By 0.9% In August

GBP/USD is currently trying to settle below the support level at 1.3800 while the U.S. dollar is mostly flat against a broad basket of currencies.

The U.S. Dollar Index managed to settle above the resistance at 92.80 but failed to get to the test of the 93 level. In case the U.S. Dollar Index settles above 93, it will head towards the resistance at 93.10 which will be bearish for GBP/USD.

UK has recently reported that Retail Sales declined by 0.9% month-over-month in August compared to analyst consensus which called for growth of 0.5%. On a year-over-year basis, Retail Sales were flat, while analysts expected that they would grow by 2.7%.

Foreign exchange market traders will also continue to monitor the developments in U.S. government bond markets. The yield of 10-year Treasuries managed to get above the 50 EMA at 1.33% and is trying to develop additional upside momentum. In case this attempt is successful, U.S. dollar may get more support.

Technical Analysis

gbp usd september 17 2021

GBP/USD continues its attempts to settle below the support level at 1.3800. RSI remains in the moderate territory, and there is plenty of room to gain additional downside momentum in case the right catalysts emerge.

In case GBP/USD manages to settle below the support at 1.3800, it will get to another test of the next support level at 1.3780. A successful test of this level will open the way to the test of the support at 1.3745. In case GBP/USD gets below 1.3745, it will continue its downside move and head towards the support at 1.3710.

On the upside, a move above 1.3800 will push GBP/USD towards the resistance at the 50 EMA at 1.3815. In case GBP/USD settles above this level, it will head towards the next resistance at 1.3835. A successful test of this level will push GBP/USD towards the next resistance level which is located at 1.3865.

For a look at all of today’s economic events, check out our economic calendar.

UK Retail Sales Puts the Pound in the Spotlight

Earlier in the Day:

It was a quiet start to the day on the economic calendar this morning. The Kiwi Dollar was back in action this morning.

For the Kiwi Dollar

Business PMI figures were in focus in the early hours.

In August, the Business PMI tumbled from 62.6 to 40.1. The PMI had risen from 60.7 to 62.6 in July.

According to the August survey,

  • Down by 22.1 points from July, the PMI avoided a fall to sub-30 levels seen amidst the level 4 lockdown of 2020.
  • The production sub-index took the biggest hit, slumping from 63.9 to 27.7.
  • New orders fell from 63.7 to 44.4, with deliveries and finished stocks also falling below the 50 mark.
  • By contrast, the employment sub-index saw a more modest fall from 57.9 to 54.5.

The Kiwi Dollar moved from $0.70726 to $0.70715 upon release of the figures. At the time of writing, the Kiwi Dollar was down by 0.01% to $0.7074.

Elsewhere

At the time of writing, the Japanese Yen was flat at ¥109.730 against the U.S Dollar, while the Aussie Dollar was up by 0.04% to $0.7295.

The Day Ahead

For the EUR

It’s a relatively quiet day ahead on the economic calendar. Finalized August inflation figures for the Eurozone are due out later today.

With little else for the markets to consider, expect any upward revisions to influence the EUR.

At the time of writing, the EUR was down by 0.02% to $1.1765.

For the Pound

It’s a busy day ahead on the economic calendar. Retail sales figures for August are due out later this morning.

With the markets looking ahead to next week’s BoE monetary policy decision, we can expect Pound sensitivity to the numbers.

Following a pickup in inflationary pressure and better than expected employment figures, positive numbers would suggest a more hawkish MPC.

At the time of writing, the Pound was up by 0.02% to $1.3798.

Across the Pond

It’s a relatively quiet day ahead. Michigan consumer sentiment and expectation figures are due out later today.

With market sensitivity to consumer sentiment heighted as a result of the Delta variant, expect the numbers to influence market risk sentiment.

The U.S Dollar Spot Index ended Thursday up 0.41% to $92.932.

For the Loonie

It’s a particularly quiet day ahead for the Loonie, however. There are no major stats due out of Canada to provide the Loonie with direction.

The lack of stats will leave the Loonie in the hands of crude oil prices and market risk sentiment.

At the time of writing, the Loonie was up by 0.02% to C$1.2681 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

September 17th 2021: GBP/USD H4 Prime Support at $1.3689-1.3724 Likely Eyed

Charts: Trading View

EUR/USD:

(Italics: previous analysis)

Prime support on the weekly timeframe resides at $1.1473-1.1583—sharing space with a 100% Fib projection at $1.1613 as well as a 1.27% Fib extension at $1.1550. Interestingly, long-term stops likely rest south of the $1.1640ish lows and perhaps accommodate enough energy to fill $1.1473-1.1583 bids. To the upside, the spotlight is on supply at $1.2412-1.2214. With respect to trend, we can see the market has largely been higher since the early months of 2020.

Meanwhile, a closer reading of price movement on the daily timeframe reveals Europe’s single currency fell sharply against a broadly energetic USD on Thursday. The buck clocked a fresh three-week top after US retail sales surprised to the upside, increasing by 0.7 percent in August (vs. minus 0.7 percent forecast). Technically, this seats Quasimodo support at $1.1689 back in the line of fire as a downside objective. Supporting further selling is the relative strength index (RSI) voyaging south of the 50.00 centreline; this informs traders average losses (over the 14-day lookback period) exceed average gains.

Recent hours nudged under support from $1.1764-1.1776, which, as you can see, is currently serving as resistance. Bearish forces confronting Quasimodo support at $1.1742 is not out of the question, which may energise a bullish showing to prime resistance at $1.1829-1.1804, an area potentially housing a healthy defence.

Lower on the curve, shorter-term flow made its way through Quasimodo support at $1.1775 amid early London hours Thursday, setting the stage to address a 1.272% Fibonacci projection at $1.1742 and neighbouring Quasimodo support at $1.1732.

Observed Levels:

The daily timeframe demonstrating some breathing space south until shaking hands with Quasimodo support at $1.1689 brings to light a bearish scene. While a retest of H1 resistance (previous Quasimodo support) at $1.1775 may occur, continuation selling from current levels is an option, targeting the H1 timeframe’s 1.272% Fibonacci projection at $1.1742—aligns with H4 Quasimodo support— and H1 Quasimodo support at $1.1732.

Albeit unlikely to make a show today, prime resistance on the H4 timeframe at $1.1829-1.1804 is a zone traders could have on their watchlists next week, particularly if bulls make an entrance off H4 Quasimodo support.

AUD/USD:

(Italics: previous analysis)

Prime support at $0.6968-0.7242 on the weekly timeframe is fighting to entice fresh bullish interest. Failure to command position opens up support at $0.6673. Should buyers regain consciousness, prime resistance at $0.7849-0.7599 calls for attention. With respect to trend, we’ve been higher since early 2020. Therefore, the response from $0.6968-0.7242 could STILL be a dip-buying attempt.

In the ‘shape’ of a bearish outside reversal, Thursday watched price breach the lower limit of prime support from $0.7286-0.7355. With the relative strength index (RSI) cementing position below the 50.00 centreline—telling traders that average losses over the 14-day lookback period surpass average gains—price action is now centred on Fibonacci support at $0.7057-0.7126.

Sellers assuming leadership yesterday hauled the currency pair through stacked demand on the H4 timeframe between $0.7282 and $0.7343, dropping to within a stone’s throw from prime support at $0.7236-0.7266 (glued to the upper edge of weekly prime support at $0.6968-0.7242). For those who read recent technical reports might recall the following (italics):

Prime support at $0.7236-0.7266 may interest bullish eyes—a base arranged to receive downside momentum derived from sell-stops below stacked demand.

The technical picture from the H1 timeframe reveals the unit slipped below $0.73 heading into US hours, establishing a decision point at $0.7308-0.7299 (structure seen clearer on M15). Also of technical relevance is Quasimodo resistance-turned support at $0.7271. Additional levels to be mindful of on the H1 are trendline resistance, extended from the high $0.7469, and Quasimodo resistance parked at $0.7339.

Observed Levels:

Focus is on the H4 timeframe’s prime support at $0.7236-0.7266, as buyers potentially gear up to take advantage of selling pressure (sell-stops) south of stacked demand.

Before reaching $0.7236-0.7266, nonetheless, traders are urged to pencil in a possible whipsaw above $0.73 into the H1 timeframe’s decision point at $0.7308-0.7299. This may provide enough to fuel moves to H1 Quasimodo resistance-turned support at $0.7271 (falls in just north of H4 prime support).

USD/JPY:

(Italics: previous analysis)

Since mid-July, ¥108.40-109.41 demand has failed to stir much bullish energy on the weekly timeframe. Nevertheless, recognising the area derives additional backing from neighbouring descending resistance-turned support, extended from the high ¥118.61, an advance could eventually emerge to familiar supply at ¥113.81-112.22.

The uninspiring vibe out of weekly demand is demonstrated by way of a clear-cut consolidation on the daily timeframe between prime support at ¥108.96-109.34 and resistance from ¥110.86-110.27. The reluctance to commit outside of these areas toughens the consolidation; range limits, therefore, are likely to remain on the watchlist.

A robust pickup in USD demand elevated USD/JPY on Thursday, pulling back to highs of ¥109.83. Overall, however, chart studies indicate a bearish vibe following the breach of a double-top pattern’s (¥110.44) neckline, drawn from ¥109.59. The pattern’s target sits around ¥108.71, plotted alongside a 1.618% Fibonacci projection at ¥108.86. Continued interest to the upside, nonetheless, is likely to close in on supply at ¥110.82-110.39—the base entertaining the noted double-top configuration.

From the H1 timeframe, a ¥109.84-109.79 decision point elbowed into the spotlight going into US trading on Thursday, prompting a shooting star candlestick pattern (frequently viewed as a bearish signal). Air space above the aforementioned zone channels focus towards the ¥110 figure, closely shadowed by prime resistance at ¥110.15-110.12. To the downside from current levels, Quasimodo resistance-turned support is seen at ¥109.45, followed closely by Quasimodo support at ¥109.31.

Observed Levels:

Recognising weekly demand in play at ¥108.40-109.41, joined by range support on the daily timeframe at ¥108.96-109.34, signals the H1 decision point at ¥109.84-109.79 is perhaps fragile and could lead to ¥110 making a show today.

Another option, of course, prior to reaching for higher levels, is a retracement to bring in buyers off either H1 Quasimodo resistance-turned support at ¥109.45, or Quasimodo support at ¥109.31.

 

GBP/USD:

(Italics: previous analysis)

In the shape of a hammer candlestick formation (bullish signal), supply-turned demand at $1.3629-1.3456 on the weekly timeframe stepped forward in July. The aforementioned zone remains active, welcoming an additional test mid-August. Yet, pattern traders will also note August’s move closed south of a double-top pattern’s neckline at $1.3664, broadcasting a bearish vibe. Conservative pattern sellers, however, are likely to pursue a candle close beneath $1.3629-1.3456 before pulling the trigger.

Britain’s pound journeyed south versus a stronger US dollar Thursday, pressured following August’s optimistic US retail sales figures. This helped reinforce a bearish setting beneath the 200-day simple moving average at $1.3828. This raises the possibility of further underperformance to Quasimodo support at $1.3609.

It was also aired in recent writing that the daily chart communicates a rangebound environment. Since late June, buyers and sellers have been squaring off between a 61.8% Fib retracement at $1.3991 and the noted Quasimodo support. Directly above the consolidation, two tight-knit 100% Fib projections are seen around $1.4017—a double AB=CD bearish configuration for any harmonic traders. Momentum studies, according to the relative strength index (RSI), made its way above the 50.00 centreline early September and retested the barrier (average gains exceed average losses).

H4 prime resistance at $1.3940-1.3888 has proved a stubborn area. Sellers have since strengthened their grip and has price fast approaching prime support at $1.3689-1.3724. This area may interest those looking at price taking out stops beneath lows around $1.3730 (blue oval).

Elsewhere. Short-term action based on the H1 chart has the pair circling the lower side of $1.38, as we write. Interestingly, supply at $1.3837-1.3812 lurks directly overhead and could help facilitate what many traders will recognise as a stop-run after the event. Chart space below $1.38 shifts attention to Quasimodo support from $1.3751.

Observed Levels:

Technical studies from the H4 timeframe suggests bears are likely to remain in the driving seat for the time being, at least until we touch gloves with prime support at $1.3689-1.3724. Prior to any downside move, H1 sellers may welcome a whipsaw north of $1.38 to supply at $1.3837-1.3812. Conservative sellers out of the aforesaid supply will perhaps wait for a DECISIVE H1 close to form beneath $1.38 before committing, targeting H1 Quasimodo support at $1.3751 and the upper edge of H4 prime support from $1.3724.

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Dollar Index Climbs After U.S. Retail Sales Show Surprise Rebound

The dollar index, which measures the U.S. currency against six others, added to gains following the report and was last up 0.5% at 92.866. It hit its highest level since Aug. 27.

Retail sales rose 0.7% last month, boosted in part by back-to-school shopping and child tax credit payments, while data for July was revised down.

A separate report showed U.S. initial claims for state unemployment benefits increased 20,000 to a seasonally adjusted 332,000 for the week ended Sept. 11. Economists had forecast 330,000 applications for the latest week.

“If you look at the retail sales number, it’s quite constructive even with the revisions, so we are seeing the dollar benefit from that, particularly against the funding currencies like the euro, Swiss and the yen,” said Bipan Rai, North American head of FX strategy for CIBC Capital Markets in Toronto.

The news could bolster investor expectations for next week’s Federal Reserve policy meeting and how soon the U.S central bank will start to taper stimulus.

“It feels like whatever lingering concerns there were with the underlying economy … that was kind of washed away a little bit. So as we move towards the Fed next week, the evidence backs up the idea that we’re going to get a taper signal from the Fed at the meeting,” he said.

On Tuesday, the dollar index fell to a one-week low of 92.321 after a softer-than-expected inflation report. Its low for the month was 91.941, on Sept. 3, when payrolls data disappointed.

Investors are looking for clarity on the outlook for both tapering and interest rates at the Fed’s two-day policy meeting that ends next Wednesday.

Tapering typically lifts the dollar as it suggests the Fed is one step closer to tighter monetary policy.

It also means the central bank will be buying fewer debt assets, in effect reducing the amount of dollars in circulation, which in turn lifts the currency’s value.

The dollar also gained 0.3% to 109.70 yen , after sliding to a six-week low of 109.110 in the previous session.

The euro was 0.4% lower at $1.1766.

The Swiss franc also fell against the dollar and was last at 0.9263 franc per dollar.

Elsewhere, the Australian dollar was down 0.5% at $0.7296.

Earlier, data showed the country’s jobless rate unexpectedly fell to 4.5%, but the statistics bureau said the change reflected a drop in the participation rate rather than a strengthening of the labor market.

In cryptocurrencies, moves in bitcoin were relatively subdued. It was last down 0.9% at $47,711. Ether changed hands at $3,589, down 0.7%.

AMC Entertainment Holdings Inc boss Adam Aron said in a tweet this week that the theater chain would accept ether, bitcoin cash and litecoin alongside bitcoin for ticket purchases.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Caroline Valetkevitch; Additional reporting by Ritvik Carvalho in London and Kevin Buckland in Tokyo; Editing by Alexander Smith, Mark Potter and Jonathan Oatis)

 

GBP/USD Price Forecast – British Pound Gives Up Gains Again

The British pound has initially tried to rally during the trading session on Thursday but gave back gains to break down towards the 1.38 handle. This is an area that of course will continue to attract a lot of attention, as it has seen support form over the last several days. Whether or not we break down is a completely different question, but if we break down below the 1.38 handle, then I think we go looking towards the 200 day EMA, followed by the 1.37 level.

GBP/USD Video 17.09.21

If we rally from here, then I think we’re going to continue to see a lot of noise near the 1.39 level, as it is an area that has been a lot of resistance recently. If we were to break above the 1.39 level, then it is possible we could go looking towards 1.40 handle. The 1.40 handle is an area that if we can break above it, the market goes much higher, perhaps reaching towards the 1.42 level. Looking at this chart, it suggests that we do have a certain amount of questions being asked in this general vicinity, and therefore I think you can count on volatility more than anything else. The 50 day EMA is also in this area but is flat, so it suggests that there is a lot of indecision.

All things been equal, I think the US dollar is about to get a bit of a boost, due to the fact that it is one of the few economies that seem to be humming right along, at least when it comes to the major currencies.

For a look at all of today’s economic events, check out our economic calendar.

GBP/USD Daily Forecast – British Pound Moves Lower Against U.S. Dollar

U.S. Dollar Gains Ground Against British Pound

GBP/USD managed to get below 1.3835 and is moving towards the 50 EMA which is located near 1.3820 while the U.S. dollar is gaining ground against a broad basket of currencies.

The U.S. Dollar Index is currently trying to get above the 20 EMA at 92.60. If the U.S. Dollar Index manages to settle above the 20 EMA, it will head towards the resistance at 92.80 which will be bearish for GBP/USD.

There are no important economic reports scheduled to be released in the UK today so foreign exchange market traders will focus on the economic data from U.S.

Analysts expect that Retail Sales declined by 0.8% month-over-month in August after falling by 1.1% in July. Initial Jobless Claims report is projected to show that 330,000 Americans filed for unemployment benefits in a week. Continuing Jobless Claims are projected to remain unchanged at 2.78 million.

Traders will also monitor the developments in U.S. government bond markets as the yield of 10-year Treasuries is trying to settle above the 20 EMA at 1.31%. In case this attempt is successful, it will head towards the 50 EMA at 1.33% which may provide additional support to the U.S. dollar.

Technical Analysis

gbp usd september 16 2021

GBP/USD is currently trying to get below the 50 EMA which is located near 1.3820. The next support level for GBP/USD is located at the 20 EMA at 1.3810.

In case GBP/USD manages to settle below the 20 EMA at 1.3810, it will gain additional downside momentum and get to the test of the support at 1.3800. A move below this level will open the way to the test of the support at 1.3780.

On the upside, GBP/USD needs to settle above the resistance at 1.3835 to have a chance to gain upside momentum in the near term. The next resistance level is located at 1.3865.

If GBP/USD gets above the resistance at 1.3865, it will move towards the next resistance at 1.3880. A move above this level will push GBP/USD towards the resistance at 1.3900.

For a look at all of today’s economic events, check out our economic calendar.