By Easy-Forex - Dollar’s price action mirrored the day before and again it has been a case of so near yet so far in terms...

... of breaking through key technical barriers. The inability to do so led to another bout of profit taking but momentum is still in the Dollar’s favour and the market awaits a heavy bout of data from the U.S. which includes Inflation & Consumer Confidence which are expected to inch higher but Retail Sales & Industrial Production could surprise to the downside. Earlier, the Trade Deficit outcome was below $60 Bn mark which helped the Dollar’s cause as the market was bracing for a record high figure given the high import costs of oil.

· Euro is hovering around the neutral region of 1.20 and continues to find strong bottom picking bid interest around 1.19. Support for the Euro also emanated from the ECB’s October monthly bulletin in which they reiterated that they are exercising strong vigilance on inflation risks coming from higher oil prices. With inflation already much higher than the ECB’s target rate and the outlook is for inflationary pressures to keep rising, thus rates could be lifted early next year with French Consumer inflation like the German result remained high. Meanwhile, Italian Industrial Production posted its second biggest increase on a monthly basis in 8 years thanks to a surge in exports on a weaker Euro. These sort of results will give the ECB more confidence to go ahead with the rate hike

· Yen after finally slipping into the 115 region on broad Dollar strength has stabilized but risks further losses. Meanwhile, mixed signals from China are also leading to patchy price action as any hopes of China revaluing the Yuan ahead of the G20 summit in China especially given the increased rhetoric from U.S. Tsy Sect. Snow was dismissed as the Chinese Finance Minister reiterated that they will move at their own pace but at the same time concrete measures for currency reform are also seen. Japanese Wholesale Gods Price index increased more than expected thus adding another case for an end to the ultra lose monetary policy. Industrial Production data is eyed today to see the effects of high oil and energy prices.

· Pound is continuing to range trade taking cue from Dollar’s general direction but sentiment towards it has become a bit more negative on continuous weak data results. The BCC Q3 survey suggesting that manufacturing conditions have worsened dramatically. Confidence is declining rapidly while export balances are the biggest concern and the trend looks worrying. Giving another perspective to BoE’ Gov King’s hawkish stance was member Walton who downplayed the significance of the rise in inflation and given his recent comments is likely to vote for a rate cut in the next meeting.

· Aussie still reeling from the poor employment report found strong bid interest and has gone back above the 0.75 mark. This morning’s data also helped as Building activity increased while first home buyers have hit record high levels. But recent poor data has soured the sentiment against it and the fact that rates are will not be increased, leaving no significant factors to push it past key resistance levels and more losses could eventuate gradually.


Economic Data Released

GMT Release Region Previous Actual Comment
08:00 August Industrial Production m/m Italy 0.5% 1.3% Production is boosted by recent rise in exports.
09:00 Q2 GDP q/q Euro-Zone 0.3% 0.3% GDP remains sluggish with consumer spending stiffened by higher oil
12:30 August Trade Balance USA -$57.9Bn -$59.0Bn Deficit rises due to high import costs of oil.
12:30 Initial Jobless Claims USA 390K 389K Claims remain high with hurricane victims filing claims
Upcoming Economic Releases
GMT Release Region Previous Forecast Comment
04:30 August Industrial Production m/m Japan 1.2% 1.2% Production to stay steady as export demand is good.
08:00 August Trade Balance m/m Italy 2387 Mn -320 Mn Balance to go in Deficit due to high import costs of oil.
12:30 September Consumer Price Index m/m USA 0.5% 0.9% Inflation to zoom higher due to high oil and energy prices
12:30 September Retail Sales USA -2.1% 0.4% Sales to rebound as general economic conditions remain strong
13:15 September Industrial Production USA 0.1% -0.5% Production to decline as hurricane disrupted activity
13:45 October University of Michigan Consumer Confidence Index USA 79.6 80.0 Confidence to inch back higher as hurricane impact has been less.


Key Intra-Day Pivot levels

EUR/USD –Yesterday’s low was 1.1914 and high was 1.2037.
The pair closed at 1.2010.
Technical scenario remains the same as the pair continues to range trade and for now has mild bottom picking bid interest just bellow 1.1950 with support lying in the 1.1890-1.1910 region. A clear break below this region brings very strong support around the 1.1850 mark with equally strong bid interest. However any moves lower will send it towards its lowest levels in the last two years will shift it into deep negative region. On the upside immediate resistance has now moved down to 1.2060 and any moves above 1.21 to lead to strong selling orders with very strong resistance around 1.2140. Today’s heavy bout of U.S. data will give further clues.
Key resistance is seen at 1.2060 followed by 1.2140 while support starts at 1.1910 followed by 1.1850.

USD/JPY – Yesterday’s low was 114.26 and high was 115.08.
The pair closed at 114.55.
Yen has slipped further on Dollar’s strength going into the 115 region with immediate resistance around 115.20; a strong break above will make gains tougher as we move into the 115 region with very strong resistance lying at 115.40-55 zone with selling orders around it. On the downside, immediate support has now moved up to around 114.10 which is followed by strong support around the 113.45 mark and decent bid interest just below it. Only moves back into the 112 region will bring the pair back in neutral territory otherwise the Yen risks further losses.
Key Resistance is seen at 115.20 followed by 115.55 while support starts at 114.10 followed by 113.45.

GBP/USD – Yesterday’s low was 1.7445 and high was 1.7573.
The pair closed at 1.7540.
The pair has rebounded impressively with mixed interest seen within the 1.74 region and broad range trade could continue. Immediate strong support lies in the 1.7380-95 region which has previously been the base of a few massive uptrends but a clear break below risks acceleration of losses before very strong support crops up at 1.7290-1.7310 region but a break below will send it to its lowest levels in more than two years and shift it in deep negative region. On the upside, broad range trading is possible with immediate resistance at 1.7575 followed by selling orders lined above the 1.76 mark with very strong resistance in the 1.7625-40 region. The Pound is likely to remain under pressure on its crosses.
Key Resistance is seen at 1.7575 followed by 1.7640 while support starts at 1.7390 followed by 1.7310.

AUD/USD – Yesterday’s low was 0.7461 and high was 0.7556.
The pair closed at 0.7494.
The pair found strong bottom picking bid interest around 0.7450 and is hovering around the mixed interest region of 0.75, immediate resistance has moved down to 0.7575 with selling orders lying above 0.76 with strong resistance around 0.7620. On the downside, further losses look likely with the break of the support mark to accelerate losses towards 0.7390 mark targeting its lowest levels in a year.
Key Resistance is seen at 0.7575 followed by 0.7620 while support starts at 0.7450 followed by 0.7390.

Kunal Sharma
E-mail: kunal@easy-forex.com
By Easy-Forex