16-Oct-2020

1) US Dollar Retreats Ahead Of The September Retail Sales Release
2) USD/CAD: Negative Bias Stalls; Positive Price Action Develops
3) AUD/USD: The Outlook Remains Negative As Long As It Holds Below 0.7095
4) EUR/USD: Seems Vulnerable Amid Fresh Coronavirus Jitters
5) GBP/USD: Brexit Headlines Continue To Infuse Volatility

1) US Dollar Retreats Ahead Of The September Retail Sales Release

The US dollar declined in overnight trading as the market reacted to rising jobless claims data. According to the Bureau of Labour Statistics (BLS), close to 900k Americans applied for initial jobless claims last week. That was higher than the previous week’s increase of 845k. It was also the highest reading since mid-August. The continuing jobless claims fell from 11.1 million to 10 million. Meanwhile, data from the New York Fed showed that the state’s manufacturing index fell from 17.0 to 10.5. In Philadelphia, the manufacturing index rose to 32.3 from 15.0. Later today, the dollar will react to the September retail sales and industrial production numbers.

The price of crude oil rose as the market reacted to the US inventories data. According to the EIA. The number of oil inventories fell by more than 3.8 million barrels last week. That was a bigger decrease than the 2.8 million that analysts were expecting. It was also a reversal from the previous week’s increase of 0.501m. Cushing inventories rose by more than 2.9 million barrels while natural gas storage fell from 75 billion to 46 billion barrels. Later today, the price will react to oil rigs data by Baker Hughes. It will also react to new data about Covid-19 infections.

Global equities dropped yesterday as investors remained pessimistic about the state of the economy as the number of infections continued to rise. In the United States, the Dow Jones and Nasdaq 100 lost 20 and 55 points, respectively. Similarly, in Europe, major indices like the German DAX and FTSE 100 fell by more than 2%. Today, the situation is changing as American and European futures are pointing upwards. Today, the indices will react to new data on the infections. Further, they will react to European car registration data, European inflation numbers, and US retail sales data.

2) USD/CAD: Negative Bias Stalls; Positive Price Action Develops

USDCAD has pushed over the 50-day simple moving average (SMA) of 1.3204 and is ready to face the mid-Bollinger band at 1.3267, following a recent bounce off the lower Bollinger band. The gliding 50- and 100-day SMAs appear to be escorting the price into a neutral-to-bearish structure.

Nonetheless, the short-term oscillators are continuing to exhibit improving momentum. The MACD, marginally below its red trigger line and zero mark, looks set to return above them, sponsoring extra gains in the pair. The stochastic oscillator is echoing a strong bullish tone, while the increasing RSI is attempting to maintain its climb above the 50 threshold.

If the price holds above the 50-day SMA at 1.3204, resistance may originate from the mid-Bollinger band at 1.3267 ahead of the 1.3340 barrier and adjacent 100-day SMA at 1.3351. Stepping above this limiting obstacle, the pair may tackle the 1.3420 fortified peak with the neighbouring upper Bollinger band of 1.3442. Should buyers manage to sustain this drive upwards, they may then target the 1.3500 handle prior to hitting the 200-day SMA at 1.3554. Should additional gains in price unfold, shifting the bias positive, attention may then turn to the 1.3600 and 1.3645 highs.

Alternatively, amplified selling interest may steer the price under the 50-day SMA and towards the 1.3100 handle and adjacent lower Bollinger band at 1.3070. Diving past these constraints may send the pair to a support base from 1.2993 to 1.2950. Plunging past these crucial troughs, the price may test the 1.2884 level – reached in October 2018 – before steeper declines sink deeper towards the 1.2782 and 1.2728 lows.

3) AUD/USD: The Outlook Remains Negative As Long As It Holds Below 0.7095

AUDUSD topped exactly at first resistance at 7165/75 & headed lower as expected to all targets as far as 7110/00 but continued lower to 7055.

NZDUSD shorts at 6670/80 worked perfectly as we hit our buying opportunity at 6580/70 & bottomed exactly here for a 90 pip profit.

AUDUSD outlook remains negative as long as we hold below first resistance at 7095/7105. A break below 7050 targets 7035/30 & the September low at 7010/04.

A break above 7105 meets a selling opportunity at 7140/50 with stops above 7165.

NZDUSD longs at the buying opportunity at 6580/70 meets first resistance at 6620/30. A break above 6640 retests 2 week trend line resistance at 6680/90. Shorts need stops above 6700.

A buying opportunity at 6580/70 with stops below 6560. A break lower targets the head & shoulders neckline at 6530/20. A break below 6510 is an important longer term sell signal.

4) EUR/USD: Seems Vulnerable Amid Fresh Coronavirus Jitters

The EUR/USD pair came under some renewed selling pressure on Thursday and refreshed monthly lows amid a strong pickup in the US dollar demand. The global risk sentiment took a hit on the back of fading hopes for additional US fiscal stimulus measures before the presidential election on November 3 and fresh coronavirus jitters. It is worth recalling that the US Treasury Secretary Steven Mnuchin said on Wednesday that he and the House of Representatives Speaker Nancy Pelosi remain “far apart” on spending priorities. Adding to this, a steep rise in COVID-19 infections fueled fears that the new wave of lockdown measures could stall the global economic recovery. This, in turn, forced investors to take refuge in the safe-haven greenback and exerted some pressure on the major.

The USD stood tall and seemed rather unaffected by mixed US macro data. In fact, the Empire State Manufacturing index missed expectations and dropped to 10.5 in October from 17.0 previous. Separately, the Initial Weekly Jobless Claims unexpectedly jumped to 898K during the week ending October 10th. The previous week’s reading was also revised higher to 845K from 840K reported earlier. Meanwhile, the Philly Fed Manufacturing Index surged to 32.3 in October as against consensus estimates pointing to a modest downtick to 14 from the previous month’s reading of 15. The data, however, did little to impress the euro bulls. However, an intraday recovery in the US equity markets extended some support to the pair and helped limit any deeper losses, at least for the time being.

The pair now seems to have stabilized and was seen hovering near the 1.1700 mark through the Asian session on Friday. Market participants now look forward to the final version of the Eurozone consumer inflation figures. Later during the early North American session, the release of the US Retail Sales data will influence the USD price dynamics and provide some impetus. Friday’s US economic docket also features the release of Industrial Production data and the preliminary estimate of the October Michigan Consumer Sentiment Index. This, along with the broader market risk sentiment, should assist traders to grab some meaningful opportunities on the last day of the week.

From a technical perspective, the overnight slide below the 1.1700 mark comes on the back of this week’s bearish breakthrough a two-week-old ascending trend-line support. Hence, a subsequent fall back towards September monthly swing lows, around the 1.1615-10 region, now looks a distinct possibility. Some follow-through selling below the 1.1600 mark might prompt some technical selling and turn the pair vulnerable. The downward trajectory could then get extended towards the key 1.1500 psychological mark before the pair eventually drops to the next major support near the 1.1460-55 horizontal zone.

On the flip side, immediate resistance is now pegged near the 1.1740 area. This is closely followed by 200-hour SMA, around the 1.1765 region. Any further move up might still be seen as a selling opportunity near the mentioned trend-line support breakpoint, currently around the 1.1800 mark. This, in turn, should cap the upside for the major near weekly tops, around the 1.1825-30 supply zone.

5) GBP/USD: Brexit Headlines Continue To Infuse Volatility

The GBP/USD pair came under some renewed selling pressure on Thursday and erased the previous day’s goodish recovery move from one-week lows. The British pound was being pressured by the introduction of new coronavirus lockdown restrictions in the UK and a strong pickup in the US dollar demand. Against the backdrop of a steep rise in new COVID-19 cases, fading hopes for additional US fiscal stimulus measures before the presidential election on November 3 weighed on investors’ sentiment and triggered a fresh wave of the global risk-aversion trade. The anti-risk flow benefitted the safe-haven US dollar and exerted some additional pressure on the major.

The intraday bearish pressure around the sterling after EU leaders called on the UK to make further concessions to secure a trade agreement. Following the conclusion of the first day of the key EU summit, Michel Barnier, the EU’s chief negotiator said the level playing field, fisheries and issues of governance remained key sticking points holding up progress on trade talks. The comments drew criticism from the UK chief Brexit negotiator, David Frost, saying that the EU is no longer committed to working intensively to reach a future partnership. The pair slipped back below the 1.2900 mark and failed to gain any respite from mixed US macro data.

The pair finally settled near the lower end of its daily trading range and remained depressed through the Asian session on Friday. Market participants now look forward to the UK Prime Minister Boris Johnson’s decision on whether the UK will walk away or continue Brexit talks. This, in turn, will derive the sentiment surrounding the British pound. Later during the early North American session, the release of the US monthly Retail Sales data will influence the USD price dynamics and further contribute to produce some trading opportunities. The US economic docket also features the release of Industrial Production data and the preliminary estimate of the October Michigan Consumer Sentiment Index.

From a technical perspective, the pair has now drifted back closer to over two-week-old ascending trend-line support. A convincing breakthrough will be seen as a fresh trigger for bearish traders and turn the pair vulnerable to accelerate the fall to the 1.2800 round-figure mark. Some follow-through selling should pave the way for a slide back towards challenging the very important 200-day SMA, currently near the 1.2710 region.

On the flip side, any meaningful recovery back above the 1.2900 mark now seems to confront resistance near the 1.2930 region. A sustained move beyond has the potential to lift the pair back towards the key 1.3000 psychological mark. Any subsequent strength might still struggle to make it through and remain capped near the 1.3065-80 heavy supply zone.