Note that this is my current view, but if market conditions change my view can change too. Generally I will trade in alignment with what I have noted here, though I will wait for a set-up before I enter. I base my view on technical and fundamental information. This is my beliefs and you are welcome to have opposite ones. Having a plan is more important than the actual direction for me.
- Wait DXY.– MT is bear normal. It is an intense week ahead for the USD which kicks off on Wednesday with the release of quarterly GDP figures just hours before the FMOC Rate Decision. On Thursday we will take a look at consumer inflation and on Friday the always much anticipated employment numbers as well as the ISM Manufacturing PMI for October. While the overall economy is still growing the ISM Manufacturing report hit a 10year low in September and the services sector showed a pace of expansion which was slower than expected. Unemployment fell to 3.5%, a level not seen since December 1969, but new jobs numbers were down and wage growth was flat which prompted Chair Powell to highlight that the labour market is weaker than previously thought. GDP growth is also forecast to have slowed further in Q3. Despite the seeming progress toward a trade deal with China the chances of a third consecutive rate cut at the end of October are very high, as the Federal Reserve continues to “act as appropriate” in a data dependent manner. To note however is that the Fed Decision arrives before the latest data on inflation, employment and PMIs will be known. During October the Dollar Index has seen a decline which brought it to test the August lows where it has found support. The tone of the Fed Statement and the upcoming data will influence the short term direction.
- Wait GBP/USD. – MT is bull normal. As a path to a Brexit deal finally emerged Cable rose strongly from support at 1.22 slicing through potential resistance at 1.25 – 1.27. Subsequently, following the EU approval of the proposal submitted by the UK Government, the pair quickly moved up to the edge of the next resistance area at 1.30 where it stalled and from which it has now retreated slightly as the hope for a swift resolution of the political impasse has faded. While a no-deal Brexit on October 31 appears completely off the table the timing of Brexit itself remains an open question.PM Johnson has called for an early election on December 12 and Parliament is set to vote on it on Monday. The protracted political drama seems to be having a real impact on the economy with the last PMI data confirming that all sectors are now in contraction territory which was also reflected in a disappointing GDP. The market however is fully focused on the Brexit fireworks and until the dust settles macroeconomic data is unlikely to be of any consequence.
- Buy USD/JPY. – MT is bull normal. Two weeks ago the pair managed to break through recent resistance at 108.50 but due to broad-based USD weakness could not proceed further stalling just ahead of the 109 handle. Over the past six session it has been consolidating in a tight 50pips range indicating that another attempt at a break through might be imminent. If the attempt is successful we could see the pair starting to move toward the next resistance area at 111-112 over the coming weeks.
- Wait AUD/USD. – MT is bull normal. Following the October rate cut the Aussie put in place a fourth rejection of 0.67 indicating that the pair might have found a bottom. The catalyst to potentially justify higher prices came shortly after in the form of the U.S. – China positive trade talks in Washington. Subsequent data also showed a modest fall in the unemployment rate which gave the pair enough strength to push through recent resistance at 0.68 and put it on course to a re-test of 0.69 as the likelihood of a further rate cut in November faded. Over the past few sessions however the Aussie weakened and we have seen a pullback towards potential support at 0.68. Of interest, between now and the next RBA meeting on November 4, we will see the release of quarterly CPI figures and Building Approvals numbers as well as Chinese PMIs.
- Wait EUR/USD. – MT is bull normal. While conditions remain dire for the European economy the Euro seems to have recently benefited from the prospect of an imminent resolution to the Brexit saga as well as from broad USD weakness. Over the past week however it has become apparent that Brexit is probably still not going to happen in a hurry while at the same time the greenback has regained some strength. On top of that German data showed further deterioration (French PMIs though surprised to the upside) and the ECB reiterated its dovish outlook. As a result the Euro retreated and closed the week below 1.11 heading to test support in the 1.105 – 1.100 area.
- Wait NZD/USD. – MT is bull normal. Together with the Aussie the Kiwi has benefitted from the recent improvement in risk sentiment following the positive U.S. – China trade talks. However it is finding resistance at the 0.6450 level. 0.63 is potential near-term support. Whilst the economic backdrop remains weak the aggressive RBNZ action back in August seems to have started filtering through to the consumer with a pick-up in in the housing market and an uptick in inflation readings. In the coming week we will see whether business confidence has continued to slide in October. A further rate cut at the RBNZ November meeting is still expected, however that might be the last one for this easing cycle.
- Wait USD/CHF. – MT is sideways normal. For the past four months price action in the Swissie has been contained in a 3% range between parity and 0.97. Recently however movement has been limited to the upper part of this wider range with 0.985 acting as support in three occasions including at the start of this week. Another attempt at 1.00 seems likely but in the absence of a strong catalyst the pair seems destined to remain stuck within these ranges.
- Sell USD/CAD. – MT is bear normal. Despite disappointing Canadian Retails Sales the CAD was the strongest major currency this past week including versus the USD. The Loonie continued its slide below support at 1.3150 toward the next downside target at 1.30. This week the Bank of Canada issues its rate Statement and updates its forecasts with the quarterly Monetary Policy Report. No change to Overnight Rate is expected. The following day we will also see the latest Canadian GDP figures.
- Sell EUR/GBP. – MT is bear normal. The downtrend which kicked off in mid-August resumed strongly after a 2 week pause thanks to the emerging Brexit deal. The Euro however seems to have been benefiting also from the easing in geopolitical tensions, Brexit and the US/China Trade War. Following the two indecision candles printed the previous week the pair has been consolidating just above 0.86. There could be a little bit more of a pullback within the 0.87-0.88 resistance area before the downtrend resumes once again.
- Wait EUR/CHF. – MT is sideways normal.
- Buy AUD/JPY. – MT is bull normal.
- Wait NZD/JPY. – MT is bull normal.
- Buy GBP/JPY. – MT is bull normal.
- Wait EUR/JPY. – MT is bull normal.
- Buy CAD/JPY. – MT is bull normal.
- Wait CHF/JPY. – MT is bull normal.
- Buy GBP/NZD. – MT is bull normal.
- Wait EUR/NZD. – MT is sideways quiet.
- Wait AUD/NZD. – MT is sideways quiet.
- Wait EUR/AUD. – MT is sideways quiet.
- Wait GBP/AUD. – MT is bull normal.
- Wait AUD/CAD. – MT is sideways normal.
- Wait GBP/CAD. – MT is bull normal.
- Wait EUR/CAD. – MT is sideways normal.
- Wait NZD/CAD. – MT is sideways normal.
- Buy GBP/CHF. – MT is bull normal.
- Buy CAD/CHF. – MT is bull normal.
- Wait NZD/CHF. – MT is bull normal.
- Buy AUD/CHF. – MT is bull normal.
- Wait Gold. – MT is sideways quiet.
- Buy Oil. – MT is bull normal.
- Wait S&P 500. – MT is sideways normal.
- Buy DAX. – MT is bull normal.
- Buy Nikkei. – MT is bull normal.
- Wait T-Notes. – MT is sideways normal.
(MT = Market Type: Click for more information on market types.)
About the Author
Massimiliano Andrighetto is a currency trader and member of the team at FxRenew. If you like his writing you can follow it here. You can also get Free access to the Advanced Forex Course for Smart Traders.