EURUSD, Daily
EURUSD price failed to close above the key 1.1280 area during the previous day’s sessions; however, the prevailing trend is that the pair continues to remain without clear direction. Buyers appear to be emerging sporadically around current price levels and are offering some short term support. The pair does retain the potential to create a lower top from the August high price (1.1713) just below the 1.1460 area; for this to play out we would like to see at least a daily close above 1.13. On the downside there remains the risk of a price breakdown should we see a clean break below the 1.1090’s.
The global stock market rally continued in Asia, hopes that weak data means global monetary policy will remain accommodative for longer and that the ECB will extend its QE program that will provide support to the stock markets. In Australia, the RBA maintained its 2.00% cash rate as expected, the BoJ started its 2-day policy meeting and the BoE will follow today. ECB president Draghi will speak this evening.
UK house prices show signs of cooling, with the September Halifax index showing a 0.9% m/m decline. The market has been in a mini-boom since the general election in May, underpinned by a record level of employment and rising real wages, along with under-supply of residential properties.
The AUD rose on the RBA’s refrain from cutting interest rates, which saw AUD-USD lift to a fresh two-week peak. The USD, EUR and the JPY held in relatively narrow ranges. German manufacturing orders fell 1.8% m/m in August data. This data supports the view that the ECB might be headed for an expansion in its QE program, and this may pressure the EUR over the longer term.
Currency Pairs, Grouped Performance (% change)
The AUD is rallying on the RBA’s refrain from cutting interest rates today. There had been a minority view anticipating an easing given the slowdown in the Chinese economy. Aside from the central bank’s inaction, there was a lack of clear policy guidance in its statement, which maintained the line on the currency as “adjusting to the significant declines in key commodity prices,” a clause that’s been used for three consecutive months now.
The USD is slightly weaker after the ISM Non-Manufacturing PMI fell in September, the EUR is trading mostly higher in the wake of higher retail sales , however we are expecting EUR price action later today when the ECB President makes his speech.
Significant daily support and resistance levels for these pairs are:
Main Macro Events Today
• AUD Trade Balance: Australian trade data for August showed an unexpected widening in the deficit, to A$ 3.095 bln from A$ 2.4 bln. A combo of a weaker currency and lower commodity prices drove the deterioration in the deficit. The deficit data, and a souring in sentiment on Europe stock bourses, have taken the upside out for the Aussie dollar.
• USD Trade Balance: August trade data is out later today and it’s expected to see an 18.2% expansion in the deficit to a -$49.5 bln (median -$43.0 bln) headline from -$41.9 bln in July and a recent low of -$38.5 bln in February. Exports are expected to decline 2.2% on the month following a 0.4% increase in July and imports are expected to climb 1.6% following a 1.1% decline in July. A new release on advance trade figures has recently started being released and the data for August point toward an expected widening in the trade gap.
• CAD Trade Balance : It is expected that the deficit, due Today, to worsen to -C$1.0 bln in August (median -C$1.1 bln) from the -C$0.6 bln shortfall in July. We could see a 0.6% m/m gain in exports after the 2.3% gain in July. A weaker CAD and improvement stateside in industries that matter are supportive of underlying export growth. However, the plunge in oil prices during August looms large and could knock total export values lower relative to July. Imports are expected to rise 1.5% m/m in August following the 1.7% rise in July.
• EUR ECB President Speech: With market expectations of an extension of the QE program mounting anything but very dovish comments from Draghi this evening will be a disappointment for markets.
