Financial markets have begun to recover from Wednesday’s panic with a moderately successful Italian bond auction. Liquidity will likely be light for the day with many banks closed in observance of Armistice/Veterans Day.
Forex Market Trends
| EUR/USD | GBP/USD | USD/JPY | USD/CHF | AUD/USD | EUR/GBP | |
| Daily Trend |  |
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| Weekly Trend | |
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| Resistance | 1.4245 | 1.6440 | 80.20 | 0.9775 | 1.0760 | 0.8830 |
| 1.3860 | 1.6130 | 79.50 | 0.9318 | 1.0445 | 0.8655 | |
| 1.3650 | 1.6000 | 78.25 | 0.9080 | 1.0245 | 0.8550 | |
| Support | 1.3480 | 1.5860 | 77.50 | 0.8880 | 1.0020 | 0.8360 |
| 1.3145 | 1.5630 | 76.10 | 0.8565 | 0.9925 | 0.8280 | |
| 1.2870 | 1.5270 | 75.56 | 0.8250 | 0.9650 | 0.8170 |
Economic News
EUR – EUR Rises from its Low
The EUR came off of its lows as Italy pulled back from the brink. Italian 10-year bonds were trading back below the 7% yield, a level considered unsustainable by most fixed income analysts. The turnaround came after a successful Italian bond auction. Italy paid higher than normal rates but the bid-cover was almost 2:1, a modest level of success for the bond auction. Perhaps it may have been the ECB buying a large portion of the Italian bonds though the ECB will only report its bond purchases on Monday.
Both France and Italy released disappointing industrial production data with France reporting a -1.7% contraction on consensus expectations of a -0.7% drop. This highlights the stalling growth problem in the euro zone. To counter the economic slowdown the ECB may cut interest rates again next month to support the economy, a negative for the EUR.
GBP – BoE Leaves Rates Unchanged
As expected the Bank of England left both its benchmark interest rate steady and did not add to its asset purchase facility. However, the size of the QE program is currently under review. This most likely is a hint at a future policy move to increase the size of the central bank’s balance sheet to support the UK economy. Unlike the Fed or ECB, the BoE does not release an accompanying statement after there is no policy change. To find out additional details economists and traders will have to wait for the release of the meeting minutes which are set to be released on November 23rd.
The BoE has left the door open for additional stimulus to support the struggling UK economy. Typically quantitative easing leads to weakness for a currency though the GBP/USD remains above the level from October 6th when the BoE announced it would purchase an additional GBP 75 bn of government bonds.
JPY – BoJ Meeting Eyed
The yen gained yesterday in an environment that is typical of USD weakness. The USD/JPY continues to move below 78, a level that is close to its 100-day moving average at 77.65. Japanese core machinery orders dipped -8.2% during the month of September with a strong yen causing corporations to delay large purchases.
Today services data showed declined more than forecasted. Traders will also be eyeing the BoJ meeting next Tuesday. Expectations are low for additional easing of monetary policy given the most recent expansion of the BoJ’s balance sheet, though the BoJ move was hardly noticed as the announcement of the Greek referendum overshadowed the news. The USD/JPY has support at 77.50 from the mid- October lows and resistance from the November 4th high of 78.15.
AUD – AUD/USD Recovering after 2.7% Drop
The AUD has clawed back following Wednesday’s crash as the AUD was pulled lower with other higher yielding currencies. Employment data released yesterday showed a decline in the unemployment rate but new jobs added were in-line with consensus forecasts.
Recent Chinese data has also been supportive of the AUD with Chinese CPI falling to 5.5% in October. The drop in inflationary pressures dispels the theory of a hard landing for the Chinese economy and opens the door to potential easing of Chinese monetary policy. Yesterday’s data showed China’s trade balance widened but was below consensus forecasts which may signal further slowing of the Chinese economy.
For AUD/USD support and resistance, please see today’s Wild Card section in the FOREXYARD Daily Analysis.
Technical News
EUR/USD
After the pair recovered to its long term trend line from the June low the EUR/USD failed to move above the previously broken trend line which turned into a resistance level. Weekly stochastiscs have rolled lower and point to additional declines in the pair. Initial Support is found at last week’s low of 1.3600 and a break here could have the pair testing the October low of 1.3145. Resistance is located at the 200-week moving average at 1.3980 followed by the October high of 1.4250.
GBP/USD
The GBP/USD continues to be buoyant with the pair forming a base at its 55-day moving average at 1.5860 though weekly stochastics are beginning to cross which hints at a decline in the price. A break below last week’s low of 1.5875 could have scope to 1.5630 from the October 18th low, a level that is close to the 61% Fibonacci retracement from the October bullish move. Resistance is capped at the pair’s 200-day moving average near 1.6140, followed by 1.6530 off of the trend line from the April and the August highs.
USD/JPY
The MOF intervened in the market when the USD/JPY was at a new all-time low and ensured that both the weekly and monthly candlesticks would make an outside day up, a bullish candlestick. However, the failure of the pair to break above the falling trend line off of the 2007 and 2010 highs show the long term downtrend remains intact. Initial support is found at 77.80 from the September high followed by 77.50. The resistive trend line comes in at 79.50.
USD/CHF
A cross of the 50-day moving average above the 200-day moving average will likely take place within the next few days and is a bullish technical move. Initial resistance is found from the October 20th high of 0.9080 followed by the October high of 0.9310. Support is back at Thursday/Friday’s low of 0.8760 followed by the October low of 0.8565.
The Wild Card
AUD/USD
Wednesday’s 2.7% decline in the AUD/USD completed a head and shoulders pattern when the price broke below the neckline at 1.0220. The neckline will likely serve as initial resistance. The bearish chart pattern has a measured move of 560 pips which gives a target from the chart pattern at 0.9650, though the March low at 0.9700 may prove to be supportive. Forex traders may find support before here at the October 10th high of 1.0020.
Written by Forexyard.com