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Monday, October 16th
The EUR/USD pair extends its downside trend for the third consecutive day, having breached the level of 1.1800 this morning, on the back of headlines about ECB QE program and expectations of the outcome on the Catalan independence declaration. The political uncertainty surrounding Catalonia’s independence vote remains one of the key driving factors for the pair, as worries about further escalation of political uncertainty in Spain weigh on the common currency. Moreover, recent news headlines, stating that the ECB intends to implement only minor adjustments in the QE program, which won’t be able to affect the overall picture, exert extra pressure on the euro. Adding to this, Friday’s dovish comments of ECB president M.Draghi, who once again reiterated the need of more accommodative monetary policy, forced the pair to close eyes to Friday’s disappointing US inflation and retail sales figures. Today both economic calendars won’t offer anything relevant, so the pair will continue to navigate, following broad market trend, while any developments from Spanish political field will be able to trigger volatility in the day ahead.
The GBP/USD pair remains on a firm note at the first working day of this week, breaking through the level 1.3300, in wake of unsuccessful attempts of the US dollar to correct its positions after Friday’s sharp downside move, triggered by a slew of disappointing US economic indicators. Moreover, the pound got additional positive impetus on the back of headlines, saying that UK PM T.May and Brexit Secretary David Davis will make an emergency trip to Brussels on Monday to meet EU's chief negotiator Michel Barnier and European Commission president Jean-Claude Juncker ahead of the EU summit to try to budge the negotiations over the Brexit deal. Adding to this, narrowing divergence between the Fed and BoE and improved risk appetite among investors, fueled by positive Chinese data, also keep sentiments upbeat around the pound. Today we have relatively silent data calendar, so broad market trend will remain the key driving factor for the pair during this trading session.
The AUD/USD pair navigates in a narrow range at the start of this trading week, consolidating its positions in the region of 0.7870–90, after Friday’s drawdown, backed by disappointing US CPI figures. However, the pair remains under pressure this morning, as the US dollar attempts to correct after strong sell-off, triggered by worse-than-expected US numbers. On the other hand, China released bloc of upbeat data, featuring PPI and CPI, which usually leads to risk-on rally across the market, thus lending support to the higher yielding-currencies, such as the Aussie. Today the US calendar won’t bring anything noteworthy, leaving the pair at the mercy of global market trend and risky sentiments, while RBA will publish minutes from its last meeting, which will be able to bring some fresh trading opportunities, especially in light of recent dovish talks regarding subdued recovery of the Australian economy.
The dollar/yen pair failed to extend its early upside trend and surrendered major part of its Asian gains, having returned to the region of 3-week lows, marked at 111.69 spot on Friday. Earlier this Monday the pair received minor bullish impetus in wake of the US dollar attempts to correct higher against its main competitors after its drawdown, backed by weak inflation data. Moreover, broadly based risk-on trend, underpinned by positive Chinese data, also negatively affected the safe-haven yen. However, further upside lacked any momentum, as investors are still digesting recent Friday’s disappointment, which weighed on market expectation of Fed’s more aggressive monetary policy tightening path. Today the US calendar will remain broadly silent, so the US dollar dynamics and widespread market trend will remain as exclusive driving factors for the pair throughout this trading session.
The main events of the day:
Support and resistance levels for the major currency pairs:
EURUSD S. 1.1761 R. 1.1903
USDJPY S. 111.32 R. 112.56
GBPUSD S. 1.3196 R. 1.3380
USDCHF S. 0.9672 R. 0.9806
AUDUSD S. 0.7782 R. 0.7950
NZDUSD S. 0.7085 R. 0.7239
USDCAD S. 1.2411 R. 1.2547
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