Daily F.X. Analysis, October 01 – Top Trade Setups In Forex – Manufacturing PMI in Highlights! 

On the news front, the eyes will remain on the series of services PMI figures from the Eurozone and the U.K. Most of the data is expected to be neutral; however, the U.S. Unemployment Claims and Manufacturing PMI will be the main highlight of the day. Claims are expected to perform better, while the ISM Non-Manufacturing PMI is expected to report negative figures. Mixed bias prevail for the U.S. dollar today.

Economic Events to Watch Today  

 

 

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EUR/USD – Daily Analysis

The EUR/USD closed at 1.17208 after placing a high of 1.17548 and a low of 1.16844. After posting gains for two consistent days, the EUR/USD pair dropped on Wednesday amid the broad-based U.S. dollar strength. Another major reason behind the fall in EUR/USD prices on Wednesday was the latest comments from ECB President Lagarde of talking up an idea of moving toward the average inflation targeting measure like the U.S. Fed to fight against pandemic recession. 

Lagarde said on Wednesday that ECB was considering following the footsteps of the U.S. Federal Reserve to ditch its current policy that sets the target of inflation below but close to 2%. The debate over whether ECB should follow the Fed in setting an average inflation target and let inflation run above 2% target came in as analysts suggested that the central bank was running out of tools. Another reason could be a low appetite for cutting interest rates below zero. These dovish hopes kept the market risk sentiment under pressure, and the Euro currency suffered that led to declining EUR/USD pair prices on Wednesday. 

Meanwhile, at the data front, the German Import Prices in August rose to 0.1% from the projected 0.0% and supported Euro. At 10:59 GMT, the German Retail Sales for August also rose to 3.1% from the anticipated 0.4% and supported Euro. 

The French Consumer Spending for August rose to 2.3% from the anticipated -0.2% and supported shared currency. The French Prelim Consumer Price Index (CPI) for September declined to -0.5% against the projected -0.3% and weighed on Euro. 

At 12:55 GMT, the German Unemployment Change in August came in as -8K against the forecasted -7K. At 14:00GMT, the Italian Prelim CPI for September declined to -0.6% against the forecasted -0.5% and weighed on single currency Euro. 

On the U.S. front, at 17:15 GMT, the ADP Non-Farm Employment Change showed a job creation of 749K against the forecasted 650K in September and supported the U.S. dollar. At 17:20 GMT, the Chicago Purchasing Managers Index (PMI) advanced to 62.4 from the forecasted 52.0 and supported the greenback. At 17:30 GMT, the Final GDP for the quarter came in as -31.4% against the projected -31.7% and supported the U.S. dollar. At 19:00 GMT, the Pending Home Sales also rose to 8.8% from the projected 3.1% and supported the U.S. dollar.

Despite the strong economic data from Europe, the pair EUR/USD continued declining on Wednesday as the focus has been shifted towards the U.S. dollar and its strength. The strong greenback managed to keep the pair under heavy pressure on Wednesday amid several factors supporting U.S. dollar gains. Furthermore, the U.S. dollar also gained its strength as the hopes for a new round of U.S. stimulus measures finally increased. Steven Mnuchin, the U.S. Treasury Secretary, said that the talks between Democrats and Republicans over the next round of the coronavirus aid package have resumed. This raised optimism in the market that both parties will reach a consensus soon given Tuesday’s statement of Lagarde in which she reiterated that she had high hopes that both parties will reach a deal by the end of this week. The broad-based greenback’s strength kept weighing on the EUR/USD pair on Wednesday.

Daily Technical Levels

Support Resistance

1.1686       1.1772

1.1630       1.1802

1.1600       1.1858

Pivot Point: 1.1716

EUR/USD– Trading Tip

The bullish bias of the EUR/USD continues to play in the market as the pair is trading at 1.1740 level. On the higher side, the EUR/USD pair may find resistance at 1.1750 level along with a support level of 1.1716 level. A bearish breakout of the 1.1715 level can extend selling bias until the 1.1694 level today. Overall, the price action of the EUR/USD pair will be highly influenced by the series of manufacturing PMI figures not only from the Eurozone but also from the U.S. economy. Bullish bias will be dominant upon the breakout of 1.1750.

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GBP/USD – Daily Analysis

The GBP/USD closed at 1.29232 after placing a high of 1.29424 and a low of 1.28051. Overall the movement of the GBP/USD pair remained bullish throughout the day. The GBP/USD pair continued its bullish streak for the 6th consecutive days on Wednesday despite the broad-based U.S. dollar weakness. The upward momentum of GBP/USD could be attributed to the renewed Brexit hopes and positive comments from Haldane. 

On Wednesday, the U.S. Dollar Index remained flat at 93.92 despite the strong macroeconomic releases on the day. At 17:15 GMT, the ADP Non-Farm Employment Change from the United States rose to 749K against the expectations of 650K and supported the U.S. dollar. At 17:20 GMT, the Chicago PMI also rose to 62.4 from the expected 52.0. At 17:30 GMT, the Final GDP for the quarter showed a contraction of -31.4% in the second quarter against the projected contraction of -31.7%. At 19:00 GMT, the Pending Home Sales for August rose to 8.8% against the forecasted 3.1%. All these positive data from the U.S., but still GBP/USD pair managed to post gains on the back of high Brexit hopes. 

On Wednesday, the Cable moved higher as the latest headlines out of Brexit negotiations were positive. The E.U.’s chief negotiator Michel Barnier praised the improved atmosphere around the post-Brexit deal on Wednesday. The member states ordered France to back down from its demands to secure status quo access to Britain’s fishing grounds. Barnier said that a breakthrough could be made during this week’s round of negotiation as both sides had been able to engage more closely on fishing and state aid issues.

Apart from Brexit renewed hopes, the comments from Bank of England’s chief economist Andy Haldane also provided support to the rising GBP/USD pair. Haldane said that Britain’s economy was being held back by the overly pessimistic views about the coronavirus crisis. He provided some relief when he said that none of the conditions that would lead to negative interest rates had been met. 

It means his comments ruled out the option of negative interest rates in the current period when the country is facing a healthy and robust wave of coronavirus pandemic. These positive comments from Haldane supported British Pound that pushed the GBP/USD pair on the upside for the 6th consecutive days.

From the U.K., the BRC Shop Price Index for the year dropped to -1.6% against the forecasted -1.4% and weighed on Sterling. At 10:59 GMT, the Nationwide HPI for September rose to 0.9% against the forecasted 0.5% and supported the Sterling that added gains in GBP/USD pair. At 11:00 GMT, the Current Account Balance from the U.K. showed a deficit of 2.8B against the forecasted deficit of 1.0B and weighed on British Pound. The Final GDP for the quarter showed a contraction of -19.8% against the forecasted contraction of -20.4% and supported the local currency GBP that ultimately provided added support to GBP/USD pair’s gains on Wednesday. At 11:02 GMT, the Revised Business Investment for the quarter came in as -26.5% against the forecasted -31.4% and supported the upward momentum of the GBP/USD pair.

Daily Technical Levels

Support Resistance

1.2821       1.2902

1.2781       1.2943

1.2740       1.2983

Pivot point: 1.2862

GBP/USD– Trading Tip

The GBP/USD is consolidating with a bullish bias at 1.2875 level, having violated the sideways trading range of 1.2770 to 1.2725 level. Most of the buying trend was triggered amid stronger Sterling and weakness in the U.S. dollar. The Cable has formed an upward channel on the hourly chart that may support the pair at 1.2827 level along with a resistance level of 1.2909 level. Bullish crossover of 1.2900 level can open up further buying room until 1.2998 level today. Let’s consider taking buying trades over 1.2827 level today. 

 

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USD/JPY – Daily Analysis

The USD/JPY pair was closed at 105.436 after placing a high of 105.802 and a low of 105.400. The USD/JPY pair broke its 7-days bullish streak on Wednesday and declined on Wednesday to its lowest level at 105.400. The USD/JPY pair managed to post losses on Wednesday despite the strong macroeconomic data releases from the U.S. 

On the data front, at 04:50 GMT, the Prelim Industrial Production from the United States in August rose to 1.7% from the forecasted 1.5% and supported the Japanese yen that ultimately weighed on the USD/JPY currency pair. The Retail Sales from Japan came in as -1.9% against the forecasted -3.2% and supported the Japanese Yen that exerted weighed on the USD/JPY pair. The Housing Starts for the year came in as -9.1% against the forecasted -10.0% and supported the Japanese Yen. The strong macroeconomic data from Japan pushed the Japanese Yen higher against the U.S. dollar and weighed on the USD/JPY pair.

On Wednesday, the U.S. Dollar Index (DXY) remained flat at 93.92 level but posted monthly gains in September by 2% and losses for the 3rd quarter by 3.5%. The steady U.S. dollar was due to the un-decisive presidential debate. Both candidates Donald Trump and Joe Biden took part in the first of third presidential debate on Tuesday and discussed issues like the coronavirus pandemic, Trump’s leadership, and the U.S. economy along with taxes. However, the debate failed to provide clues about the results of upcoming elections and weighed on the U.S. dollar that dragged the USD/JPY pair’s prices.

Moreover, the renewed hopes about the Stimulus package came under headlines after Steven Mnuchin said that the White House would hold talks with Democrats over the stimulus issue. Meanwhile, the Governor of Federal Reserve, Michelle Bowman, said that economic recovery from the pandemic crisis was bumpy because of the high rate of unemployment and persisting need for support from fiscal and monetary departments of the U.S.   

The President of Federal Reserve Bank of Minneapolis, Neel Kashkari, also called the U.S. economic recovery as grinding and told the lawmakers that it would remain the same unless a dramatic change or sooner than expected breakthrough in vaccine development. He said that to smooth the economic recovery of the world’s largest economy, a dramatic policy change was needed. The above comments from Fed officials also had a role in the downward movement of the USD/JPY pair on Wednesday.

Daily Technical Levels

Support Resistance

105.41      105.82

105.17      105.99

105.00      106.23

Pivot point: 105.58

  

USD/JPY – Trading Tips

The technical side of the safe-haven pair USD/JPY continues to be steady as it’s consolidating with a bullish bias to trade at 105.460 level, and the series for EMA is now extending at 105.750 level. On the lower side, the support holds at 105.300 level. The MACD also supports the bullish bias amid a stronger U.S. dollar and diminished safe-haven appeal. A bullish crossover of the 105.750 is likely to lead the USD/JPY price towards the next resistance level of 106.250. As we can see, the 50 periods EMA is also in support of buying; therefore, we should look for buying trades in the USD/JPY pair. However, bearish trend continuation and violation of the 105.300 level can open further room for selling until 104.900. Good luck!