Daily F.X. Analysis, October 05 – Top Trade Setups In Forex – Eyes on Eurogroup Meetings! 

The Asian sessions exhibit thin volatility as Chinese banks are closed in observance of National Day. However, the European and the U.S. session may drive some volatility on the back of Services PMI, Euro-group Meetings, and ISM Non-manufacturing PMI data. Let’s keep an eye on them today.

Economic Events to Watch Today  

 

 

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EUR/USD – Daily Analysis

The EUR/USD pair was closed at 1.17160 after placing a high of 1.17488 and a low of 1.16955. . On Friday, the EUR/USD currency pair posted losses on the back of a strong U.S. dollar and weak Euro due to declining Consumer prices in many countries of the European Union. 

The 19-nation Eurozone saw a decline in Consumer prices on Friday more than forecasted in September and kept the pressure on the European Central Bank over the decision to add further stimulus help in the economy for fighting against the coronavirus crisis. At 11:45 GMT, the French Gov Budget Balance was released that showed a deficit of -165.7B against the previous decline of -151.0B. At 12:00 GMT, the Spanish Unemployment Change showed that the unemployment was reduced by -26.3K figure against the forecasted positive 59.5K and helped Euro gained strength. 

At 14:00 GMT, the Flash estimate for the year of Consumer Price Index for the whole Eurozone declined to -0.3% against the forecasted -0.1% and weighed on Euro. The Core CPI Flash estimate for the year also declined to 0.2% against the forecasted 0.5% and weighed on Euro. The weak inflation rate from Eurozone could be attributed to many reasons, including the temporary sales-tax cut in Germany, subdued demand, and the declining import costs due to the appreciation of the Euro.

The President of the European Central Bank (ECB), Christine Lagarde, has already warned that the region’s prices will slip in the months coming ahead, but she also said they would turn up again in early 2021. The ECB is currently looking to adjust its target inflation of 2% as part of its strategic review as the average inflation in 2022 is projected as 1.3%, which is far below its goal.

Many policymakers have started to lay the ground for further support from the government as one of the executive members of ECB said that there was less risk in delivering too much support than delaying and being shy to deliver. The ECB Vice President Luis de Geindos said last week that there was no need to immediately take any decision; however, in time of need, the Bank could recalibrate its 1.35 trillion euros emergency bond-purchase program. There are also some predictions that this program will be increased by 350 billion euros this year in December. All these things kept the Euro currency under pressure on Friday and added weight on EUR/USD pair prices.

The U.S. dollar was strong across the board after releasing the Unemployment Rate and Revised Consumer Confidence report. At 17:30 GMT, the U.S. job loss rate declined to 7.9% in August against the projected 8.2% and supported the U.S. dollar. The Revised UoM Consumer Sentiment rose to 80.4 against the anticipated 78.9 and supported the U.S. dollar. The U.S. dollar’s strength was also supported by the news that U.S. President Donald Trump and his wife were diagnosed with coronavirus. The U.S. Dollar Index rose to 93.918 level in late Friday after this news raised the safe-haven appeal and the U.S. dollar gained due to its safe-haven status and weighed on EUR/USD pair.

The pair was also down due to low-risk sentiment and declining U.S. stocks that fell sharply after the news that Trump and First Lady tested positive for COVID-19. The S&P 500 futures were down by 1.3%, the Dow Futures were down by 1.2%, and the NASDAQ was down by 1.8%; this weighed further on EUR/USD pair on Friday.

Daily Technical Levels

Support Resistance

1.1724     1.1739

1.1715     1.1745

1.1709     1.1754

Pivot point: 1.1730

EUR/USD– Trading Tip

The EUR/USD is trading over a resistance become a support level of 1.1728 level. Above this level, the EUR/USD can soar until the next resistance level of 1.1740 and 1.1760. Conversely, a bearish breakout of 1.1720 can lead EUR/USD pair towards 1.1711 areas. Let’s keep an eye on the Eurogroup meeting to determine further trends in the market. The bullish bias remains dominant today.

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GBP/USD – Daily Analysis

The GBP/USD pair was closed at 1.29345 after placing a high of 1.29538 and a low of 1.28364. The GBP/USD pair remained positive throughout the day on the back of rising hopes that this weekend there might be a breakthrough in the Brexit deal as PM Boris Johnson and ECB President Ursula Von der Leyen are set to meet.

Pound investors see this weekend meeting as a positive sign for the Brexit deal and raised the British Pound value on renewed hopes that this meeting will provide some fresh hopes on the Brexit deal. However, the gains remain limited as there were many uncertainties in the market weighing on the riskier assets.

During the late-night Thursday, the news that U.S. President Donald Trump and his wife, First Lady, tested positive for COVID-19. The uncertainty related to the U.S. President and a candidate for the upcoming U.S. Presidential Election, Donald Trump’s health, raised concerns that it might cause the election’s complications.

Although the U.S. dollar gained in this uncertainty due to its safe-haven status, the gains remain limited and failed to reverse the GBP/USD pair’s an upward trend as the issue affects the U.S. in particular. So, in this situation, investors found other safe-havens like the Japanese Yen comparatively more appealing.

On the data front, the highly awaited Average Hourly Earnings for September declined to 0.1% on Friday against the forecasted 0.5% and weighed on the S.U. dollar. The Non-Farm Employment Change revealed that the U.S. created only 66K jobs in September projected as 900K and weighed heavily on the U.S. dollar. In August, the factory orders of the U.S. also fell to 0.7% from the projected 1.5% and weighed on the U.S. dollar.

Due to negative macroeconomic data, the weak U.S. dollar added further support to the rising GBP/USD prices on Friday. Meanwhile, the pair GBP/USD remained supported by the progress being made in the Brexit process and the U.S. Presidential Elections. The hopes in the market raised that weekend talks could lead to a breakthrough or approve further months of negotiations due to comments that progress has been made, but some significant gaps were still there. 

If some more time is provided for negotiations, then the Brexit deal might get approved, and that is why investors were cheering the news of a meeting between Johnson and Ursula. Furthermore, the GBP/USD pair’s gains were capped by the rising number of coronavirus cases in the U.K. U.K. reported roughly 12,900 cases in a single day that was the biggest daily record that raised fears that a full lockdown could be imposed in the U.K. The U.K. has already imposed a lockdown in some areas, and fears for further restrictions capped further gains in GBP/USD pair. The investors will look forward to Bank of England’s Haldane’s speech on Monday to find fresh clues about the pair’s movement.

Daily Technical Levels

Support Resistance

1.2912     1.2948

1.2896     1.2968

1.2876    1.2984

Pivot point: 1.2932

GBP/USD– Trading Tip

The GBP/USD is holding below a strong resistance level of 1.2954 level after violating the narrow trading range of 1.2835 – 1.2810. Above this resistance level of 1.2954, the GBP/USD may go after the 1.3000 level. The leading technical indicators such as 50 periods EMA and MACD suggest bullish bias in the Sterling; however, the recent closings below the 1.2950 level can drive selling bias until the 1.2885 level today. Consider taking selling trade below 1.2955 level or buying above the same level today. 

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USD/JPY – Daily Analysis

The USD/JPY pair was closed at 105.361 after placing a high of 105.664 and a low of 104.941. Overall the movement of the USD/JPY pair remained bearish throughout the day. The pair USD/JPY fell to its seven days lowest level on Friday amid the U.S. President’s shocking news being infected with the coronavirus. In the early trading session on Friday, the pair suffered heavy selling bias; however, during the late trading session, the pair recovered most of its daily losses but remained bearish all day.

On the data front, at 04:30 GMT, the Unemployment Rate from Japan remained flat with 3.0% expectations in August. 

At 04:50 GMT, the Monetary Base for the year from Japan raised to 14.3% from the forecasted 11.9% and supported the Japanese Yen. The Consumer Confidence from Japan was released at 10:00 GMT that raised to 32.7 from the projected 31.6 in September and supported the Japanese Yen. The strong JPY weighed on the USD/JJPY pair, and the pair started to decline on Friday.

However, the pair was already under pressure due to Trump’s late-night announcement being infected by COVID-19. He twitted that he and the Frist Lady of the U.S. were tested positive for coronavirus. This news kept the uncertainty higher in the market as the 2020 U.S. Presidential Elections were coming, and an influencing candidate fell sick of coronavirus. The news came in hours after a top adviser to U.S. President Donald Trump was tested positive for COVID-19.

The bullish bets in the Japanese Yen caught up after this news as the issue was related to the United States and investors found the Yen more appealing. The rising JPY added further pressure on the USD/JPY pair that dropped to its 7-days lowest level. In the late trading session, the U.S. dollar saw some buying that capped some earlier daily losses in the USD/JPY pair on Friday. The U.S. Dollar Index posted gains on Friday with reaching at 93.918 level in the late trading session. The US Stocks also declined on Friday amid the shocking news with S&P futures down by 1.3%, and Dow futures fell by 1.2% along with NASDAQ futures down by 1.8%. 

From the U.S. side, the Average Hourly Earnings for September declined to 0.1% from the anticipated 0.5% and weighed on the U.S. dollar. The Non-Farm Employment Change also dropped to 661K against the projected 900K and weighed on the U.S. dollar. Simultaneously, the Unemployment Rate in August dropped to 7.9% from the forecasted 8.2% that supported the U.S. dollar.

After these releases, the President of Philadelphia Federal Reserve, Patrick Harker, provided his reviews over Fed’s new framework. He said that the employment gap in society would be closed by allowing inflation to move slightly higher. He added that more support would be needed from governments and employers to ensure that lower-income workers could benefit from it. Harker also stressed the need to build an equitable workforce recovery and added that it would not be easy to recover all lost jobs during a pandemic crisis. Harker suggested that a program is needed to help workers provided better jobs and pay. Harker’s positive comments provided some strength to the U.S. dollar that was further supported by the late session positive data release.

At 19:00 GMT, the Revised Consumer Sentiment raised to 80.4 from the projected 78.9 and supported the U.S. dollar. Whereas, the Revised UoM Inflation Expectations came in at 2.6%. These positive updates gave the U.S. dollar strength and capped further losses in the USD/JPY pair.

Daily Technical Levels

Support Resistance

105.34     105.65

105.16     105.78

105.04     105.96

Pivot point: 105.47

USD/JPY – Trading Tips

The USD/JPY is also trading neutral at 105.560 amid thin trading volume and China national holiday today. The downward trendline is extending resistance at 105.560 level on the two-hourly timeframes today. The closing of Doji candles below the trendline is suggesting neutral bias among traders. The technical side of USD/JPY may extend the pair lower towards 105.200, and the series for EMA is now developing support at 105.400 level. On the flip side, the bullish breakout of 105.590 level may lead the safe haven pair towards 105.800. Consider taking buying trade over 105.450 level and selling below the same today. Good luck!