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Daily F.X. Analysis, September 11 – Top Trade Setups In Forex – U.S. Inflation Figures in Highlights

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On the fundamental side, the eyes will remain on the U.S. Inflation and core inflation figures expected to underperform compared to previous figures. In this case, the U.S. dollar may trade with a bearish bias today.

Economic Events to Watch Today  

 

EUR/USD – Daily Analysis

The EUR/USD pair was closed at 1.18143 after placing a high of 1.19173 and a low of 1.17981. The EUR/USD pair rose on Thursday to its highest for 6 days on the back of optimistic comments from the European Central Bank. The currency pair recovered much of its recent losses following the ECB’s policy decision and the weakened US dollar by US job stats.

On the data front, the French Industrial Production was released at 11:45 GMT, and was declined to 3.8% from the forecasted 5.1% and weighed on Euro. At 13:00 GMT, the Italian Industrial Production advanced to 7.4% from the expected 3.6% and supported a single currency that took the EUR/USD pair higher.

The European Central Bank President Christine Lagarde took a modestly upbeat view on Europe’s recovery from a historic recession on Thursday and played down the concerns about Euro’s strength. She also disappointed the hopes for the more stimulus from the European government.

Lagarde signaled higher underlying inflation and slightly upgraded the bank’s 2020 growth forecast on the back of strong rebound inactivity. In response to the latest 8% rise of the Euro against the US dollar, the President of ECB took a benign view on the currency and simply said that the bank would monitor carefully exchange rate movements.

Analysts were highly awaiting this response but these simple comments disappointed them as these were the weakest possible expression of concern. She said that exchange rates will carefully monitor and the matter was being discussed in the governing council. Investors had expectations of tougher language but the simple comments that were keen to avoid a currency war actually firmed the Euro. The ECB’s rate-setting Governing Council said that they judged that the currency was broadly in line with economic fundamentals and they feared any hint of a currency war with the United States.

In response to deflation concerns, the ECB President Lagarde said that deflation pressures had eased since June and that the weak inflation levels could be attributed to low energy prices. And for the high value of the Euro, she said that there was no need for the markets to overreact to the currency gains.

With the strong Euro amid hawkish comments from ECB, the EUR/USD pair rose above 1.191 level on Thursday.

Meanwhile, the US dollar was also weak onboard that added further strength in the pair’s gains. At 17:30 GMT, the Unemployment Claims from the previous week rose to 884K against the expected 838K and weighed on the US dollar. The rise in unemployment benefit claims raised concerns for economic recovery and weighed on local currency and gave support to the EUR/USD pair.

However, the gains in the EUR/USD pair failed to hold position and dropped in the late trading session and lost most of its gains on the back of rising concerns over the coronavirus cases. Western Europe surpassed the US in new daily COVID-19 infections and was re-emerging as a global hot spot after bringing the pandemic under control in the summer. 

The rising coronavirus cases in European countries exerted negative pressure on the local currency due to economic recovery concerns and the pair reversed its direction.

Daily Technical Levels

Support Pivot Resistance
1.1770 1.1844 1.1888
1.1726 1.1962
1.1653 1.2006

EUR/USD– Trading Tip

The EUR/USD continues to trade at 1.1835 level as the ECB decided to leave it’s interest rate unchanged in its monetary policy meeting. On the higher side, the pair may find resistance at 1.1839 level, and above this, the pair may find the next resistance at 1.1860 level along with support at 1.1828 level. Below 1.1828, the EUR/USD may find the next support at 1.1797 and 1.1755 level.

GBP/USD – Daily Analysis

The GBP/USD pair was closed at 1.28051 after placing a high of 1.30350 and a low of 1.27724. Overall the movement of the GBP/USD pair remained bearish throughout the day. The GBP/USD pair moved on a track for its biggest weekly fall in nearly six months on Thursday as the European Union threatened to pursue legal action against the U.K. if it proceeds with the bill that aims to undermine the Brexit-withdrawal agreement.

The GBP/USD pair fell by 1.56% on Thursday to its lowest since July 27. The E.U. demanded the British government drop its internal market bill by the end of the month or risk jeopardizing negotiations and legal action.

The U.K. government published the internal bill on Wednesday that seeks to create common rules that apply across the U.K., including England, Northern Ireland, Scotland, and Wales. 

The bill would likely clash with the terms agreed on Withdrawal agreement requiring that Northern Ireland follow E.U. rules in the post-Brexit period to avoid a hard border with the Republican of Ireland. However, The Cabinet minister Michael Gove insisted the U.K. will not withdraw the bill. Prime Minister Boris Johnson has already said that the U.K. will leave the E.U. without a deal if Europe and the U.K. failed to reach an agreement by October 15. If no-deal is secured by then, the U.K. will follow the World Trade Organization’s trade rules. 

The hopes of any progress in upcoming Brexit-deal talks faded after the E.U.’s latest threat, and the hopes for a “hard Brexit” have increased. This weighed heavily on GBP/USD pair on Thursday, and the pair fell to its multi month’s low level.

On the data front, at 04:01 GMT, the RICS House Price Balance rose to 44% against the forecasted 23% and supported GBP/USD pair. At 06:30 GMT, the C.B. Leading Index dropped to -0.3% in July from the previous 0.0%. From the U.S. side, the Core PPI in August rose to 0.4% from the forecasted 0.2% and supported the U.S. dollar that added further pressure on GBP/USD pair. The Producer Price Index in August rose to 0.3% against the projected 0.2% and supported the U.S. dollar that added in the losses of the GBP/USD pair on Thursday. At 19:00 GMT, the Final Wholesale Inventories in July came in as -0.3% against the projected -0.1% and supported the U.S. dollar that took the GBP/USD prices further towards the downside.

 Daily Technical Levels

Support Pivot Resistance
1.2706 1.2871 1.2969
1.2608 1.3134
1.2443 1.3232

GBP/USD– Trading Tip

The GBP/USD traded sharply lower at 1.2843 level, and now it’s forming a Doji candle, which may trigger buying in the GBP/USD pair. On the higher side, the Sterline may soar to target 1.2928 level, and even above this, the next target for Sterling can be 1.3033 level. The MACD and EMA are still supporting a selling bias; therefore, we should be looking to take selling entry below 1.2928 level today. 

USD/JPY – Daily Analysis

The USD/JPY currency pair stopped its early-day bearish rally and drew some modest bids around above 106.20 level, mainly due to the risk-on market. However, the positive tone around the equity market was supported by the news of receding tension between India and China, and Tokyo’s optimism over easing lockdown restriction also favor the market trading sentiment, which eventually undermined the Japanese yen currency and contributed to the currency pair gains. 

The broad-based U.S. dollar weakness, in the wake of low safe-haven demand, becomes the major factor that kept the presure on any further gains in the currency pair. Meanwhile, the on-going US-China tussle over several issues, the risk of a no-deal Brexit, and delay in the U.S. stimulus keep challenging the market trading sentiment, which might cap further gains in the currency pair. The USD/JPY is trading at 106.19 and consolidating in the range between 106.08 – 106.20.

The market trading sentiment was bolstered by optimism over a possible vaccine and treatment for the highly infectious coronavirus. After the Goldman Sachs, these hopes fueled that Pfizer’s candidate said that Pfizer’s candidate vaccine could be approved as early as October. In the meantime, the news of receding tensions between India and China and the optimism over the easing coronavirus (COVID-19)-led lockdown restrictions also boosted the market trading sentiment. This in, turn, undermined the safe-ave Japanese yen and extended support to the currency pair. 

The reason for the upbeat sentiment could also be associated with record recovery in the BSI Large Manufacturing Conditions Index for the third quarter (Q3). The record recovery in the BSI Large Manufacturing Conditions Index for the third quarter (Q3), from -44.2 expected and -52.3 before +0.1, citing that the Japanese economy is up for a strong recovery. 

Across the ocean, the market trading sentiment rather unaffected by the intensified US-China tussle and Brexit issue. The Trump administration continues to keep TikTok on the sellers’ radar. In the meantime, the cancellation of over 1,000 visas of Chinese residents also irritates China. 

Also capping the gains could be the headlines suggesting that the Tokyo metropolitan government lowered its coronavirus alert by one level to 3 on Friday. This might underpin the local currency and dragged the currency pair down. The Japanese yen currency might also take clues from the Producer Price Index (PPI) data for August that recovered to -0.5% from -0.9% YoY.

The traders will keep their focus on the U.S. Consumer Price Index (CPI) for August, which is expected 1.2% against 1.0% YoY. Moreover, the updates surrounding the Sino-US tussle, as well as Brexit related headline, could not lose their importance.


Daily Technical Levels

Support Pivot Resistance
105.9700 106.1400 106.3000
105.8200 106.4600
105.6500 106.6200

USD/JPY – Trading Tips

The USD/JPY is consolidating at 106.050, with a resistance mark of 106.480 level. An upward crossover of 106.480 level may extend further buying trend until the 106.840level, and the violation of this level can extend buying until the next resistance level of 107.150. On the downside, the safe-haven USD/JPY currency may gain support at 105.620 and 105.280. Let’s consider taking a sell trade below 106.024 level as the MACD and RSI also suggest selling bias. Good luck! 

 

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