Daily FX Brief, October 02 – Major Trade Setups – Weaker Dollar Sentiment Prevails!

The Greenback retreated 0.2% from a two-year high to 99.15 on Tuesday, as data suggested that U.S. manufacturing activity contracted at the quickest pace in a decade. The euro gained 0.3% to $1.0934, while USD/JPY slid 0.3% to 107.75.

The British pound tested a day-low of $1.2207 before bouncing back to close flat on the day at $1.2292. Media reported that European Union leaders have considered offering the U.K. a concession on Brexit that could set an expiration date on the contentious Irish backstop. The Markit U.K. Manufacturing PMI rose to 48.3 in September (vs. 47.0 expected) from 47.4 in August. Whereas, the U.S. ISM manufacturing PMI figures fell dramatically, triggering a sharp sell-off in the U.S. dollar.

Economic Events to Watch Today

Let’s took at these fundamentals

 

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EUR/USD – Daily Analysis

The EUR/USD currency pair consolidates in the narrow range and maintains 0.32% increases. Prominently, the pair may take bids on them today due to the increasing possibilities of the rate cut by the Feral Reserve and the intensified United States slowdown fears.

The United States Insitute of Supply Managements was closely-observed yesterday. The manufacturing index dropped to 47.8 during the month of September. Its the weakest range since the month of June 2009. Besides this, the gauge contracted for the 2nd-consecutive month, confirming the fact that the continuing trade war with the dragon nation is damaging the United States economy lower.

Yesterday’s economic data has propped the U.S. economic slowdown fears, forcing markets to price in the possibility of further rate cuts by Federal Reserve in October. 

Today, the Greenback may trade further lower if the United States ADP employment change which is due to release at 12:15 GMT, release against the estimated number. Consequently, the EUR/USD may hit a high level of 1.10, as suggested by the flag breakout on technical charts. 

Daily Support and Resistance

S3 1.079

S2 1.0854

S1 1.0893

Pivot Point 1.0918

R1 1.0957

R2 1.0982

R3 1.1046

EUR/USD – Trading Tips

On Wednesday, consider staying bearish below 1.0918 level as the EUR/USD has formed a tweezers top pattern on the 4-hour timeframe. 

On the lower side, one should look for a target of 1.0880 and 1.0820. 

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USD/JPY – Daily Analysis

USD/JPY was opened on Tuesday at 108.070 and had shown a bearish trend. The U.S. Dollar on Tuesday fell because of drop-in ISM Manufacturing PMI to a 10-year low point.

The highlight release on Tuesday, ISM Manufacturing PMI came in lower than expected increased the fear of the U.S. falling into recession because of Prevailing US-China Trade war’s impact on the domestic economy.

After the weak economic results from the United States on Tuesday, Donald Trump blamed the Federal Reserve for a strong Dollar in his tweet that the Fed has no clue that they are their enemy.

The weak PMI indicated that economic activity in the U.S. manufacturing sector was reserved in September. The data showed that PMI dropped to a 10-Year low of 47.8 from the previous month’s 49.1.

From Japan Side, at 4:30 GMT, the Unemployment Rate came as 2.2% against 2.3% in favor of Japanese Yen. At 4:50 GMT, Tankan 

Manufacturing Index and Tankan Non-Manufacturing Index came as 5 and 21 against expected 1 and 20 respectively. They were also in favor of the Japanese Yen.

However, the Final Manufacturing PMI from Japan at 5:30 GMT came as 48.9 against 49.3 expectations. Like the U.S. and other countries, Japanese PMI also showed a drop in economic activities in September.

The USD/JPY showed a downward movement of 0.2% on Tuesday and placed a low of 107.625; it is currently moving at 107.761.

Daily Support and Resistance

S3 107.13

S2 107.56

S1 107.82

Pivot Point 108

R1 108.26

R2 108.44

R3 108.87

USD/JPY – Trading Tips

The USD/JPY is likely to trade mostly lower as the pair has violated the bullish channel at 108.200. On the lower side, the support stays at 107.300, which is why I will be looking to take sell positions below 108 level to target 107.400.  

 

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GBP/USD – Daily Analysis

 The GBP/USD currency pair hit the bearish track and dropped by 0.2% to 1.2280, ahead of U.K. Prime Minister Boris Johnson who is ready to announce his last and final Brexit deal/offer to the European Union during this day. Meanwhile, he clearly said that Britain would not talk anymore if the agreement is not engaged and will leave on October 31.

It should be noted that the greenback overall weakness couldn’t send the GBP/USD sellers far away due to new headlines from the U.K. left bearish pressure on the cable pair. By the way, the currency pair is presently trading around 1.2290.

The United Kingdom PM Boris Johnson has a strong attitude about the Brexit final date October 31. Still, at the same time, the PM is hoping for additional effort to extend the British Parliament. 

Apart from this, the intensified fears and anxiety of the economic recession are likely to keep investor’s focus on the Federal Reserve Bank of New York President John Williams’ speech for further clues about the Fed policy ahead. Whereas the September’s ADP Employment Change is expected 140,000 against 195,000 prior and it’s also one of the highlights today.

Daily Support and Resistance    

S3 1.2008

S2 1.2143

S1 1.2217

Pivot Point 1.2279

R1 1.2352

R2 1.2414

R3 1.2549

GBP/USD – Trading Tips

The GBP/USD pair is finishing the Asian session in a bearish mode, falling over from 1.2330 to 1.2250. The sideways trading range market is keeping the cable in between 1.2335 to 1.2235 zone. 

The MACD and RSI are mixed due to a series of mixed fundamentals. On one side, the GBP/USD is turning bullish over a weaker dollar, and on the other hand, bears are shorting GBP to avoid uncertainties coming from Brexit. 

Consider staying bearish below 1.2330 to target 1.2250. In the case of a bearish breakout, the GBP/USD pair can drop further towards 1.2185.

All the best!