Market Overview

Dovish Draghi, Strong US Data, Weak EUR

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GROWTHACES.COM Trading Positions:
GBP/USD: long at 1.6320, target 1.6540, stop-loss 1.6210

EUR/CHF: long at 1.2085, target 1.2160, stop-loss 1.2045

USD/JPY: long at 108.45, target 110.50, stop-loss 107.70

EUR/USD: Dovish Draghi, strong US data, weak EUR

(we stay aside, our bullish bias is under pressure)
•The governor of the ECB Mario Draghi warned that heightened geopolitical tensions could dampen business and consumer confidence. In his opinion sanctions imposed on and by Russia as a result of the Ukraine conflict had so far been limited in their impact on the euro zone economy. Draghi reiterated: "We stand ready to use additional unconventional instruments within our mandate, and alter the size or composition of our unconventional interventions should it become necessary to further address risks of a too prolonged period of low inflation."
•Yesterday's data highlighted the diverging economic outlook for the Euro zone and the USA. While German business sentiment fell again in September to its lowest level since April 2013, sales of new U.S. single-family homes surged in August to their highest level in more than six years. US new home sales jumped 18.0% mom to a seasonally adjusted annual rate of 504k, the highest level since May 2008.
•Dovish comment from Draghi, weak Euro zone data and better US numbers resulted in the EUR/USD weakness. The EUR/USD hit today's low at 1.2696 during Asian session. We expect profit take bids around 1.2700/10. Our bullish bias is under pressure. Comments from central bankers and yield differentials are supportive for the USD.

Significant technical analysis' levels:

Resistance: 1.2816 (low Sep 22), 1.2864(high Sep 24), 1.2872 (10-dma)

Support: 1.2661 (low Nov 13, 2012), 1.6267 (low Sep 7, 2012), 1.2561 (low Sep 6, 2012)

NZD/USD under pressure after RNBZ's chief comments

(no positions are justified from the risk/reward perspective)
•One of the biggest movers in the currency market was the NZD. Our long position was risky, based mainly on technical situation of the chart and the rate has reached the stop-loss at 0.8000. We are flat on the NZD/USD.
•The NZD fell after Reserve Bank of New Zealand Governor Graeme Wheeler stepped up his rhetoric against kiwi strength. He said: "The Bank's analysis indicates that the real exchange rate is well above its sustainable level, and also above levels justified by short-term business cycle factors." Wheeler said the currency's fall in recent months didn't adequately reflect the sharp decline in prices of dairy products, a key export earner for the agriculture-based economy.
•The statement comes days before the central bank releases figures on its currency reserves for August (Monday). A big drop in the kiwi during illiquid trading triggered rumours that the RBNZ may have entered the market to sell the currency.
•The central bank governor did not directly touch on whether the RBNZ had been intervening in currency markets to lower the kiwi's value, but suggested that some conditions for such action have been met. He said: "Unjustified and unsustainable are important considerations in assessing whether exchange rate intervention is feasible. Another consideration is whether conditions in the foreign exchange markets are conducive to intervention having an impact on the exchange rate."

Significant technical analysis' levels:

Resistance: 0.8000 (psychological level), 0.8076 (high Sep 25), 0.8094 (high Sep 24)

Support: 0.7915 (high Sep 5, 2013), 0.7883 (low low Sep 6, 2013), 0.7856 (low Sep 5)

GrowthAces.com is an independent macroeconomic research consultancy for traders. We offer you daily forex analysis with forex trading signals. The service covers forex forecasts and signals for following currencies: EUR, USD, GBP, JPY, CAD, CHF, AUD, NZD as well as emerging markets. Our subscribers should expect to receive: forex trading strategies, latest price changes, support and resistance levels, buy and sell forex signals and early heads-up about the potential fx trading opportunities. GrowthAces.com offers also daily macroeconomic fundamental analysis that enables you to see fundamental changes on forex market. We provide in-depth analysis of economic indicators resulting from knowledge, experience, advanced statistics and cutting-edge quantitative tools.

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The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

 

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