Market Overview

USD Under Pressure After Dovish Comments From The Fed

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GROWTHACES.COM Trading Positions

USD/CHF: long at 0.9590. target 0.9750, stop-loss 0.9450

USD/CAD: long at 1.1150, target 1.1290, stop-loss 1.1060

AUD/USD: short at 0.8800, target 0.850, stop-loss 0.8780

NZD/USD: short at 0.7880, target 0.7500, stop-loss 0.8000

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

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EUR/USD higher after dovish comments from the Fed

  • Fed Vice Chairman Stanley Fischer said the effort to finally normalize U.S. monetary policy after years of extraordinary stimulus may be hampered by the global outlook. He added: "In determining the pace at which our monetary accommodation is removed, we will, as always, be paying close attention to the path of the rest of the global economy and its significant consequences for U.S. economic prospects."
  • Chicago Federal Reserve Bank President Charles Evans said a strengthening of the dollar and weak growth abroad could mean slower inflation in the United States, and less justification for the U.S. central bank to raise rates.
  • Kansas City Fed President George (does not vote on the FOMC, hawk) says 2015 is a good time for the Fed to begin removing monetary policy accommodation but subsequent rate hikes should come gradually.
  • European Central Bank Governing Council member Ewald Nowotny the EUR is very likely to keep weakening against other major currencies was due to the difference in the ECB's monetary policy compared to the United States and United Kingdom
  • The EUR/USD opened the Asian session at 1.2635. The USD eased across the board today due to dovish comments from Fed officials on the weekend. The outlook for the EUR/USD is no more so clearly bearish now. We have the turn in Fed expectations following last week's FOMC minutes that was strengthened by dovish comments from the Fed. On the other hand, the weak Euro zone economic outlook will likely limit the EUR upside but the downward trend is losing momentum.

Significant technical analysis' levels:

Resistance: 1.2698 (hourly high Oct 13), 1.2716 (high Oct 10), 1.2733 (hourly high Oct 9)

Support: 1.2638 (200-hma), 1.2605 (low Oct 10), 1.2583 (low Oct 7)

USD/JPY: Yen in demand in limited trading.

  • Bank of Japan Governor Haruhiko Kuroda said the divergence in monetary policy among the world's four largest central banks is justified as they reflect differences in their economic situations. Kuroda reiterated his view that while Japan's economy was headed for a moderate recovery, the central bank would stick to its quantitative easing programme as the country was still only half-way in meeting its 2% inflation target.
  • Japanese markets were closed for a public holiday. The JPY rose to a one-month high against the USD and traded near 11-month peaks against the EUR on Monday. We expect limited trading in USD/JPY and EUR/JPY due to the US and Canada holidays. The nearest strong support level is a 107.00, but the USD/JPY is likely to fall as low as 106.55 (38.2% of 100.81-110.90) over coming days. We are looking to get long at lower levels.

Significant technical analysis' levels:

Resistance: 107.63 (session high Oct 13), 108.15 (high Oct 10), 108.32 (high Oct 9)

Support: 107.06 (low Oct 13), 106.81 (low Sep 16), 106.55 (38.2% 100.81-110.09)

AUD/USD stronger after better-than-expected China's export performance.

  • China's export performance in September beat forecasts. Exports rose 15.3% yoy in September, beating a median forecast for a rise of 11.8% and quickening from August's 9.4% rise. Imports rose 7% yoy, compared to an estimate for a 2.7% fall. China's demand for iron ore in September was up 13.1% from August, while coal imports were up 12.2%.
  • As a result, China posted a trade surplus of USD 31.0 bn in September, down from USD 49.8 bn in August.
  • The AUD is sensitive to data out of China, the biggest buyer of Australian commodity exports. The AUD/USD rose 0.8750 from 0.8650 after the release. We are short on the AUD/USD at 0.8800, but have lowered our stop-loss level to 0.8780. If stop-loss is reached we will be looking to get short again at higher levels.

Significant technical analysis' levels:

Resistance: 0.8785 (high Oct 10), 0.8898 (high Oct 9), 0.8927 (high Sep 23)

Support: 0.8649 (low Oct 13), 0.8641 (low Oct 3), 0.8623 (low Jul 8, 2010)

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