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Fundamental Currency Analysis

September 11th, 2014,  Guest post by Jay Hawk at Orbex..

USD: The U.S. Dollar Index is currently up +0.0070 or 0.01% to 84.29 after having traded as low as 84.1760 right after the Asian session opening. Yesterday’s releases had Crude Oil Inventories decline -1.0%, as was widely anticipated, while the Treasury’s 10-year Bond Auction had a yield of 2.54% with a bid to cover ratio of 2.7 versus the previous 2.44% yield and 2.8 ratio. Later today the U.S. Department of Labor releases its Weekly Initial Jobless Claims (306K).  


EUR: The Euro is slightly lower against the U.S. Dollar in Asia today in the wake of yesterday’s Eurozone economic releases. French Industrial Production increased +0.2% versus an expected decline of -0.4% and Germany’s 10-year Bond Auction saw a yield of 1.05% and a bid to cover ratio of 1.4 versus its former 1.08% yield and 1.6 ratio. Today’s releases will have the ECB Monthly Bulletin and a speech in Milan by ECB President Mario Draghi.  


GBP: Sterling is trading steady against the Greenback after today’s Inflation Report Hearings which scrutinized members of the Monetary Policy Committee, including Weale, Miles and Shafik. BOE Governor Mark Carney also gave testimony before Parliament’s Treasury Committee. No significant economic releases are expected out of the UK until next week.  


CHF: The Swiss Franc is trading slightly lower against the U.S. Dollar today in the absence of any significant economic data out of Switzerland.  


JPY: The Japanese Yen extended its losses against the U.S. Dollar today despite this morning’s release of the Japanese BSI Manufacturing Index, which printed at +12.7. This was significantly higher than the previous reading of -13.9 and beat expectations of a -10.3 print.  


AUD: The Aussie rebounded today against the U.S. Dollar after the previous two days’ sharp declines on the back of Australian Employment Change, which showed an increase of +121.0K jobs in August. This was notably higher than the expected increase of +15.2K, although the previous number was downwardly revised to -4.1K from -0.3K. In addition, the Australian Unemployment Rate dropped to 6.1% from 6.4% and beat the analysts’ consensus of a decline to 6.3%.  


CAD: The Loonie is trading lower against the U.S. Dollar today with only one economic release due out later from Canada today, the New Housing Price Index or NHPI (0.2%) for July.    


NZD: The Kiwi is down against the Greenback today after dropping to its lowest level in seven months after the release of the RBNZ’s Official Cash Rate, which was unchanged at 3.5%.The central bank noted that the level of the Kiwi was “unjustified and unsustainable” in their associated Rate Statement.


Highlighted Chart of the Day: USD/JPY  


A daily candlestick chart of the USD/JPY currency pair appears above showing the new recent high made after the descending triangle breakout that targets 107.51. The rate is now well above its rising 200 day Moving Average shown in green, and its 14 day RSI that appears in blue in the indicator box is confirming the rise in overbought territory. (See additional technical analysis in the section below.)


Technical Analysis for the Majors


EUR/USD: The Euro is still consolidating this morning, holding below its psychological 1.3000 level and above key support at the 1.2859 recent low. Its falling 200 day MA now lies at 1.3605, and its 14 day RSI is still oversold at the 22.14 level. Resistance is seen at 1.2957/62 and 1.2987, while support shows at 1.2881/83 and 1.2859/66. Outlook is neutral near term but bearish medium term.


USD/JPY: USD/JPY pushed up to a new recent high at the 106.94 level this morning. Support is seen at 106.47 and 106.03/04, with resistance at 106.94 and 107.18. The rate’s descending triangle pattern breakout of August 19th still suggests an upside target of 107.51. Its 14 day RSI is more overbought this morning at 83.20, and thereby confirms the recent high. The rate remains well above its increasingly rising 200 day MA currently reading at 102.41. Outlook is near and medium term bullish. (See highlighted chart above.)


GBP/USD:  Cable bounced back a bit yesterday from its 1.6058 recent low, rising to 1.6229 before meeting resistance at 1.6232, which is the bottom of last weekend’s as yet unfilled gap. The rate’s 200 day MA is at 1.6746 with an increasingly negative slope. Its 14 day RSI is recovering from considerably oversold levels and now reads at the 26.97 level after confirming the recent low at 1.6058. Resistance shows at 1.6229/32 and 1.6280, with support seen at 1.6156 and 1.6058/63.Outlook isneutral near term butbearish medium term.


USD/CHF:  The Swissy consolidated its gains above 0.9359 this morning after rallying to a new recent high at 0.9395 yesterday. Support is noted at 0.9358/59 and 0.9334, with resistance at 0.9378/79 and 0.9395/96. The rate’s 14 day RSI remains in overbought territory at the 75.00 level after failing to confirm the recent new high, signaling that a correction lower may be forthcoming. The rate remains well above its rising 200 day MA now situated at the 0.8947 level. Outlook is bullish in the near and medium terms.


AUD/USD:  After falling sharply to 0.9111 yesterday, the Aussie recovered to 0.9217 this morning, before selling off again. The rate remains below its former 0.9201 to 0.9504 medium term trading range, with a target of 0.8898. Also, the rate stayed below its rising 200 day MA now at the 0.9228 level, and its 14 day RSI has been correcting its almost oversold condition to now read at the 35.92 level after confirming yesterday’s new low. Support is seen at 0.9111 and 0.9156, with resistance noted at 0.9217 and in the 0.9284/91 region. Outlook is bearish near term and neutral turning bearish medium term.


USD/CAD:  The Loonie remained below its recent 1.1030 high this morning, and above its subsequent reaction low of 1.0933. Resistance is seen at 1.0996 at 1.1030, with support noted at 1.0933/41 and 1.0901. Its 14 day RSI has relaxed into central neutral territory and now reads at the 55.39 level. The rate still trading just above its now flat 200 day MA currently situated at 1.0937. Outlook is neutral near term and turning bullish in the medium term.


NZD/USD: The Kiwi fell to a new recent low at the 0.8181 level this morning. It is declining between the falling upper trendline of its medium term down channel now drawn at the 0.8310 level and its parallel lower support line drawn at 0.8076.  Its 14 day RSI has fallen further into oversold territory at the 23.84 level, and confirmed today’s low. In addition, the Kiwi remains comfortably below its now gently falling 200 day MA at 0.8513.  Support is noted at 0.8181, with resistance seen at 0.8206 and 0.8221. Outlook is now bearish in the near and medium terms.

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