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FX Analysis – Technical Outlook (2015-10-19)

by James Chen

Key economic data releases this week:

Monday (19th October):

  • AUD – Reserve Bank of Australia (RBA) Monetary Policy Meeting Minutes

Tuesday (20th October):

  • GBP – Bank of England (BOE) Governor Mark Carney Speaking
  • USD – US Building Permits

Wednesday (21st October):

  • CAD – Bank of Canada (BOC) Monetary Policy Report, Rate Statement, and Press Conference
  • GBP – Bank of England (BOE) Governor Mark Carney Speaking
  • CAD – Energy Information Administration’s (EIA) US Crude Oil Inventories

Thursday (22nd October):

  • GBP – UK Retail Sales
  • European Central Bank (ECB) Minimum Bid Rate and Press Conference
  • CAD – Canada Retail Sales and Core Retail Sales
  • USD – US Unemployment Claims

Friday (23rd October):

  • EUR – French and German Flash Manufacturing and Services Purchasing Managers’ Index (PMI)
  • CAD – Canada Consumer Price Index (CPI) and Core CPI

Technical developments:

  • EUR/USD retreats from major resistance and could seek a further move back down within the current consolidation as the US dollar regains some footing.
  • GBP/USD continues to face key resistance around the 1.5500 level and could begin to retreat once again if that resistance level holds.
  • USD/JPY rebounded after breaking down but continues to face downside risk on any return of global market volatility.

EUR/USD

james-chen-EURUSD-2015-10-19

The past week saw EUR/USD attempting to breach key 1.1450 resistance on a weakened US dollar, but quickly retreating after it briefly broke above that level mid-week, hitting a high just shy of 1.1500. The beginning of this new trading week on Monday initially saw a further retreat for the currency pair as the US dollar continued to regain some of its footing. In the event that EUR/USD remains mired under the 1.1450-1.1500 resistance zone, the currency pair could continue to extend its recent prolonged consolidation, targeting the trading range’s middle support level at 1.1100. Any strong breakdown below 1.1100 could then begin to target the bottom of the consolidation around the key 1.0800 support level. Any sustained re-break above 1.1450 should be met by major resistance around the 1.1700 level.

GBP/USD

james-chen-GBPUSD-2015-10-19

GBP/USD climbed in the past week up to major resistance around the 1.5500 level on continued US dollar weakening, but has not been able to breach that level as of this writing. In the process of last week’s rise, the currency pair broke out above a key downtrend resistance line and two major moving averages – the 200-day and 50-day. In the event that GBP/USD continues to be rejected by the 1.5500 resistance level, the currency pair could likely turn back down towards the 1.5200 level, followed by the 1.5000 psychological support objective further to the downside. Any sustained breakout above 1.5500 should be met by further upside resistance around the 1.5650 level.

USD/JPY

james-chen-USDJPY-2015-10-19

USD/JPY broke down below a key triangle pattern consolidation last week, closely approaching its initial downside support target of 118.00 before rebounding. Despite the rebound, downside risk remains prevalent as volatility continues to threaten the global equity markets. Of technical note, the 50-day moving average has recently crossed below the 200-day moving average, creating a potential “death cross” technical scenario that could presage further downside for USD/JPY in the event of any return to global market volatility and a resulting flight to the yen. The 118.00 level continues to be the major downside target, with any breakdown below 118.00 potentially targeting the 116.00 support level. Short-term upside resistance currently resides around the 120.00 psychological level.

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