Forex Market Focus - page 2
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Analysts Prefer Short Positions in USD/JPY
On Monday, the USD/JPY pair had set a new 3-week high at level 95.46. However, Mizuho’s analysts note that the upside just followed market situation, when the volume of positions on futures opened was at the lowest level since 2003. Analysts see only a few signals of top formation so far, nevertheless, the pair evidently stooped before Fibonacci resistance near 95.40. As for trading strategy, Mizuho prefers selling for the most profitable price, adding positions upon confident break of 94.40; the target is set to 93.25, stop loss to 95.40. Currently USD/JPY is found near 94.62.
Scotia Capital: Forex Market Daily Update
EURUSD (1.4145). EUR continues to trade within its well defined 1.3750 to 1.4338 range - see middle chart - and has failed twice to break above. Yesterday, the currency formed an ‘engulfing’ pattern, which hints at a underlying change in sentiment. For now, we expect EUR to continue trading within its range, but continue to believe that before year-end we will see EUR move significantly higher than current levels. ECB council member Papademos tried to ease market concerns today when he commented that due to the way liquidity has been injected into the system, the exit strategy should be relatively easy. However, he also noted that it is still too early for liquidity to be withdrawn. It is notable that European equities have managed to remain in positive territory even after the collapse in Chinese markets. This is one of the few positive signals we see as we move into the North American session.
GBPUSD (1.6380). Sterling is flirting with a downside break of its 50-day moving average of 1.6315, which would be bearish, but continues to trade within its recent range. Mortgage approvals, which tend to be a leading indicator for the housing market, made gains for the fifth consecutive month and are now well above their June 2008 level. Even though they remain well below their 10-year average, the consecutive improvements provide further evidence that at a minimum the UK housing cycle has completed its downturn. We continue to look for a push higher in EURGBP into year-end.
USDJPY (94.95). The yen is a midperformer today, having lost 0.4% against the USD as we move into the North American open. Retail trade in Japan came in worse than expected, declining –3.0% y/y and –0.3% m/m. However, this was essentially offset by a material jump in small business confidence, which climbed back to pre-crisis levels (41.1).
Gold (935.80). Yesterday’s violent downward move in gold, which pushed easily through the 50-day moving average of 942.73 indicates that the bears have regained control of the market and foreshadows further downside ahead.
GBP Rises as Nationwide House Market Becomes Positive
The GBP is rising today consequently to the publishing of positive data on Nationwide House prices. The GBP has recovered its 2-day drop against USD by now. This was also empowered by macroeconomic statistics in Great Britain. House prices have been increasing for 3 months in a row, which inspired the market participants to buy GBP. As for the EUR/GBP pair, sterling has been strengthening its positions for 4 days in a row. House price dynamics improves business and consumer confidence in the country. Probably, GBP will continue rising against the main rival currencies within the next few days.