US Dollar Index
The major trend of the US Dollar Index is still down. On Wednesday, the index went to a high of 78.180 before settling at 77.915, which is down by 0.275 compared to the previous day. The low of the week is 77.860. Immediate resistance to the Index is 79.548 (13-Week Moving Average Line), followed by 80.00.
Currently the RSI is pointing downward at 30.62%, indicating that the index is losing its upward (major “upward” retracement) momentum again, which is a weakening US Dollar. We still expecting the RSI to rise to the high of 43% before resuming its major downtrend.
General Market Commentary (October 17, 2007) by MG Financial Group:
Trading in the currency market was mixed in the Wednesday session, with the Greenback holding steady near recent levels against the majors. The Dollar recovered in the afternoon versus the Euro to hover beneath the 1.42-level while bouncing away from the 2.04-mark. Another bout of disappointing US economic data prompted renewed selling in the currency, pushing the dollar to a two-week low versus the Yen at 116.20.
The data releases this morning included key gauges on inflation and the housing market. The September consumer price index was largely inline with expectations. The core CPI figure was unchanged at 0.2% m/m and 2.1% y/y. The headline inflation figure edged up to 0.3% m/m, compared with a 0.1% decline and 2.8% y/y. More importantly, were the release of sharply worse than anticipated housing starts data, which plunged by 10.2%, versus a 2.6% decline from August to 1.191 million units. The report provides no reprieve for rapidly deteriorating conditions in the housing market.
The Fed’s Beige Book, however, provided little clues into the FOMC’s policy decision at the end of the month. The Beige Book noted improved economic activity in early October, albeit at a decelerated pace since August. It remained upbeat on consumer spending, but acknowledged continued weakening in the housing markets. On inflation, the Fed said prices increased, in part due to the Dollar decline.
Traders will exhibit heightened cautiousness heading into this weekend’s G7 Finance Minister’s meeting. US Treasury Undersecretary McCormick said that a key focal point for the meeting will be financial market turmoil. He refrained to comment on whether the Dollar will be a topic at the G7, instead referring to Treasury Secretary’s reaffirmation of the strong dollar policy. We rule out any form of concerted intervention, similar to that of propping up the Euro in 2000. Although we do not anticipate the communiqué to address the Dollar’s broad based slide, post meeting official commentary could trigger volatility in the currency market.
EUR/USD
From the weekly chart, the pair is on a major “upward” move, as indicated by the Long MACD and the Moving Average Lines. This week’s price candle has turned bullish indicating that the pair is again losing its upward momentum in its major downward retracement. The pair continues to remain above the weekly support of 1.4084, with next support at 1.4011 which is the upper band of the upward channel. Immediate weekly resistance is at 1.4300, which is the pair’s historically high. Weekly Stochastic is seen crossing downward at the 80% level, indicating that the pair’s upside is still limited.
From the daily chart, the pair turned bullish again on Wednesday. The pair remains supported at 1.4154, with next support at 1.4065, 1.3972 and 1.3853. Immediate daily resistance is at 1.4300. The Default MACD is showing a down-trend while the two pairs of Moving Average Lines are still indicating an up-trend. Immediate daily resistance is at 1.4200, followed by 1.4300. Daily Stochastic is seen crossing downward at the 60% level, indicating a possible downward move over the next few trading days. This week, we are expecting the pair to make another attempt for a major “downward” retracement.
From the hourly chart, the pair continues to be well-supported at 1.4150 with 1.4240 as its intra-day resistance.
We are still bearish towards the pair. However, due to this weekend’s G7 Finance Ministers’ Meeting, we need to exercise some extra caution.
GBP/USD
From the weekly chart, the pair is on a major “upward” move, as indicated by the Long MACD and the Moving Average Lines. This week the price candle has turned bullish, as the pair moved back above 2.0398, which becomes its immediate weekly support, followed by 2.0250 (13-Week Moving AVerage Line), followed by 2.0140. Weekly Stochastic is seen crossing downward at the 83% level, indicating a gathering of momentum for a major “downward” reracement.
From the daily chart, the pair turned bullish Wednesday. Its immediate daily resistance is at 2.0480, followed by 2.0546. Its immediate daily support is 2.0360, followed by 2.0284 (40-Day Moving Average Line) and 2.0200. The pair’s short-term moving average lines (10 and 40-Day) are still indicating an uptrend. However, the Default MACD is indicating a downtrend. Daily Stochastic is seen at the 61% level.
From the hourly chart, the pair has been ranging between the high of 2.0480-2.0440 region and the low of 2.0280 region since September 28. We are expecting the pair to break the range support, as the pair resumes its major “downward” retracement. The timing will depends on the outcome of the G7 Finance Ministers’ Meeting.
We are still bearish towards the pair, waiting to short the pair when it resumes its major “downward” retracement. However, we need to exercise some caution due to this weekend’s G7 Finance Ministers’ Meeting.
USD/CHF
From the weekly chart, the pair is on a major “downward” move, as indicated by the Long MACD and the Moving Average Lines. However, this week’s bear candle indicates that the pair is still undergoing its secondary downward retracement. The pair met firm resistance at 1.1848. Immediate weekly support is at 1.1770 (Weekly 23.6% Fibo Level), followed by 1.1642. Weekly Stochastic is at the 41% level.
From the daily chart, the pair turned bearish on Wednesday, with immediate daily support at 1.1625, while immediate daily resistance is at 1.1824, followed by 1.1895 (Daily 23.6% Fibo Level) and 1.1935 (89-Day Moving Average Line). Both MACDs are showing an up-trend, while the short-term moving average lines (10-Day and 40-Day Moving Average Lines) are still indicating that the pair is on its major “down” trend. The Daily Stochastic is seen moving downward at the 41% level, indicating the pair may need to do a pullback before resuming its major “upward” retracement.
From the hourly chart, the pair remained supported at 1.1800. However, currently, it has insufficient momentum to reach 1.1880.
We are waiting for the pair to resume its major “upward” retracement and go long on the pair.
USD/JPY
From the weekly chart, the pair is continuing its attempt to crawl back to its upward channel. However, both the Long MACD and the Moving Average Lines are still indicating a down-trend. This week the pair has broken below the 13-Week Moving Average Line (116.88). Next immediate weekly support is at 116.41, followed by 115.60 (Weekly 38.2% Fibo Level). Immediate weekly resistance is at 117.80 (26-Week Moving Average Line), followed by 118.97 (Weekly 23.6% Fibo Level). Weekly Stochastic is continuing its upward move at 83% level.
From the daily chart, the pair continues to be bearish on Wednesday, and is seen supported at 116.57 (Daily 50% Fibo Level) and 116.39 (40-Day Moving Average Line). Immediate resistance is at 117.38, followed by 117.85 (144-Day Moving Average Line) and 118.40 (Daily 38.2% Fibo Level). Its short-term (10-Day and 40-Day) moving average lines have crossed upward indicating its upward move. Both MACDs are also indicating an uptrend. Daily Stochastic is seen at the 42% level.
From the hourly chart, the pair is supported at 116.40, with intra-day resistance is at 117.53.
We continue to be cautious with this pair due to this weekend’s G7 Finance Ministers’ Meeting.
EUR/JPY
On the weekly chart, this week, the pair met firm resistance at the upper band of its upward channel (i.e. 167.89). Its immediate weekly support is at 163.63, followed by 162.94 (13-Week Moving Average Line) and 161.29 (Lower band of the upward channel). Weekly Stochastic is seen crossing downward at 90% level. Watch for a major downward retracement just like EUR/USD.
On the daily chart, the pair continued to be bearish on Wednesday, after meeting firm resistance at 167.00. Its immediate daily support is at 165.16, followed by 164.70 (Daily 23.6% Fibo Level) and 162.05 (Daily 32.8% Fibo Level). Both MACDs are still indicating an upward trend. Daily Stochastic is seen crossing downward again at the 48% level.
On the hourly chart, the pair met firm support at 165.16, with intra-day resistance at 166.45.
We are now bearish towards this pair. Watching to sell on rebound but with caution due to this weekend’s G7 Ministers’ Meeting.
TNT students, please use the updated TNT charting templates that was sent to you on October 14. Any resistance or support levels not found in the charts, please manually update them yourself as we will be sending you the next updated charting templates this coming Sunday.
The above analysis can also be used by our non-TNT students as a guide to their own trading. We welcome feedback from our non-TNT students regarding the effectiveness of this Daily TNT Market Analysis for your trading.
Have a great trading day ahead!
Cheers,
Clarence
Admin of The Forex Club