Daily Key points: USD continues to reign supreme

The greenback tended to remain at elevated levels against its counterparts despite some retreats here and there with the market cautiousness still being present and providing support for the US currency. Across the Pacific though the Japanese Government seems about to take decisive steps in order to support the JPY as Reuters reported Japan’s finance minister Suzuki stating that “It’s important for currencies to move stably, as sharp and one-sided moves are undesirable,“. It should be noted that the Japanese Government had allready performed a market operation to defend its currency, yet the effects quickly fizzled out allowing the JPY to retreat once again to record low levels against the USD. Should Japan perform another market intervention operation, we may see it increasing it’s size in an attempt the intensify the “shock and awe” effect for the markets, yet the effect may prove to be short lived once again as the root of JPY’s weakness lays with BoJ’s ultra loose monetary policy settings that have not altered. Also we would like to make a special comment for RBA’s interest rate decision, the bank is expected to hike rates which theoretically could provide some support for AUD yet should the bank sound dovish or imply that future rate hikes may be smaller in size, the Aussie may weaken. On the other hand should the bank proceed with a rate hike wider than the 25 basis points currently expected we may see the Aussie getting some support.

AUD/USD seems to show some signs of stabilisation between the 0.6360 (S1) and the 0.6530 (R1) levels. Yet for us to change our bearish outlook in favour of a bias for a sideways movement we would require a clear breaking of the downward trendline guiding the pair. Should the bears maintain control over the pair we may see it breaking the 0.6360 (S1) support line and take aim for the 0.6255 (S2) support level. On the other hand should the bulls take over, we may see AUD/USD breaking the prementioned downward trendline in a sign of a trend reversal, break the 0.6530 (R1) resistance line and take aim of the 0.6660 (R2) level.

USD/JPY remained stable just below the 145.00 (R1) resistance line. We tend to maintain a bias for a sideways movement for the pair yet some slight bullish tendencies seem to be present, given that the RSI indicator is above the reading of 50. On the other hand the narrowing of the Bollinger bands highlights the lower volatility for the pair. Should the pair actually find fresh buying orders along its path we may see it breaking the 145.00 (R1) resistance line and aim for the 147.50 (R2) resistance level. On the other hand should a selling interest be expressed by the market we may see the pair breaking the 142.80 (S1) on its journey southwards.

Other highlights for the day:

Today in the European session we get Switzerland’s CPI rates for September, Turkey’s CPI rates for the same month, Germany’s, Eurozone’s and UK’s manufacturing PMI figures for September and in the American session we get from the US and Canada the S&P manufacturing PMI figure for September as well as the US ISM manufacturing PMI figure for the September.

As for the rest of the week:

On Tuesday we get from Japan Tokyo’s CPI rates for September, Australia’s building approvals for August, RBA’s interest rate decision and in the American session we note the release of the US factory orders for August. On Wednesday we note the release of Australia’s services PMI figure for September, the Jibun Bank services PMI figure for September, from New Zealand RBNZ’s interest rate decision, France’s, Germany’s the Eurozone’s, UK’s and the US S&P PMI figures while from the US we also get the ISM non manufacturing PMI figure for September and the EIA weekly crude oil inventories figure. On Thursday we note Australia’s trade data for August, Germany’s industrial orders for August, Sweden’s GDP for August and from the US the weekly initial jobless claims figure. On Friday we get Germany’s industrial output for August, the US employment report for September as well as Canada’s employment data for the same month.

AUD/USD H4 Chart

Support: 0.6360 (S1), 0.6255 (S2), 0.6120 (S3)

Resistance: 0.6530 (R1), 0.6660 (R2), 0.6765 (R3)

USD/JPY H4 Chart

Support: 142.80 (S1), 140.80 (S2), 139.05 (S3)

Resistance: 145.00 (R1), 147.50 (R2), 150.00 (R3)

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