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Wednesday, October 4th
The EUR/USD pair retains its recovery trend for the second day in a row on the back of renewed weakness of the US dollar, backed by recent Fed leadership talks. In Asia the pair came under bullish control, having refreshed its 2-day highs at 1.1800 spot, in wake of speculations on who will take Fed Chair positions, once Yellen’s term expires next year. The market is digesting idea that the next Fed Chairperson could become FOMC member J.Powell, as he looks more ideologically aligned with Trump administration, while remaining more dovish candidate then Mrs. Yellen. However, the pair stalled its upside trend, as political jitters surrounding the Catalan referendum vote are still weighing on the common currency. Today we have plenty of macroeconomic events, such as the ADP Jobs report, US ISM services PMI and speeches of both heads of the regulators, which will be able to provoke fresh wave of speculations regarding divergence between the Fed and ECB during the NA session.
The GBP/USD pair extends its yesterday’s consolidation trend, as the market is awaiting for the UK services PMI, especially after streak of disappointing UK economic results. However, seems that the pair managed to regain its mildly positive tone and bounced off its monthly lows, marked yesterday at 1.3222 level, as US bulls look exhausted this Wednesday on the back of rumors that Fed Chair position may take more dovish candidate then Mrs. Janet Yellen. On the other side, ongoing uncertainty around Brexit negotiations continues to exert negative pressure on the pound. Besides crucial data from the UK economy, investors are also looking forward for such reports as US ADP jobs data and US ISM non-manufacturing PMI. Meanwhile, the main event of this Wednesday remains Fed Chair J.Yellen’s speech, as it will be able to bring some fresh clues regarding one more Fed rate hike at the end of this year.
The NZD/USD pair staged a solid comeback in Asia, leaping higher for about 50 pips on the back of renewed weakness of the greenback. Today the pair bounced off its monthly lows, marked at 0.7149 spot, and now is trading in the region of 0.7180 with its daily tops, touched above the level of 0.7200. Recall, recent weakness of the pair was mainly attributed to higher positions of the US dollar against its main competitors, as markets believe that the Fed will increase its interest rate one more time this year. Adding to this, recent NZ election results are also still exerting negative pressure on the Kiwi. However, seems that the market has put aside rumors of more aggressive Fed monetary policy tightening in response to looming uncertainty over who will be the next Fed Chairperson. On the other side, ongoing weakness around oil prices is limiting pair’s further recovery trend. Looking ahead, today investors’ attention will remain focused on the US ADP jobs report and US ISM services PMI data, while crude oil stockpiles will also be able to bring some impetus during the NA session. Beside the US macroeconomic reports, traders will also pay attention to several Fedspeaks for fresh insights on further Fed monetary policy tightening path.
Today the dollar/yen pair extends its yesterday’s retreat from its 7-week highs, as returned weakness of the US dollar dominates the market at the equator of this week. Yesterday the pair met strong resistance in the region of 113.20 and lost its further upside momentum afterwards, having refreshed its 3-day lows in the vicinity of 112.40. Recent weakness of the pair is mainly attributed to the downside correction of the US dollar, sparked by rumors that Mrs.Yellen could pass Fed Chair position to more dovish candidate. Adding to this, slightly increased cautiousness ahead of the key event of this week, scheduled on Friday, is providing support to safe-haven assets, such as the yen. Looking ahead, today we will have pretty busy NA session, with US ADP jobs report, which is considered as a preview to the key Friday’s jobs report, US ISM non-manufacturing PMI and Fed Chair Janet Yellen's speech, which will be able to set up pair’s next short-term direction during the NA session.
The main events of the day:
UK Services PMI – 11.30 (GMT +3)
US ADP Nonfarm Employment Change – 15.15 (GMT +3)
US ISM Non-Manufacturing PMI – 17.00 (GMT +3)
US Crude Oil Inventories – 17.30 (GMT +3)
ECB President M.Draghi’s Speech – 20.15 (GMT +3)
Fed Chair J.Yellen’s Speech – 22.15 (GMT +3)
Support and resistance levels for the major currency pairs:
EURUSD S. 1.1660 R. 1.1816
USDJPY S. 112.28 R. 113.46
GBPUSD S. 1.3184 R. 1.3314
USDCHF S. 0.9692 R. 0.9806
AUDUSD S. 0.7766 R. 0.7872
NZDUSD S. 0.7117 R. 0.7219
USDCAD S. 1.2443 R. 1.2559
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