Currency Analyst since 2010

Forex trading plan for September 8

US dollar kept suffering after American ISM services PMI fell by 4.1 pints to 6-1/2-year low of 51.4 in August. The release reduced the prospects of the Federal Reserve’s interest rate hike on September 21 meeting. The futures market is now pricing only 15% odds of this month’s rate hike.

EUR/USD: German industrial production unexpectedly fell in July by 1.5%. All eyes on Thursday will be on the ECB meeting (11:45 GMT) and Mario Draghi’s press conference (12:30 GMT). The European Central Bank is expected to keep interest rate unchanged, but may extend QE program or adjust its rules to ease a perceived scarcity of bonds available to buy. Most economists surveyed by Bloomberg expect the ECB to make these steps before the year-end. The reason to expect some action from the ECB is low inflation and Brexit, which poses negative risks for the European economy. EUR/USD ran into resistance in 1.1280 area (previous support and now resistance line, 100-week MA). The lack of action from the ECB will make the pair rise to 1.1360. Support is at 1.1200, 1.1170 and 1.1150.

GBP/USD: Despite strong manufacturing PMI released last week, British manufacturing production came in at -0.9%, worse that the forecast of -0.4%. The nation’s industrial production showed better dynamics rising by 0.1%. The Bank of England’s Governor Carney said that the economy is a bit stronger that the BOE forecasted, but underlined that all elements of stimulus can be increased and it is proposed to do so if necessary. GBP/USD returned below 1.3400 and we will likely see more downside. The main support lies at 1.3300, return below this level will open the way down to 1.3225.  

USD/JPY: There was a report from the Sankei newspaper that the Bank of Japan policymakers are divided ahead of the central bank's next meeting on September 20-21. This rumors decrease the possibility of monetary stimulus from the BOJ. Japan will release current account and final Q2 GDP early on Thursday. USD/JPY looks vulnerable for further declines. The target is at 100.75.

AUD/USD: Australian GDP growth turned out to be lower than expected – 0.5% vs. the forecast of 0.6%, while the precious growth was revised down to 1%. On Thursday the nation will release trade balance figures (deficit is expected to narrow). Also watch the publication of China’s trade balance – it usually has a big impact on the market’s risk sentiment. Resistance lies at 0.7700 and 0.7755. Remember that the pair failed to overcome the latter in August. Support is at 0.7650 and 0.7600.

USD/CAD: The Bank of Canada left the benchmark interest rate unchanged at 0.50%, but accompanied its decision with a dovish statement highlighting downside risks for economic growth. Canada’s Ivey PMI missed expectations. USD/CAD recovered from support in the 1.2825 area and may strengthen to 1.2925. Watch oil inventories data from the US on Thursday as Canada’s a big oil exporter.  

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