Trading plan for Oct. 7
EUR/USD found some support around $1.2500 (psychological level, 74.6% Fibo) and recovered a bit on Monday despite bad data from Europe. Data release showed that German factory orders made a sharp decline of 5.7% in August. Sentix Investor Confidence was also negative. At the same time, US dollar is broadly weaker versus its peers as it’s long overbought, and it’s harder for the USD bulls to push up. Tomorrow watch German industrial production (06:00 GMT) and French budget balance (06:45 GMT) – forecasts are weak, but EUR/USD may hold on as the biggest market mover is the FOMC meeting minutes due on Wednesday. The most important piece of data from America tomorrow will be the speeches of Kocherlakota and Dudley (17:20 and 19:00 GMT) – these are the dovish members of the Fed, so their comments will be potentially USD-negative. We think that the pair will be trading in the $1.2500/1.2650 area. It’s reasonable to sell at the top of this range with stops above $1.2700.
Japanese yen has recovered some ground on Monday: USD/JPY fell back to 109.10 yen in the European trade. Bank of Japan holds its monetary policy meeting on Tuesday. Policy is widely expected to remain unchanged. Markets will pay special attention to the BOJ press conference: will the Central Bank change the tone? We don’t expect too much from this meeting: the economy still remains weak, but, according to the recent speculation, the regulator is more likely to change the terms of achieving the inflation target than the monetary policy. However, any dovish comments will push USD/JPY higher. Resistance lies at 110.00 and 110.60, while support – at 109.10/00 and 108.20.
GBP/USD recovered from the 11-month low of $1.5950, but remains capped by the $1.6000 mark. The short-term picture remains clearly bearish below $1.6050. Great Britain is scheduled to release Manufacturing Production data on Tuesday, 8:30 GMT (forecast 0.2% vs. prior 0.3%). Market participants remain indecisive ahead of the FOMC minutes (Wednesday) and the BOE policy decision (Thursday), but we expect the cable to extend the downside in the coming days. Next support lies at $1.5900 and $1.5840.
AUD/USD recovered from the recent lows, but is still under pressure of the Ichimoku Cloud on H4. The market expects the RBA to sound dovish at its tomorrow meeting. If it does, the pair will test support at $0.8660, $0.8615 and $0.8600 – the base scenario. Resistance is at $0.8665, $0.8830 and $0.8870.