Forex trading plan for October 23
The euro slumped on dovish comments of the ECB’s president Mario Draghi on Thursday. Draghi said that the ECB would keep conducting quantitative easing (QE) until September 2016 or longer if necessary. According to Draghi, there is no shortage of the bonds for the ECB to buy. The main bearish statement, which gave such force to the bears, was that the central bank discussed the possibility of the deposit rate cut at its meeting. EUR/USD found some support at 1.1170 (100-day MA). The trend line support since August was breached and now acts as strong resistance in the 1.1250 area. We recommend selling the euro on the pullbacks up. Further support is at 1.1125 and 1.1100 ahead of 1.1015. The euro zone’s flash October manufacturing and services PMIs will be released on Friday (07:00-08:00 GMT). The forecasts project a slight decline in readings.
Also note, that the US dollar was strong not only versus the euro, but also against British pound and Japanese yen, as American unemployment claims were at their best readings since 2000. GBP/USD tried to rise above 1.5500 on bright national data: UK retail sales jumped by 1.9% in September (forecast: +0.3%), though August change was revised down to -0.4%. However, after the US data releases cable fell to 1.5400. A close below this level will significantly reduce the possibility of the break to the upside. Focus is on 1.5380 and 1.5330 (200-day MA) on the downside.
USD/JPY rose above 120.00, but is going to face a very serious resistance in the 120.90/121.00 zone. Support is at 120.00 and 119.60. AUD/USD was holding above an important support at 0.7200 as the ECB meeting improved the market’s risk sentiment. However, the pull back up may be limited by resistance at 0.7280/0.7300.