Earnings Season Keeps On Earning

Oct 21 21, 09:32 GMT

USD weakens while US stockmarkets send mixed signals

The USD continued to weaken yesterday against a number of its counterparts experiencing possibly some safe haven outflows as the market sentiment seems to remain positive and as US stockmarkets tended to gain with the exception of Nasdaq which retreated somewhat. It should be noted that US stockmarkets seem to be boosted by better-than-expected earnings reports that are released and today we note Intel’s (#INTC), AT&T’s (#T), PayPal’s (#PYPL) and Unilever’s earnings reports for Q3 among others. On the other hand, gold’s price tended to gain on the back of a soft USD, given also that US yields remained rather stable. Today we note the release of the weekly initial jobless claims figure which is expected to correct a bit higher after last week’s wide drop and we also note the release of the US existing home sales for September a bit later.

USD Index continued to drop yesterday clearly breaking the 93.70 (R1) support line, now turned to resistance. We maintain a bearish outlook for the index as long as it remains below the downward trendline incepted since the 13th of the month. The RSI indicator below our 4-hour chart is currently below the reading of 50 implying a slight advantage for the bears. Should the selling interest be continued we may see the index breaking the 93.20 (S1) support line and take aim for the 92.75 (S2) level. Should USD be in high demand the Index could reverse direction, break the prementioned downward trendline the 93.70 (R1) resistance line and aim for the 94.10 (R2) level.

Commodity currencies on the rise

Currencies such as the AUD and CAD continued to be on the rise, strengthening against the USD supported by high commodity prices and a positive market mood. It should be noted that the CAD gained as oil prices continued to rise, stoked by expectations for stronger demand and a surprise drawdown reported yesterday by EIA regarding last week’s US oil inventory levels. AUD on the other hand seems supported by high commodity prices while some analysts tend to note that the market may expect earlier rate hikes by RBA, hence we expect RBA governor Lowe’s speech today to gain on attention and could affect AUD’s direction. Should the positive market sentiment continue to characterize the markets we may see commodity currencies gaining further.

AUD/USD continued to rise yet corrected lower after reaching a three and a half month high by testing the 0.7540 (R1) resistance line. We tend to maintain a bullish outlook for the pair as long as it remains above the upward trendline steepened since the 18th of October. Please note that the RSI indicator below our 4-hour chart has surpassed the reading of 70, which may imply that the pair is overbought and could correct lower. Should the bulls maintain control over the pair we may see AUD/USD breaking the 0.7540 (R1) line thus paving the way for the 0.7600 (R2) level. Should a correction lower be performed by the pair we may see it breaking the prementioned upward trendline, the 0.7475 (S1) support line and aim for the 0.7420 (S2) level.

Today’s events and expectations

Today in the European session we get from France October’s business climate indicator as well as UK’s CBI Trends for industrial orders , for the month of October as well while later on we get from Turkey CBRT’s interest rate decision. In the American session we note the release of the weekly initial jobless claims figure, the US existing home sales for September as well as the preliminary consumer confidence for October. On the monetary front we note the speeches of Fed Board Governor Waller, and RBA Governor Philip Lowe, while during tomorrow’s Asian session NY Fed President Williams speaking. Also during tomorrow’s Asian session, we get Japan’s inflation data for September as well as the preliminary PMI figures for October from Japan and Australia.

USD Index H4 Chart