USD Gained Supported By Improved Data And Market Worries

Oct 22 21, 09:19 GMT

The USD tended to gain against a number of its counterparts yesterday, supported also by lower-than-expected weekly initial jobless claims figure and a higher-than-expected existing home sales figure for September, while the Philly Fed Business Index increased worries for the pace of the US economic recovery as it dropped, implying a slowing economic activity for the area. It should be noted that worries for China’s property sector were still present yesterday which could have made investors more cautious and supported the USD, yet at the same time US stockmarkets seem to remain optimistic and focused on the earnings season. On the other hand, gold’s price tended to remain rather steady yesterday, even edged up despite the strengthening USD and rising US yields. Today we highlight the release of the preliminary Markit PMI figures for October of the Eurozone, UK and the US while on the monetary front Fed Chairman Powell is scheduled to speak along with San Francisco Fed President Daly and could sway the market’s opinion.

AUD/USD dropped yesterday and for a short period even breached the 0.7475 (S1) support line. For our bullish outlook to change however, we would require a clear breaking of the upward trendline guiding the pair since the 6th of October. Please note that the RSI indicator below our 4-hour chart is near the reading of 50 also implying a rather indecisive market. Should the bulls maintain control over the pair’s direction we may see it aiming if not breaching the 0.7540 (R1) which capped the upward movement of the pair during yesterday’s Asian session. Should the bears take over we may see the pair breaking the 0.7475 (S1) support line, the prementioned upward trendline and aim for the 0.7420 (S2) level.

Pound remains rather stable

The pound tended to remain rather stable against the USD yesterday maybe with some slight bearish tendencies, displayed a similar behavior against EUR and dropped against safe haven currencies CHF and JPY. Monetary wise the pound could be supported by the market’s expectations for an earlier tightening of BoE’s monetary policy, despite the tick-down of the headline CPI rate for September. On a fundamental level we note the continuation of supply shortages, while at the same time we also note the rise of coronavirus cases in the UK. Please note that the energy crunch in the UK bites as more energy suppliers seem to face the danger of closing operations. As for financial releases besides October’s preliminary PMI figures we also note the release of UK’s retail sales for September earlier in the morning.

GBP/USD tended to remain rather stable, with slight bearish tendencies, between the 1.3750 (S1) support line and the 1.3875 (R1) resistance line. As the upward trendline guiding cable since the 13th of October has been broken, we switch our bullish outlook in favor of a bias for a sideways movement for the time being. Should a selling interest be displayed by the market, we may see the pair breaking the 1.3750 (S1) support line and aim for the 1.3600 (S2) level. Should buyers be in control of the pair’s direction we may see the pair breaking the 1.3875 (R1) resistance line and aim for the 1.4000 (R2) level.

Today’s events and expectations

Today during the European session we note the release of UK’s retail sales growth rate for September and highlight October’s preliminary PMI figures for France, Germany, Eurozone and the UK. In the American session we get from Canada the retail sales growth rate for August which are expected to accelerate and if so, could provide some support for the Loonie, as well as the preliminary PMI figures for August, while oil traders may be more interested in the release of the weekly Baker Hughes oil rig count. On the monetary front we highlight the speech of Fed Chairman Jerome Powell and San Francisco Fed President Daly.

AUD/USD H4 Chart