USD Seems To Recover After Friday’s Drop

Fundamental analysis of Forex market

The USD seemed to recover somewhat against some of its counterparts during todays’ Asian session, after Friday’s wide retreat as uncertainty seems to be on the rise once again. It should be noted that shares in China’s giant developer Evergrande were halted from trading in the Hong Kong stock exchange forcing uncertainty to resurface about the issue in the markets. The uncertainty tended to strengthen the USD during today’s Asian session, while US Stockmarkets seemed to weaken in the premarket hours as the possible ripple effects seem to worry traders. It should be noted though that Dow Jones tended to gain during Friday’s session, as Merck’s Covid 19 pill seemed to provide optimism regarding the US economic recovery. Also, on US fundamentals, we note the possibility of further escalations in the US-Sino relationships which could provide further support for the USD, while traders eye the release of the US employment report for September on Friday. The CAD gained on Friday against the USD as the positive market sentiment tended to provide support for the commodity currency, while local data tended to be lukewarm capping the bull’s action. On the other hand, oil prices edged higher on Friday yet corrected a bit lower during today’s Asian session, as trader’s eyes turn towards the OPEC meeting in order to decide how much oil production levels are to be raised. We note from Australia RBA’s interest rate decision tomorrow and the bank is widely expected to remain on hold at 0.10% while New Zealand’s RBNZ is expected to proceed with a 25-basis points rate hike on Wednesday.

The USD index corrected a bit higher during today’s Asian session yet remains below the 94.10 (R1) resistance line for now. We tend to maintain a bias for a sideways motion currently, as the price action shows signs of stabilisation and given that the RSI indicator below our 4-hour chart is near the reading of 50, implying a rather indecisive market. Should buyers take charge of the index’s direction, we may see it breaking the 94.10 (R1) line which kept the bulls at bay in today’s Asian session and aim for the 94.60 (R2) level. Should a selling interest be displayed by the market, we may see the index aim if not breach the 93.70 (S1) support line.

AUD/USD seems to be aiming for the 0.7280 (R1) resistance line today. We tend to maintain a bullish outlook for the pair as long as it remains above the upward trendline incepted since the 29th of September. Should the bulls actually maintain control over the pairs’ direction, we may see it breaking the 0.7280 (R1) resistance lien and aim for the 0.7335 (R2) resistance level. Should the bears take over, we may see the pair reversing course breaking the prementioned upward trendline and aim if not breach the 0.7225 (S1) support line.

Today’s events and expectations

Today during the European session, we note the release of Turkeys’ and Switzerland’s CPI rates for September while in the American session we get the US factory orders growth rates.

As for the rest of the week

On Tuesday, we get from Japan Tokyo’s inflation data for September, Australia’s RBA interest rate decision, UK’s reserve totals for September, the US and Canada’s trade balances for August and the US ISM non-manufacturing PMI for September. On Wednesday, we get from New Zealand RBNZ’s interest rate decision, Germany’s industrial orders for August, Eurozone’s retail sales for August and form the US the ADP National employment figure for September. On Thursday we get, UK’s Halifax House prices for September, Germany’s industrial output for August and the weekly US initial jobless claims, while from Canada BoC Governor Macklem is scheduled to speak. On Friday, we get Japan’s current account balance for August, Germany’s trade data for August, the US employment report for September and Canada’s employment data also for September.

USD index H4 Chart

Support: 93.70 (S1), 93.20 (S2), 92.75 (S3)

Resistance: 94.10 (R1), 94.60 (R2), 95.00 (R3)

AUD/USD H4 Chart

Support: 0.7225 (S1), 0.7170 (S2), 0.7110 (S3)

Resistance: 0.7280 (R1), 0.7335 (R2), 0.7420 (R3)