Weekly Outlook. November 11, 2013

November 11, 2013



The Aussie dollar continued its fall in the previous week after markets punished the Australian dollar after its jobless report come in much weaker than expected, with -28k full time jobs in the previous month.  This was further hampered by the RBA taking the opportunity to talk down the exchange rate further, continuing on from the previous week where the head of the RBA Glenn Stevens talked down the high valuation.

Overall, Australian news is going to remain light for the coming week, as the major movers were last week. The focus will be on the US as its major trading partner, which has major announcements at the end of the week.

Current resistance levels are at 9.440, 0.9507 and 0.9571, it’s unlikely that these levels will be tested unless there is a breakout through the current trend line. Support levels can be found at 0.9350, 0.9300 and 0.9254 with the 0.9350 and 0.9300 likely to act as major support levels as the pair trends lower.



The Euro fell heavily against this week as Mario Draghi cut rates for the ECB from 0.50% to 0.25% as inflation started to stagnate and the ECB looked to lift inflation and also devalue the currency to help exports, and lift the Euro-zone out of recession.  Looking at the Euro, it is currently under the bears’ control as it pushes downwards.

Markets will be focusing on UK data for the Euro currency, as this week is heavy on UK data. However, industrial production, GDP and CPI are due out for the Euro-zone. CPI data is expected to show deflation for the previous month, however the ECB has already cut rates to counter this.

Current technical movements show that the EURUSD is continuing its current downward trend after a strengthening of the USD and after recent rate cuts for the Euro. Current resistance levels can be found at 1.3397, 1.3425 (38.2 Fib mark) and 1.3468. Support levels can be found at 1.3297, 1.3255 and 1.3200.  The RSI is currently showing heavy selling pressure against the Euro after Fridays Nonfarm Payroll data. However, it is looking like it does not want to break through the current 30 level.



The Pound ranged heavily over the previous week after positive news for the UK economy and the US economy led to ranging or the pair compared to the start of last week where a steep decline looked likely. Overall though positive sentiment seems to be in effect for the economy, however technical are looking to pull back.

The markets will be trading the pound heavily this week, as a raft of data is released by the Bank of England; including CPI, PPI, average earnings and retail sales. Forecasts have been strong for the UK economy as of late and it's unlikely this will change. Inflation though will be a major one to watch, as a jump may lead to calls for an interest rate rise in the future.

Market technical movements show the pound is still in a downward trend, however it has the ability to range as well.  Current resistance levels are at 1.6040, 1.6090 and 1.6174 to 1.6090 acting as the major resistance level of the pound. Support levels can be found at 1.5950, 1.5913 and 1.5860 and look likely to be tested this week if the pound continues its downward trend. The RSI though is showing little momentum but signalling that some initial buying pressure might be in the works over the next 24hours.



The New Zealand Dollar ranged over the week to settle at the end of the week relatively unchanged as markets looked to push the kiwi higher on the back of positive unemployment data showing strong growth for the NZ economy. However, a strong USD from nonfarm payroll data erased all the gains from the week as the US dollar strengthened heavily after payroll data exceeded all forecasts.

Traders will now be focused on retail sales data for the NZ economy which is expected to be strong in the wake of improved employment. Additionally PPI will be the most major announcement due out on Thursday.

Market technicals show that currently buying and selling pressure is fairly even for the pair. Market levels of resistance can be found at 0.8310, 0.8364 and 0.8433 with the major levels at 0.83100 and 0.8346. Market support can be found at 0.8225 (61.8 Fib level), 0.8166 and 0.8121 (50.0 Fib level). Currently the 61.8 fib level is acting as a major barrier or any further declines in the NZD.



The Yen has recently broken out of its triangle after pressure from the USD led to people moving out of the safe haven and back into the USD after a strong week from the US economy as GDP data was stronger than expected, and nonfarm payroll as well above what economists expected. The Yen however, is expected to weaken in the long run as the government looks to strengthen the economy more heavily before structural reforms which will be required to enable financial stability.

The Yen has a big week ahead of it as the Bank of Japan is set to release a substantial amount of data including the Industry Index tonight, followed by GDP and Industrial Production data on Wednesday and Thursday.

Looking at market technicals we can see that the Yen has broken out of its triangle on opening, but is looking to dive back inside for the coming week. Resistance levels can be found at 99.243, 99.618 and 100.142, with 99.243 acting as the major level of resistance and the level to watch. Support levels can be found at 98.614, 98.179 and 97.805, with the 98.179 level acting as the major mid support level that the pair ranges off. Additionally the pair is still trading heavily of Bollinger bands and any inter-day trading should incorporate these key bands.


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By Alex Gurr
Currency Analyst

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