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FX Strategy 12 Sep 17

 

The USD Index is consolidating after a sharp recovery yesterday on improved risk sentiments as concerns over Hurricane Irma and North Korea abated. JPY continues to remain the weakest G10 currency this week but given that the movements in the Yen are largely risk dependent we can see a sharp rise if sentiments worsen. The commodity currencies also continue to improve with NZD, CAD and AUD number one, three and four, respectively. The rally in NZD is partially driven by the emerging polls for the upcoming general election which shows an increased support for the nationalist party. That said, we see bullish NZD trade being more dependent on the rates market with paying rates looking more attractive given an improved global outlook. Elsewhere, GBP continues to remain strong ahead of the key UK CPI release today where a strong print of 2.8% is expected; in our view, a data beat is likely to raise chances that BoE will err on the hawkish side on Thursday. In the equities space, the Nikkei 225 has closed +1.18% at 19776.62 and the European equities have also opened firmer with FTSE up 0.1%, DAX up 0.4%, and CAC up 0.3%. In the rates market, the German and US 10-year yields have risen sharply once again. The US and German 10-year are now trading at 2.15% and 0.36%, respectively. In the energy space, the WTI front month is consolidating around $47.96 after a sharp recovery in oil yesterday. In terms of data today, the Swedish inflation rate came in at 2.1% slightly weaker than 2.2% expected but SEK still rose sharply as CPIF, a measure the Riksbank will look at for setting monetary policy, came in as expected. Looking ahead the UK CPI is the key data from Europe today at 0830 GMT while Jolts job opening at 1400 GMT is the only data of any significance from the US.

 
 

USD-Index Daily chart (2-month)

 
 

Brent Front month Daily chart (2-Month)

 
 

Trade weighted basket hourly chart (1-week)

 
 

Major Currency Pairs

 

EURUSD Hourly Chart (Two-week)

 
 

Strategy: Support at 1.1926 for 1.2020
Short-term view: EUR/USD daily momentum indicators still remain bullish and we expect a bounce to 1.2020-1.2029. Below 1.1926 opens 1.1871.

 

GBPUSD Hourly Chart (Two-week)

 
 

Strategy: Support at 1.3155 for 1.3259
Short-term view: GBP/USD short-term momentum is strong and hence we may see a rise to 1.3259-1.3276 (next resistance area). Below 1.3155 opens 1.3119.

 

USDJPY Hourly Chart (Two-week)

 
 

Strategy: Resistance at 109.90 for 109.00
Short-term view: USD/JPY MACD is reversing from the overbought levels and hence, if 109.90 holds we may see a dip to 109.00. Above 109.90 opens 110.50.

 

AUDUSD Hourly Chart (Two-week)

 
 

Strategy: Support at .7992 for .8084
Short-term view: AUD/USD interim support around .7992-.8000 has held firm and MACD has reversed from the oversold area. Hence, a bounce to .8072-.8084 may ensue. Below .7992 to open .7968

 
 
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