By Lukman Otunuga, Research Analyst, FXTM
A mildly hawkish Fed Chair Janet Yellen offered the clarity most investors had been seeking, when at Thursday’s conference she stated that rates in the US may likely be hiked before the end of the year. Some mist was cleared as investors digested the news that the hike would take place either in October or December. With the prerequisites of a rate hike reverting back to a dependency on US data, the USD appreciated. The additional statement which discussed that global economic weaknesses may have a muted impact on altering the Fed’s plan to raise rates may reduce some of the pressure which the USD has been receiving from developments in China.
Despite the core durable goods orders for the US below expectations, the clarity gained from Yellen’s speech inspired some bullish momentum on the USD. This may be viewed within the Dollar Index being in a vulnerable position earlier in the week due to the soft data from China exposing it to losses. Focusing on EURUSD, the USD strength resulted in a sharp decline to the 1.1150 area. If USD strength persists and prices sink back below the 1.1100 support, the technical break on the EURUSD may open a path to the next relevant support at 1.1000.
Most European equities closed in negative territory on Thursday as fears around the health of China influenced a selloff. The FTSE100 which has traded at levels not seen since August 24 remains in the spotlight. This index may continue to experience further losses, as pressure from the declining mining stocks linked to China act as a factor that may warrant a further drop.
On the economic data front, Friday is fairly quiet with the only major release in the New York session being the Final GDP q/q for the U.S.
AUDUSD: The AUDUSD experienced a sharp incline above the 0.7200 resistance before a sharp decline back below the 0.7050 support. This pair has become technically bearish. Prices are below the 20 daily SMA and the MACD has crossed to the downside. The 0.7050 may act as a dynamic resistance which should provide the foundation for a decline to the next relevant support at 0.6900.
EURJPY: The EURJPY is technically bearish. Prices are trading below the daily 20 SMA and the MACD has crossed to the downside. As long as prices can keep below the 135.50 resistance, a decline down to the 133.50 support may be expected.
CADJPY: The CADJPY remains in a period of consolidation. Within the wedge, there is resistance at 92.50 and support at 89.00. Prices are below the daily 20 SMA and the MACD has crossed to the downside. A break below the 89.00 support may open a path to the next relevant support at 87.30.
AUDCAD: The AUDCAD remains technically bearish as long as prices can keep below the 0.9400 resistance. The MACD trades to the downside, but prices are currently trading marginally above the daily 20 SMA. A move to the next relevant support at 0.9200 may be expected as long as prices can keep below the trend-defining resistance.
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