- Intraday Comment
-
13.10.2015, 1pm
· The dollar traded lower against most of its G10 counterparts during the European morning Tuesday. It was higher against GBP and AUD, in that order, while it remained virtually unchanged against NOK and CAD.
· EUR/USD broke briefly our 1.1390 resistance level but gave back all the gains and fell below it following the German ZEW survey for October. Both indices declined sharply from the prior month, with the expectations index down to 1.9 from 12.1. The Volkswagen scandal coupled with the weak growth in EM deteriorated the economic outlook for Germany. I would expect the weakening fundamentals to weigh on EUR/USD and put it under renewed selling pressure. A break below the 1.1320 support zone is needed to trigger further bearish extensions.
· The UK inflation rate fell 0.1% yoy in September from 0.0% yoy previously, missing expectations of a flat reading. What’s more, the core CPI rose 1.0% yoy, unchanged in pace from August and below expectations of +1.1% yoy. The dip to deflation pushed further back expectations of a rate hike by the BoE, and put GBP under renewed selling pressure. Even though in the latest BoE meeting the officials were concerned over the inflation outlook, the pound fell sharply ahead of the release and in the event, the rate continued its plunge. GBP/USD broke below our 1.5260 support line and now aims our next support at 1.5220. Nevertheless, I would prefer to see a weak employment report, to be released on Wednesday, to trust further declines. Given that the current expectations are for a strong jobs report, sterling could gain back some of its today’s losses.
· DAX futures traded lower after finding resistance near our 10150 (R1) resistance barrier. The decline was halted around our 9935 (S1) support zone. A decisive break of that level is needed to set the stage for extensions towards our next support at 9780 (S2). Our momentum studies reveal downside speed and magnify the case for further declines. The RSI hit resistance near its 70 line and edged lower, while the MACD, although in its positive territory, has topped and fallen below its trigger line. On the daily chart, the break below 10670 on the 20th of August has shifted the medium-term outlook to the downside, in my view. However, given that the index has printed two lows at around 9315, I would change my stance to neutral for now, as far as the overall picture is concerned.
· Support: 9935 (S1), 9780 (S2), 9670 (S3)
· Resistance: 10150 (R1) 10325 (R2), 10525 (R3)
