HUBFX End of Week Report: September 13, 2024

USD/CAD Technical Analysis

Current Support Levels

The USDCAD is currently supported by its 100-hour moving average, which is positioned at 1.35756. This moving average acts as a crucial support level, providing a base for potential bullish momentum.

Resistance Levels to Watch

For the USDCAD to exhibit a sustained bullish outlook, it needs to overcome several resistance levels:

• Swing Area High: The first significant resistance is at 1.36188, where the pair has previously faced selling pressure.
• 38.2% Fibonacci Retracement Level: Positioned at 1.3633, this level is a key technical barrier that could impact the price action.
• 200-Hour Moving Average (on the 4-Hour Chart): At 1.36459, this moving average is a notable resistance point.
• 100-Day Moving Average: Found at 1.36740, it represents a longer-term resistance level.
• 50% Fibonacci Retracement Level: Located at 1.36927, this is another critical level that traders will monitor.

Market Sentiment

If the USDCAD remains above the 100-hour moving average, the pair is likely to continue its upward trajectory. However, a drop below this support level could signal a bearish shift, indicating potential downward pressure on the currency pair.

EUR/USD Analysis

Significant FX Option Expiries

The 1.1000 level for EUR/USD is particularly noteworthy due to the significant FX option expiries occurring at this strike price. This level is expected to act as a floor for the currency pair’s price action. However, there are also considerable expiries at the 1.1045-50 range. This concentration of expiries could create a sandwich effect, influencing price movements and providing resistance above the 1.1000 level.

Impact of Recent UK Economic Data

Recent economic data from the UK shows stagnation in July with a GDP growth rate of 0.0%, falling short of the expected 0.2%. The services sector contributed a slight +0.1% to GDP growth, but this was countered by declines in industrial output (-0.8%) and manufacturing (-1.0%). The overall stagnation, following a similar trend in June, points to a potential slowdown in the UK economy during Q3. This economic weakness may exert bearish pressure on the GBP, potentially influencing the EUR/USD exchange rate.

GBP/USD Overview

Economic Slowdown in the UK

The UK economy’s performance in July, showing no growth, reflects broader economic challenges. The services sector’s minimal contribution was insufficient to offset declines in other sectors such as industrial output and manufacturing. This stagnation trend from June into July indicates a slowing economic environment for the UK, which could translate into further weakness for the GBP.

Implications for GBP/USD

Given the weak economic data, the GBP is likely to face downward pressure. This could lead to a weakening of the GBP/USD pair, especially if the economic slowdown continues to impact market sentiment negatively.

USD /JPY Analysis

BOJ’s Comments and Market Reaction

Bank of Japan (BOJ) board member Nakagawa has recently commented on the future of Japan’s monetary policy. While the BOJ is prepared to raise interest rates if inflation aligns with forecasts, the timing remains uncertain. This stance has contributed to USD/JPY falling to 140.75, driven by declining US Treasury yields and overall market volatility.

Technical Movements

The USD/JPY’s movement reflects the current economic and policy uncertainty. The pair’s decline is partly due to the lower Treasury yields, which affect the USD’s attractiveness. Additionally, market reactions to BOJ’s comments and global economic conditions will play a crucial role in shaping the pair’s future movements.

Market Impact and Sentiment

US Politics and Currency Movements

Recent political developments, including Taylor Swift’s endorsement of Harris and debates surrounding the US Vice President’s campaign, have had minimal direct impact on currency markets. However, they may influence broader market sentiment and investor confidence, which could indirectly affect currency pairs.

Global Economic Developments

• Oil Demand: The International Energy Agency (IEA) has reported a slowdown in global oil demand, particularly from China. This slowdown could influence oil prices and related currency pairs, impacting broader market dynamics.
• European Equities: Positive movement in European equity indices reflects cautious optimism in the markets. This sentiment is influenced by recent US economic data and decisions from the European Central Bank (ECB).

Conclusion

This week’s data presents a mixed economic picture with significant implications for currency markets. The USDCAD shows potential for further gains if it maintains support levels, while the EUR/USD and GBP/USD are influenced by recent UK economic data and FX option expiries. The USD/JPY’s performance will be closely tied to BOJ’s future rate decisions and broader market conditions. Monitoring these factors will be essential for navigating the evolving FX landscape effectively.