Trading Blogs

EUR/USD weekly outlook: September 23 - 27

Investing.com – The euro was steady close to eight-month highs against the dollar on Friday after St. Louis Federal Reserve President James Bullard indicated that the U.S. central bank could start to taper its stimulus program in October.

EUR/USD settled at 1.3523 on Friday, dipping 0.05% for the day after rising as high as 1.3567 on Thursday, the highest since February 7. On the week, the pair was 1.4% higher.

The pair is likely to find support at 1.3475 and resistance at 1.3567, Thursday’s high.

The greenback found support after St. Louis Fed President James Bullard said the decision not to taper in September was “close” and did not rule out a small reduction in the central bank's bond purchases in October. 

The comments came during an interview with Bloomberg television.

Forex - Dollar drops as Fed leaves stimulus program unchanged

Investing.com – The dollar plummeted against most major currencies on Wednesday after the Federal Reserve said it was making no changes to its USD85 billion monthly bond-buying program.

Many investors were expecting the U.S. central bank to trim the amount of bonds it purchases a month at least by USD10 billion.

In U.S. trading on Wednesday, EUR/USD was up 1.07% at 1.3501.

The Federal Reserve on Wednesday left its key benchmark lending target, the fed funds rate, unchanged at 0.25% and kept its USD85 billion monthly asset-purchasing program in place. 

The Fed said the economy was showing signs of improvement though it still faced enough headwinds to prompt monetary authorities to hold off on tapering its asset purchases, which weaken the dollar to spur recovery. 

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As gold soared towards 34 recently, greed seemed to be making a comeback.  From the lows near 80, the golden metal had rallied about 4, with only one minor pullback.

The sell-off over the past few weeks has squashed that greed, and that’s good news for gold bulls.  Markets rise on walls of worry, and worry seems to be creeping back into the gold market.

That’s the daily gold chart.  From a technical standpoint, I don’t see anything to be overly concerned about.

My stokeillator reached a level of about 90, as gold peaked in the 34 area, and the lead line is now at about 47.

The stokeillator (14,7,7 Stochastics series) tends to fall to the 20 area, very roughly speaking, about once a month. 

Using that rule of thumb, gold could drift lower or consolidate here for another couple of weeks, before starting another move to the upside.

Interestingly, the next FOMC meeting announcement is scheduled for September 18^th at 2pm.  Bloomberg surveys suggest that’s when most money managers believe the Fed will announce the start of QE tapering.

At 2:30pm on the same day, Fed Chairman Ben Bernanke is scheduled to hold one of his rare press conferences.  Journalists will be able to ask him some questions, and he will respond.

If Chairman Bernanke stuns the mainstream money managers by holding off on the “taper caper”, gold could surge violently higher, and perhaps trigger a stokeillator buy signal, from near the 20 level on my gold chart.  

Any tapering that does occur is likely to be quite mild, and it’s probably already priced into the gold market now.

I think the growing “demoralization” amongst gold bulls, on the current pullback, is no different from the mood that set in on the first pullback, and it’s probably very healthy for the market. 

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The EUR/USD currency pair has consolidated just above a major support confluence around the 1.3150 region, which is currently at the same price location as the key 200-day moving average. This price action follows a substantial two-week drop from just above 1.3400 resistance, a level last reached prior to that in June.

Having dropped down to the strong 1.3150 support confluence, the currency pair is currently at a critical juncture. A continuation of the significant bearishness of the past two weeks could prompt a breakdown below this major support, targeting the key 1.3000 psychological support level to the downside. Any further breakdown below 1.3000 should then move the pair towards the important 1.2750 support level, site of the major double-bottom from April and July. Conversely, if the price turns back to the upside at or around the current 1.3150 support, strong upside resistance resides around the 1.3300 level.

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