Watching the foreign exchange market on October 14: technical analysis of the euro, the pound and the Australian dollar

Currency: EUR/USD



Resistance 2: 1.1680
Resistance 1: 1.1620
Spot price: 1.1599
Support 1: 1.1525
Support 2: 1.144

In Asia, the euro/dollar rebounded from a new low of 1.1523 in 2021, breaking the 1.1600 price area as high as possible. Since U.S. Treasury yields have remained weak since the opening, and the decline in U.S. inflation data has accelerated after the release, the decline in the U.S. dollar creates an opportunity for the euro to rebound. Germany announced September inflation data. The German consumer price index was in line with expectations, with a monthly rate increase of 0.3% and an annual rate of 4.1%. The annual rate of industrial production in the EU in August was 5.1%, better than expected. Finally, the Federal Reserve announced the minutes of the latest meeting. As expected, the document shows that the Fed is preparing to gradually slow down the pace of asset purchases, with the goal of ending its bond purchase program in the middle of 2022. These contents were as early as expected by the market and had already reacted before, so after the announcement, they failed to continue to uphold the US dollar. The euro/dollar is currently trading at a high of 1.1593. The daily chart shows that the rebound of the euro/dollar is likely to be seen as a consolidation. The euro/dollar is still below the firmly bearish 20 SMA. The current level is near 1.1640. Momentum indicators are flat in the negative zone, and the relative strength indicators have rebounded from oversold and remain in the negative zone. The 4-hour chart shows that the euro/dollar has a mild bullish momentum. The euro/dollar is above the 20 SMA with uncertain direction, but below the large-level moving average that maintains a bearish tendency. If the exchange rate continues to rise above 1.1640, the bulls may have a better chance.

Currency: GBP/USD



Resistance level 2: 1.3800
Resistance 1: 1.3722
Spot price: 1.3668
Support 1: 1.3570
Support 2: 1.3530

Britain’s August GDP data once pushed up the pound’s rise to 0.4%. After the British economy contracted for the first time in six months in July, it resumed growth in August. As a result, financial markets continued to bet that the Bank of England would start raising interest rates before the end of the year. The Bank of England looks set to be the first major central bank to raise interest rates since the outbreak. Financial markets are betting that the benchmark interest rate will rise to 0.25% by December, which is currently at the lowest level in history of 0.1%. From a fundamental point of view, the downward pressure on the pound will continue to exist before the Federal Reserve officially announced the reduction of debt purchases in early November. Technically, the pound has been trading sideways recently, and the rebound since the end of September has been clearly lacking in momentum, and it is still below the 50% retracement level of the 1.3913-1.3412 range, which is also quite detrimental to the bulls. If the Bank of England rejects the call for early tightening of monetary policy, the pound may briefly fall to 1.32 against the dollar in the next two months. At present, the long and short sides are still in the game. Below the pound is the low 1.3569. If you break this support, look at 1.3531, which is a 23.6% retracement. A break below this level may open the door to the September 29 low of 1.3412. Above, pay attention to the daily high of 1.3644, and further pay attention to the October 11 high of 1.3674 and the 50-day moving average at 1.3725.

Currency: AUD/USD



Resistance level 2: 0.7478
Resistance 1: 0.7425
Spot price: 0.7388
Support 1: 0.7330
Support 2: 0.7280

The US dollar was weak across the board and the price of gold rose sharply. AUD/USD resumed its upward momentum and approached its weekly high of 0.7384. Following the release of the U.S. Consumer Price Index and FOMC meeting minutes, the U.S. dollar and U.S. Treasury yields fell together, and the U.S. Treasury yields remained sluggish. Australia will release September employment data on Thursday. The country is expected to lose 137,500 jobs that month, and the unemployment rate is expected to rise from 4.5% to 4.8%. AUD/USD closed above the 0.7360 retracement level of 61.8% of the recent decline. On the daily chart, the risk is on the upside. The AUD/USD stayed above the flat 20 moving average, and the relative strength indicator continued to rise. It is currently near 59. Momentum indicators are down, but in a positive zone, and the exchange rate remains below the previous daily high. The 4-hour chart shows that the exchange rate is above all moving averages, and the 20 moving average is up and above the large-level moving average. If the AUD/USD finally closes above the current resistance level of 0.7410, the bullish situation may become clear. However, we still have to be wary of the short counterattack that will be caused once it breaks through 0.7410 to no avail.

Wang Gang, Bank of China Guangdong Branch

Source: Bank of China official website

Original Title: Forex Market Watching on October 14, 2021