Daily Technical Analysis by XtreamForex

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September Inflation Numbers Put the EUR and USD in Focus

It’s a busy day on the data front, with inflation numbers out of the Eurozone and the U.S the key numbers, though geo-politics will also influence.
Earlier in the Day:
Economic data released through the Asian session this morning was on the heavier side, with key stats including August building consent figures out of New Zealand, August job / applications ratio, prelim industrial production, retail sales and September inflation numbers out of Japan and Australia’s private sector credit numbers for August.
For the Kiwi Dollar, building consents surged by 7.8% in August, month-on-month, reversing most of July’s 10.3% slide. Auckland recorded a record number of new homes consented to be built according to Stats NZ.
The Kiwi Dollar moved from $0.66075 to $0.6609 upon release of the data before rising to $0.6611 at the time of writing, down 0.11% for the session.
For the Japanese Yen, while the jobs / applications ratio held steady at 1.63 in August, the rest of the stats were skewed to the positive.
Tokyo core inflation picked up from 0.9% to 1.0% in September, year-on-year, the uptick being attributed to a 3.6% rise in fuel, light and water charges, a 1.8% rise in prices for clothes and footwear and a 1.4% rise in prices for culture and recreation. There were also increases in prices for medical care, education, housing and transport and communication. Weighing on consumer prices was a 1.1% fall in prices for furniture and household utensils.
The Japanese Yen moved from ¥113.402 to ¥113.36 against the Dollar, upon release of the figures that came ahead of production and retail sales numbers.
Industrial Production fell short of a forecasted 1.5% increase, according to August prelim figures released by the Ministry of Economy, Trade and Industry, rising by 0.7% to reverse July’s 0.2% fall.
Industries that contributed to an increase included: Transport equipment; General-purpose, production and business oriented machinery and Plastic products.
Industries that mainly contributed to a decrease were: Electronic parts and devices; Chemicals (excl. Drugs) and Fabricated metals.
Production is forecasted to increase in September and October
Retail sales rose by 2.7% year-on-year in August, coming in ahead of a forecasted 2.2% rise and July’s 1.5% increase.
The Japanese Yen moved from ¥113.372 to ¥113.403 against the Dollar, upon release of the figures, before easing to ¥113.51 at the time of writing, down 0.11% for the session, with talks between the U.S and Japan on trade likely to lead to Japan moving more auto production to the U.S, which raises doubts on production forecasts going forward, particularly with the U.S – China trade war dragging on.
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Gold Price Prediction – Prices Drop as The Dollar Rallies

Gold prices tumbled on Thursday, as traders buoyed the dollar following Wednesday’s decision by the Federal Reserve to increase interest rates. What was clear from the Fed decision is that looking forward the Fed will continue to raise rates until 2020. When rates hit 3.375%, the Fed believes they will have hit neutrality. As the yield differential moved in favor of the greenback, the dollar rose weighing on the yellow metal. Since gold is priced in dollars, a strong dollar makes gold less attractive in other currencies. US pending home sales disappointed as supplies rose but not where demand is available.

Technical Analysis
Gold prices dropped on Thursday hitting a fresh monthly low, as the dollar gained traction. Target support on the yellow metal is seen near the August lows at 1,160. Resistance is seen near the 10-day moving average at 1,198. Momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices.The Fed Tightens Rates and Will Continue to Raise in 2019, and 2020
The FOMC tightened rates by 25-basis points and the majority of Fed officials see rates rising again in 2018. The Fed removed the term accommodative from their statement, but in a press conference Chair Powell said that rates still remain accommodative. The Fed provided projections for 2021, which shows no additional increases in the Fed funds rates. The Fed altered its growth forecasts increasing their growth figures 3.1% from 2.8% for 2018. The Fed raised its 2019 growth forecasts to 2.5% from 2.4%. The Fed kept its growth forecast for 2020 at 2%.
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U.S. Dollar Boosted by Fed, Solid Economic Data, Weaker Euro

The U.S. Federal Reserve increased the target for the bank’s benchmark by 0.25%, to a range of 2%-2.25%. FOMC members led by Chairman Jerome Powell said the economy is strong enough that aggressive stimulus is no longer necessary. This confidence was shown by the Fed ending its description of its policy as “accommodative”. The divergence between the monetary policies of the hawkish U.S. Federal Reserve and the dovish Bank of Japan helped drive the Dollar/Yen to its highest level since December 21. The Reserve Bank of New Zealand (RBNZ) kept its official cash rate at a record low of 1.75 percent.
The U.S. Dollar closed higher last week, helped by expectations of rising interest rates, political turmoil in the Euro Zone and better-than-expected U.S. economic data.
U.S. Federal Reserve Raised Rates Again

On September 26, the U.S. Federal Reserve increased the target for the bank’s benchmark by 0.25%, to a range of 2%-2.25%. A majority of Federal Open Market Committee members also said they expect another rise before the end of the year. This was also the bank’s eighth rate hike since 2015, continuing its policy of gradual rate hikes.
FOMC members led by Chairman Jerome Powell said the economy is strong enough that aggressive stimulus is no longer necessary. This confidence was shown by the Fed ending its description of its policy as “accommodative”.
Powell also said the rate hike reflected the Fed’s confidence in the U.S. economy, describing it as a “particularly bright moment”. Powell also warned that a permanent shift to a “more protectionist world” would hurt the U.S. and global economies, but added that for now, he expects the overall economic impact to remain relatively modest. “We don’t see it in the numbers,” he said at a press conference in Washington after the meeting.
Fed Predictions

Fed officials now expect the U.S. economy to grow by 3.1% this year, faster than the 2.8% forecast in March, according to the projections released after the meeting. Their predictions for inflation remained unchanged at around 2%.
The FOMC forecasts showed Fed officials expect about three rate hikes in 2019 and one more in 2020, which would lift the central bank’s important Fed funds rate to about 3.4% that year.
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NEM’s XEM Technical Analysis – Support in Play – 01/10/18

A bearish start to the quarter could see NEM’S XEM test support levels later in the day should the broader market reverse early gains.
Key Highlights
NEM’s XEM rose by 0.51% on Sunday, following a 1.72% gain on Saturday, to end the week down 5.07% to $0.09714.
An early morning intraday low $0.09455 saw NEM’s XEM steer clear of the day’s first major support level at $0.0932.
Support from the broader market led NEM’s XEM through to a late in the day intraday high $0.09781, falling short of the first major resistance level at $0.0990.
The week’s losses reaffirmed the extended bearish trend formed at late April’s swing hi $0.46546, NEM’s XEM continuing to fall well short of the 23.6% FIB Retracement Level of $0.1695.
NEM’s XEM Price Support
NEM’s XEM gained 0.51% on Sunday, following a 1.72% rise on Saturday, to end the week down 5.07% to 0.09714. The week’s reversal contributed to a September 7.68% slide and a 40.61% tumble through the 3rdquarter.
It was a particularly choppy end to the quarter, with NEM’s XEM falling back from a start of a day morning high $0.9731 to an early morning intraday low $0.09455, before support from the broader cryptomarket kicked in for NEM’s XEM to move through to a late morning high $0.09701. The moves through the 1st half of the day left the major support and resistance levels untested.
NEM’s XEM managed to avoid of hitting a new low through the afternoon, with a number of pullbacks to $0.095 levels finding plenty of support, leading to a late in the day rally to an intraday high $0.09781, falling short of the day’s first major resistance level at $0.099 ahead of the day’s end.
At the time of writing, NEM’s XEM was down 0.24% to $0.96916, with NEM’s XEM moving from a start of a day morning low $0.9655 to a morning high $0.09777, before easing back, the day’s major support and resistance levels left untested, NEM’s XEM one of only a few of the majors in the red in the early hours.
For the day ahead, a move through the morning high $0.09777 would support a run at $0.098 levels to bring the day’s first major resistance level at $0.0985 into play, upward momentum from the broader market likely to lead to a reversal of the early losses should sentiment across the cryptomarket remain positive through the morning.
Failure to move back through the morning high $0.09777 could see NEM’s XEM take a bigger hit later in the day, with a pullback through the morning low $0.09655 likely to lead to a fall through to sub-$0.096 levels to bring the first major support level at $0.0952 into play before any recovery that would be dependent upon the news wires at the time of testing support levels.
It’s bearish start to the quarter, with direction likely to be hinged on the broader market later in the day.
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DAILY FOREX NEWS BY XTREAMFOREX
Euro May Fall Further as Italy Clashes With EU on Budget

TALKING POINTS – EURO, SWISS FRANC, EUROPEAN UNION, ITALY, BUDGET
Euro declining as budget talks between Italy and EU Commission approach
Spread between German and Italian 2-year bond yields notably increasing
Friction between Italy and EU laws likely to increase political risk in region
Italy’s economic nationalism has caused significant volatility in the Euro and regional bond markets. Italy’s recently released 2019 budget deficit target of 2.4% sent the single currency down, while the spread between German and Italian bond yields widened.
Italy is set to present its proposal to the EU Commission on October 20th. The regional bloc’s executive, is likely to reject their proposal however due to the regulations surrounding member states’ debt-to-GDP ratios and deficit limitations, all of which Italy is currently violating.
Because of Italy’s massive debt, they are required to follow a specific set of regulations known as the Excessive Deficit Procedure (EDP). This requires that they commit to a target that will bring deficits and debts back to statutory levels. If they cannot propose a fiscal plan within regulatory parameters, they face the possibility of economic sanctions.
Friction between Italy’s anti-establishment government and EU technocrats is likely to continue weighing down on the Euro. The increased political risk may cause a rise in demand for regional alternatives such as the Swiss Franc and British Pound. If broader risk aversion follows, the Yen may also rise.
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Rising Geo-Political Risk Drives Support for the Yen and Dollar

Risk aversion hits the Aussie and Kiwi Dollar early, supporting the Greenback and the Yen, as Italy, Trade and Brexit haunt the markets.
Earlier in the Day:
Economic data released through the Asian session this morning was on the lighter side, with stats limited to August building approval figures out of Australia.
For the Aussie Dollar, building approvals tumbled by 9.4% in August, according to the ABS, which was far worse than a forecasted 1.2% rise and continued the downward trend following July’s 5.2% slide.
The tumble was attributed to a 17.2% decrease in approvals for private dwellings excluding houses, while approvals for private houses were also in decline, down by 1.9%.
The value of total building approved fell by 1.3%, marking a 9th consecutive monthly fall.
The Aussie Dollar moved from $0.71745 to $0.71696 upon release of the figures, before rising to $0.71709 at the time of writing, down 0.24% for the session.

Elsewhere, the Japanese Yen, was up by 0.09% to ¥113.55 against the U.S Dollar at the time of writing, supported by market jitters over Italy and, not only its fiscal policy plans, but also some chatter of being better off with its own currency. For the Kiwi Dollar, things were not much better, the risk off sentiment weighing, the Kiwi down 0.27% to $0.6575 at the time of writing.

In the equity markets, the Nikkei hit reverse, down by 0.56% at the time of writing, with risk aversion weighing in the early part of the day, while the ASX200 managed to stop the rot, up 0.32%, with support coming from the big-4 that had been under the hammer of late. For the Hang Seng, the slide continued early, the Hang Seng down 0.34%, the ongoing trade war with the U.S and weakening economic data out of China doing the damage alongside risk aversion stemming from geo-political risk rising out of the EU.
The Day Ahead:
For the EUR, economic data scheduled for release out of the Eurozone is on the heavier side and includes September service sector PMI numbers out of Italy and Spain and finalized PMI numbers out of France, Germany and the Eurozone, with the Eurozone’s August retail sales figures also due out.

While we can expect the EUR to show some response to the stats, the ongoing concerns over Italy ahead of the coalition government’s budget submission to Brussels mid-month continues to be a concern and may well overshadow the numbers should there be more chatter from members of the coalition.

One other factor to consider and monitor will be chatter from the Oval Office, the EU now in the U.S administration’s sights on trade, the last trade meeting with the EU now some time ago.

At the time of writing, the EUR was down 0.06% to $1.1541, the Italian Budget and noise from the Oval Office remaining the key risks to the EUR, with today’s stats to provide some direction at the time of release.
For the Pound, it’s the last of the 3 September PMI numbers, with September’s service sector PMI scheduled for release. While the manufacturing and construction PMIs delivered mixed results, it’s down to the more significant component of the UK economy to provide the markets with some guidance on where the UK economy is heading going into the 4th quarter. Forecasts are for a slightly softer number, anything weaker than forecasts likely to rile the Pound.
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Bitcoin – Bulls Fail to Deliver as the Bears Eye $6,300

Bitcoin kicks off the day in the red, with sub-$6,400 levels on the cards should a move back through to $6,500 levels not materialize by late morning.

Bitcoin fell by 1.2% on Tuesday, following Monday’s 0.34% decline, to end the day at $6,522.9, with the day’s decline marking it a 4th day in the red out of the last 5.
A positive start to the day saw Bitcoin come within reach of the first major resistance level at $6,673, with an intraday high $6,644.7 before succumbing to pressure from a broader market reversal that saw Bitcoin slide through the morning and early afternoon to an intraday low $6,467.9
Falling through the day’s first major support level at $6,513 to come within range of the second major support level at $6,426.5, Bitcoin managed to bounce back to an afternoon high $6,589.2 before being hit by a late in the day pullback to leave Bitcoin with its heaviest lost since 25th September’s 2.15% slide.
In spite of the day’s reversal, Bitcoin’s dominance picked up to 51.9%, with some of the crypto majors seeing more material losses through the day, leading to the cryptomarket cap falling back to $218.08bn.
News of market manipulation by the WSJ would not have done Bitcoin and the broader market any favours, investors well aware that the SEC’s main concern over approving Bitcoin ETFs revolves around price manipulation.
Other negative news through the day included reports of New Zealand passing new laws that allows customs to gain access to traveller passwords for electronic devices or impose a fine. While the news is less related to traveller’s investment holdings and more to do with data storage, the wires took this as a potential threat to the privacy enjoyed by cryptocurrency investors.
Of greater concern will be the continued reports of price manipulation, which may pin back the hopes of Bitcoin ETF approvals near-term, the SEC’s position on Bitcoin ETFs considered a key driver for Bitcoin and the broader market, alongside sentiment towards the regulatory landscape.
At the time of writing, Bitcoin was down 1.17% to $6,451.1, Tuesday’s late reversal continuing into the early hours of this morning. Bitcoin has fallen from a start of a day high $6,545.1 to a morning low $6,424.6, sliding through the first major support level at $6,445.63 before finding support.
For the day ahead, a move back through to $6,500 levels would signal a possible afternoon rebound, with Bitcoin needing to move through the morning high $6,545.1 to bring $6,600 levels and the day’s first major resistance level at $6,622.43 into play, though we can expect Bitcoin to face plenty of resistance on any run at $6,600 levels later in the day.
Failure to move back through to $6,500 levels could see Bitcoin take a bigger hit later in the day, a pullback through the morning low $6,424.6 likely to bring $6,300 levels and the day’s first second major support level at $6,368.37 into play before any recovery, with the news wires certainly capable of delivering a more material decline.
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Aussie Record Trade Surplus Does Little to Slow the Greenback

The Dollar’s on a tear, only the Japanese Yen managing to hold on in the early hours, with a record trade surplus out of Australia doing little for the AUD.
Earlier in the Day:
Economic data released through the Asian session this morning was limited to trade August figures out of Australia
For the Aussie Dollar, Australia’s trade surplus jumped from a revised A$1.548bn to A$1.604bn in August according to the ABS.
Imports were flat for the month, while exports rose by 1%, month-on-month.
The increase in exports was attributed to a 13% (A$229m) rise in the export of non-monetary gold and a 3% (A$134m) rise in the export of rural goods that were partially offset by a 1% (A$222m) fall in the export of non-rural goods.
On the import front, the import of capital goods rose by 9% (A$569m), which was offset by a 41% (A$289m) slide in the import of non-monetary gold and a 2% (A$264m) fall in the import of intermediate and other merchandise goods.
The Aussie Dollar moved from $0.70945 to $0.70994 upon release of the figures, before easing to $0.7093 at the time of writing, down 0.14% for the session, the jump in U.S Treasury yields offsetting any material upside from this morning’s stats.
Elsewhere, the Japanese Yen, was up by 0.17% to ¥114.33 against the U.S Dollar at the time of writing, the Yen finding some support to partially recover from the overnight slide that came off the back of yet more impressive stats out of the U.S. For the Kiwi Dollar, a jump in U.S Treasury yields weighed, the Kiwi down 0.29% to $0.6495 at the time of writing.
In the equity markets, the Nikkei was in the red, reversing early gains, down 0.22% at the time of writing, the index finding little support from the Yen’s slide to ¥114 levels against the Dollar and the overnight gains in the U.S equity markets, while the ASX200 also in positive territory, up 0.66% at the time of writing. For the Hang Seng, the slide continued early, the Hang Seng down 1.06%, with investors having nowhere to hide early on, trade war jitters continuing to weigh.The Day Ahead:
For the EUR, there are no material stats scheduled for release through the day to provide direction for the EUR, leaving budget chatter from Italy and market risk sentiment to provide direction through the day.
While upside for the EUR was reversed on Wednesday, following the U.S stats and hawkish FED chatter, uncertainty over what lies ahead on the budget side and Italy’s debt troubles will be a continued concern ahead of the Italy – EU showdown mid-month.
At the time of writing, the EUR was down 0.05% to $1.1472, the Italian Budget and noise from the Oval Office remaining the key risks to the EUR.
For the Pound, it’s a quiet day on the data front, leaving the Pound in the hands of Brexit chatter and news of the Tory Party Conference that ended on Wednesday.
There’s been no good news of late for the Pound, with chatter out of France likely to upset the Pound further, any hopes of UK’s neighbour being supportive seemingly dashed as the French government look to prepare for Britain to depart the EU without a deal.
At the time of writing, the Pound was down 0.09% to $1.2931 with Brexit chatter the key driver through the day.
Across the Pond, economic data due out of the U.S includes the weekly jobless claims figures and August factory orders, factory orders likely to have a greater influence following the ADP nonfarm employment change number on Wednesday, orders forecasted to be Dollar positive.
Hawkish FED Chatter could also be on the cards, with FOMC member Quarles speaking, though FED Chair Powell may have done the necessary work for the Dollar overnight on Wednesday, hawkish sentiment towards the economy and monetary policy providing the Dollar with strong support late in the day.
At the time of writing, the Dollar Spot Index was up 0.32% to 96.065, with today’s stats and Oval Office chatter the key drivers through the day.
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Gold Price Prediction – Prices Grind Sideways Ahead of NFP Report

Gold prices continue to trade sideways, and appear to be support ahead of Friday’s payroll report. A stronger than expected payroll gain or accelerating wage inflation, will likely lift the dollar and pave the way for lower gold prices. Data released earlier in the week saw the private payrolls increase by a stronger than expected 230K jobs, which has priced in the highest 2-year yield seen in the US since 2008. The 10-year yield spiked on Thursday hitting a high of 3.19%, which is also helping the yield differential move in favor of the dollar. Traders took profits in their dollar positions as rates rise ahead of the payroll report. Jobless claims were lower than expected dropping to 40+ year lows and signaling that the unemployment rate will likely dip lower.
Technical Analysis
Gold prices consolidated on Thursday ahead of Friday’s payroll report. Prices are capped by a downward sloping trend line that comes in near 1,209. Short term support is seen near the 10-day moving average at 1,195. Additional Support is seen near an upward sloping trend line at 1,183. Momentum is positive to neutral, as the MACD (moving average convergence divergence) histogram prints in the black with a flat trajectory which reflects consolidation. The MACD recently generated a crossover buy signal.
Jobless Claims Continue to Drop
The Labor Department reported that claims declined by 8K to 207K for the week ended Sept. 29, 2018. Claims fell to 202,000 during the week ended Sept. 15, which was the lowest level since November 1969. Expectations where for claims to dip to 213K. The Labor Department said claims for South and North Carolina were affected by Hurricane Florence, which lashed the region in mid-September. The four-week moving average of initial claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose 500 to 207,000 last week.
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AUD/USD and NZD/USD Fundamental Weekly Forecast – Focus Will Remain on U.S. Treasury Yields, Inflation Data

There are no major reports from Australia and New Zealand this week. In the U.S., investors will get the opportunity to react to Producer and Consumer Inflation data. The PPI is expected to show an increase of 0.2%, up from -0.1%. The CPI is forecast to show an increase of 0.2%, up from 0.1%.
The Australian and New Zealand Dollars tumbled last week to multi-year lows, driven by a sharp rise in U.S. Treasury yields and hawkish talk from U.S. Federal Reserve Chairman Jerome Powell.
The rise in interest rates led to a widening of the interest rate differential between U.S. Government bond yields and Australian and New Zealand Government yields. This helped make the U.S. Dollar a more attractive investment.
For the week, the AUD/USD settled at .7049, down 0.0168 or -2.33% and the NZD/USD closed at .6437, down 0.0182 or -2.75%.
Essentially, it’s the divergence in monetary policy between the hawkish U.S. Federal Reserve and the dovish Reserve Banks of Australia and New Zealand that is driving the price action.
Last week, the Reserve Bank of Australia left its benchmark interest rate unchanged at a historically low 1.50%. It also suggested that while the economy is expected to improve, there are still issues with housing and lower wages that are preventing the RBA from raising interest rates. Traders don’t expect the central bank to begin raising rates until early 2020.
Two weeks ago, the Reserve Bank of New Zealand also left its benchmark interest rate unchanged. Traders are saying that the next move by the RBNZ could actually be an interest rate cut.
In other news, Australian Building Approvals fell 9.4%. However, the Trade Balance came in better-than-expected at 1.60 billion and Retail Sales rose 0.3%.
In the U.S., the headline grabbing nonfarm payrolls increased by 134,000 jobs in September, the fewest in a year. However, data for July and August was revised to show 87,000 more jobs added than previously reported. Average hourly earnings rose 8 cents, or 0.3 percent, in September after rising 0.3 percent in August. The unemployment rate fell from 3.9 percent to 3.7 percent.
Federal Reserve Chairman Jerome Powell moved Treasury yields and the U.S. Dollar when he said the central bank has a ways to go yet before it gets interest rates to where they are neither restrictive nor accommodative.
“The really extremely accommodative low interest rates that we needed when the economy was quite weak, we don’t need those anymore. They’re not appropriate anymore,” Powell said.
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