Contributed by: DailyFx
North American Commodity Update
Commodities - Energy
Skepticism in US GDP, Promise of Fed Stimulus Keeps Oil Bound to its Month-Long Trend
Crude Oil (LS Nymex) - $81.43 // -$0.75 // -0.91%
The lack of progress made by crude this past week speaks clearly of the speculative market’s bearings heading into what is one of the most fundamentally important weeks we have seen in months. Friday’s session was prone to another dramatic bout of volatility; but the early morning selling would see yet another sharp intraday reversal – very similar to the aggressive move from this past Wednesday. All this price action taken into account, the commodity remains bound to the same congestion pattern that has defined price action through the entire month. A descending trend channel has whittled down the active range of the market to a mere three dollar gap between $83 and $80. It shouldn’t come as a surprise that this stability has developed before the long-awaited FOMC rate decision – which speculators have used as a rallying point for bullish ambitions on speculative assets since September.
With a mind towards the event risk ahead, it is still surprising that the energy market would not experiencing a greater level of volatility – and perhaps even some level of trend development – through Friday’s session. Top event risk through the period was the release of US GDP. The advanced, third-quarter reading came in-line with the official consensus for a 2.0 percent annualized pace of expansion. Looking more closely at the breakdown, the personal consumption gauge (accounting for approximately three-quarters of activity) marked its strongest performance at 2.6 percent since the fourth quarter of 2006. However, the report was generally considered discouraging given the cooling in fixed investment, the plunge in building and the heavy contribution by inventories. Where this data’s real value comes from is its use as a benchmark to next week’s FOMC rate decision. The speculative markets have been adjusting their expectations for this particular event for a few months now. With the official announcement of the group’s stimulus decision, traders will finally see whether they were justified to bid risky assets in the hopes that a Fed capital injection would boost the markets for an easy profit. This leverages a very specific need from this particular event. If the support falls short of what was expected, the markets will quickly correct to account for the overzealous positioning. In addition to the FOMC decision, BoE and BoJ decisions will likely carry weight. A range of manufacturing reports and Friday NFPs will also direct.
From the purely objective side of the supply-and-demand curve, oil traders will keep an eye on inventory figures after this past week’s 5 million barrel surge in DoE holdings (the largest since June). In the meantime, volume on the active December Nymex crude contract cooled a modest 2 percent from Thursday’s turnover (290248 contracts). Activity was generally tame all week long. More interesting was the 9 percent increase in net speculative longs in the COT data to 178,824 contracts (a six-month high).
Crude Futures Chart (Daily)
Commodities - Metals
A Week-End Rally Eases Pressure of a Trend Reversal ahead of Next Week’s Wall of Event Risk
Spot Gold - $1,359.40 // $15.35 // 1.14%
A well-funded rally Friday would push gold through $1,345 resistance to end two-weeks of congestion and relieve pressure on a potential trend reversal. Since the precious metal pulled back from its record highs a few weeks ago; the selling pressure has moved the market down to the test the larger, ascending trend channel that developed back at the end of July / beginning of August. This move conveniently averts the need to decide on a major trend ahead of major fundamental waves scheduled for next week. That said, it is worth noting that gold’s rally is largely unique. The commodity put in for its first back-to-back rally of more than 1.0 percent since June 7th; and we hadn’t seen an equivalent move in equities, Treasuries or even the dollar.
The deviation in performance between gold and risk-based assets is far from remarkable. It has become more of the norm recently because sentiment itself has been relatively stable. What is far more interesting is the breakdown of the inverse correlation between metal and dollar. Gold has increasingly derived its strength from the diversification away from fiat currencies and particularly the US dollar (which also happens to maintain its own appeal as a safe haven). Friday’s US GDP reading for the third quarter had the opportunity to influence both markets evenly; but the dollar was ultimately little moved on a trade-weighted basis after the data crossed the wires. This growth reading was founded on questionable support; but it was far from the type of reading that would leverage the argument for a much larger stimulus program from the Fed next week.
Looking out over the next week, the scheduled event risk is exactly what a gold trader that is looking volatility would ask for. Wednesday’s FOMC rate decision is key as the market has been speculating on this particular event for months now – driving up its expectations for that capital markets will climb; and the greenback will be subsequently devalued. We will see whether these were reasonable, underrated or overrated expectations. A surprise on this front that leads to volatility in the dollar would almost guarantee the same from the precious metal. What’s more, it will be important to avoid tunnel vision. The Bank of Japan has moved up its next rate decision by three weeks for a reason. Further, the BoE, ECB and RBA are set to convene.
For trading activity into the end of the week, volume on the active December futures contract rose a mere 4 percent from the previous day’s activity level to 154,006 contracts. Equally measured was the 4 percent drop in net speculative long positions by the CFTC through the week ending October 26th to 239,086 contracts. More remarkable was the 11th consecutive declines in ETF holdings – measuring a total 0.8 percent decline from a record high.
Spot Silver - $24.75 // $0.76 // 3.17%
Silver would borrow its enthusiasm from gold Friday to put in for the biggest rally since the October 8th drive that propelled the market to a new level of amplitude and record high at the same time. And, with this advance, the metal wouldn’t be able to take out the intraday highs set three weeks ago; but the close was the highest in 30 years. For activity levels, December contract volume was 16 percent higher while CFCT net speculative longs dropped 6 percent.
Spot Gold Chart (Daily)
Contributed by: DailyFx
* Dollar Crosses a Fundamental Hurdle in GDP to Focus all its Attention on Next Week’s FOMC
* Japanese Yen May Soon Respond to its Own Fundamentals as the BoJ Amplifies its Stimulus Effort
* Canadian Dollar Struggles for Gains Despite Favorable GDP, Focus on Dollar and Jobs Next Week
* British Pound Teeters on the Verge of Trend as the BoE is Faced with a Stimulus Opportunity
* Australian Dollar one of the Few Currencies with an Encouraging Future ahead of RBA Decision
* Euro to take its Bearings from the Dollar Rather than ECB Next Week
Dollar Crosses a Fundamental Hurdle in GDP to Focus all its Attention on Next Week’s FOMC
With Friday’s outcome, the dollar has committed itself to a specific fundamental path going forward – one that is far more prone to volatility and wide open to meaningful trend development. The greenback had the opportunity to offset some of the heady event risk associated with next week’s Federal Open Market Committee (FOMC) rate decision. All that was needed was a strong move for the dollar to end the week that pushed the currency into the beginnings of a new trend before liquidity was swallowed up by the weekend. This was not a wholly unrealistic expectation given the event risk for the day. Nevertheless, the growth, stimulus and risk implications that the advanced third quarter GDP reading held would prove a dud for market movement. Looking for true fundamental momentum, the best opportunity for a dollar rally would come via a move in equities and other risk-sensitive markets. That said, the S&P 500 would ultimately bide its time with a narrow range and reduced level of volume. As long as this benchmark for investor sentiment is held to its steady, two-month rising trend channel; the greenback will be under pressure. That said, even this risk-positive, dollar-negative drive has lost its impetus recently. Altogether, this makes for the perfect scenario for next week’s event risk.
Looking at the scenario’s for Friday’s GDP release, there were two general potential outcomes (completely unrelated to the actual performance of the data): either the market would decide to ignore the indicator or use the report’s clout to leverage risk trend and perhaps stimulus speculation. In the latter scenario traders would take advantage of the greenback’s tumble over the past few months in reference to expectations for a second round of asset purchases to either fuel continuation or a reversal of the prominent trend. However, it seems the masses would rather wait for proper confirmation before committing themselves to greater exposure. That said, the growth data is not simply a write off. Annualized growth through the third quarter of 2.0 percent represents a relatively stable – if muted – pace of recovery. In reality, a measured pace of expansion is preferable at this stage of the game as it is far more sustainable. Looking into the component data, it is encouraging to see personal consumption (which accounts for approximately three-quarters of economic activity) growth 2.6 percent – the best clip since the fourth quarter of 2006. At the same time, the 1.44 percentage points added by the $115.5 billion in inventory buildup, the 2.0 percentage points subtracted by trade and sharp contraction in construction gives enough reason to question the United States’ future.
Turning our focus to the future, we should actually interpret the influence of Friday’s GDP reading on next week’s top event risk: the Fed’s rate decision. Skepticism over the sustainability of expansion would build the argument of a larger stimulus package; but this data was relatively stable – so the outcome for this event is still wide open to interpretation. Heading into the release, the popular consensus is a $100 billion injection per month for five or six months. Yet, there has been rumor that some of the Primary Dealers the central bank polled for expectations of size and time frame of the eventual program were voting $1 trillion. If the Fed’s intentions are not to disappoint, the dollar may be in trouble.
Japanese Yen May Soon Respond to its Own Fundamentals as the BoJ Amplifies its Stimulus Effort
It is difficult to pontificate the virtues of the Japanese yen. Pushing record or multi-year highs (depending on which pair we are looking at), it is difficult to justify the currency’s sustained advance given its anemic yields, structural growth problems, long-lasting credit troubles and the increasingly aggressive effort by the government and central bank to stem the yen’s advance. That said, when a speculative trend is in place, it can sometimes be difficult to curb the steady influx of capital that is directed by the herd. The coming week has a unique opportunity to finally break this speculative drive. First, the FOMC rate decision could open the doors back up to investment capital that has been consistently rerouted to Japan as an alternative. Furthermore, the Bank of Japan will likely do its part with a follow up rate decision (moved up three weeks) that is scheduled coincidently just after the Fed’s meeting. This unusual meeting will bring clarity to stimulus efforts and maybe a larger package.
Canadian Dollar Struggles for Gains Despite Favorable GDP, Focus on Dollar and Jobs Next Week
Given the economic ties between the US and Canadian economies, it shouldn’t come as a surprise that the loonie was looking at the performance of the US 3Q GDP reading (and the greenback’s reaction to it) rather than the August growth reading from Canada. That said, the 0.3 percent pick up was nonetheless impressive. Next week, the dollar will lead again; but Friday’s employment figures will weigh in.
British Pound Teeters on the Verge of Trend as the BoE is Faced with a Stimulus Opportunity
There was a general improvement across the board in second tier indicators for the UK Friday. Consumer confidence, net credit, mortgage approvals and money supply (as a measure of inflation) all rose. For next week, the pound could prove the sleeper currency of the week. The BoE rate decision has been written off after the UK’s 3Q GDP reading; but there is still the possibility that stimulus expansion is in the cards.
Australian Dollar one of the Few Currencies with an Encouraging Future ahead of RBA Decision
For most of the major policy authorities out there, the optimistic option is to hold while the realistic choice is to loosen the monetary reins to support growth. This isn’t the case with the Aussie dollar and RBA. Next week’s RBA rate decision comes with a 22 percent probability of a 25 bps hike. That said, should the rest of the central bank’s take a dovish lean, this will be a defacto boost for the Aussie dollar.
Euro to take its Bearings from the Dollar Rather than ECB Next Week
Not to be left out of the fundamental mix, the euro has its own central bank rate decision to contend with next week. The only problem is that the ECB has been the most consistently neutral group out there. Instead, the euro is likely to find its direction and pace through the performance of the US dollar. As EURUSD is the most liquid currency pair in the world, a move by the greenback will lead to the opposite drive for the euro.
Contributed by: DailyFx
US Dollar, Risk Appetite Likely to Return to Trend On FOMC Decision
Fundamental Outlook for US Dollar: Neutral
* An in-line 3Q GDP reading doesn’t stir enough speculation to redefine stimulus expectations and risk appetite
* The Federal Reserve asks its Primary Dealers what they think the size and maturity of QE2 will be
* Congestion is the state before breakout – but what direction is EURUSD heading from here?
Before delving into the fundamental possibilities for the dollar over the coming week; we should first reflect on the ‘neutral’ forecast I have levied against the currency. In fact, the currency is highly likely to catch a trend next week on the long-awaited announcement of the Federal Reserve’s monetary policy plans. However, the bearings that the dollar takes and the pace with which it is imbued can be highly variable depending on what policy officials agree to. If we were to have ‘activity level’ as an assessment, I would have set it to ‘extremely high’ and established the scenarios for direction from there. That said, if given a two-to-three week horizon and told to determine the most likely course for the dollar, my inclinations would lean more towards a significant recovery effort for the severely weakened currency.
In assessing the dollar’s future, there is little doubt that one event dominates the currency’s dance card. The Federal Open Market Committee (FOMC) is expected to deliberate on the economic and financial health of the US economy and announce what actions it will take come November 3rd at 18:15 GMT. Economists and the speculative market are already heavily favoring an increase in stimulus. ‘If’ is no longer the concern on this point. This facet has already been priced in. And, that said, if there is in fact no change to policy; the greenback will immediately reverse course as positioning to this point was made in the effort to price just such a scenario in. Following the lines of probability though, the more pivotal and debatable aspect of this event is the size and maturity (how long it scheduled to last) of a second asset purchasing program. Given the musings of a few policy officials, the consensus is for a more flexible program that comes in intervals of $100 billion injections over five or six months. That is our unofficial benchmark.
An interesting angle to this event was added just this past week when it was reported that the Federal Reserve Bank of New York polled its Primary Dealers (those banks that have to engage in open operations and bid on Treasuries) to see what they expected the size and maturity of a second stimulus plan would be. This is likely an effort to see what the market is expecting so as to understand what scenarios would disappoint, appease or somehow surprise the masses. With some dealers throwing in forecasts of $1 trillion, we have to wonder whether this is an effort to match the market’s expectations so as not to generate unwanted volatility. Only time will tell.
Now that we laid out the scenarios and background information, what will be the reaction? Considering the Fed does opt for an additional stimulus program, matching expectations may ultimately offer little for risk appetite and leave the greenback at fair value. Besting the $500-$600 billion consensus could very well weigh the dollar as it devalues the currency; but feeding risk appetite is another thing. The first program clearly did not work; and many believe the marginal utility of further support will diminish quickly. If that is the case, risk appetite is still highly likely to collapse in the not so distant future; and the dollar will in turn find a foothold to rally.
Contributed by: DailyFx
New Zealand Dollar Awaits Guidance of Risk Trends, Yield Speculation
Fundamental Forecast for New Zealand Dollar: Neutral
* RBNZ holds its benchmark rate, says recovery slower than expected but hikes still in the future
* NZDUSD puts in for a tell-tale double top and evening star, is this a precursor to reversal?
The New Zealand dollar was exceptionally strong into the end of this past week. This was quite the feat considering there was nothing on New Zealand’s economic docket and the risk appetite trends were sedate through the final 24 hours of trade. Is this burst of life a signal of performance heading into the coming week? As it stands, the commodity currency was in or on the verge of significant price developments when liquidity was drained. Perhaps the most remarkable sign of tension was NZDUSD’s retest of a two-plus-year double top at 0.7650. Yet that isn’t the only kiwi-pair ready for action. AUDNZD has plunged more than 400 points this past week; EURNZD dropped to a five-week low; and NZDJPY has pushed back against the remarkably strong Japanese yen. This is exceptionally remarkable when we consider the New Zealand benchmark is lower than its Australian counterpart, growth forecasts have waned and demand for yield has leaned more towards emerging markets than it has sovereign debt (even high-yield sovereign debt).
In the world of trading, where everything is based on probabilities and the potential for return, ‘unusual’ and ‘remarkable’ should trigger caution. The New Zealand dollar is not the Japanese yen or US dollar. We need some material reason to believe that the kiwi can break meaningful resistance and carry an aggressive rally through. On its own, there is little to do that. The primary appeal of this particular currency is high yields and the possibility of higher yields down the line. RBNZ Governor Alan Bollard modestly stepped up his hawkish commentary; but his remarkable transparency wouldn’t hint at anything resembling a near-term hike. We could get around this fact if there were likely to be a surge in general risk appetite in the near future. There is a scenario for that in an expansion of stimulus efforts by the FOMC, Bank of Japan and perhaps Bank of England. However, that is perhaps over-reaching a speculative forecast. It would be too easy to disappoint. Besides, an expansive taste for risk would theoretically benefit the Aussie dollar more as it has the higher yields and greater probability of further hikes.
Given the New Zealand dollar’s standout strength and incredible performance against the star performer Aussie dollar, it is most likely the case that speculators are solely responsible for driving it higher. Speculative interest holds powerful sway over the markets; but it is also highly unstable without a meaningful fundamental handle for the masses to hold onto. For that reason, we should watch out for a sharp reversal from the kiwi if a broader risk appetite bid doesn’t develop out of the Fed’s rate decision. In the meantime, we should also take in the 3Q employment data scheduled for release as a long-term assessment of growth and rate expectations, as well as the short-term implications for volatility.
Contributed by: DailyFx
U.S. Session Key Developments
* GDP Grew at Annual Rate of 2 percent
* Reuters/University of Michigan Confidence Report Fails to Meet Expectations
Stocks Flat Despite GDP and Consumer Sentiment Data
U.S. Markets fluctuated between gains and losses throughout much of the day, but ended the session closing slightly higher. The DJIA experienced the best October since 2006, gaining 3 percent throughout the month. The S&P 500 was up 3.7% for October, the best performance since October 2003. The October rally in the markets was sparked by investors’ speculation that the US Federal Reserve will pursue further quantitative easing in order to stimulate the economy. Data released Friday indicated that the economy expanded in the third quarter at a slightly faster pace compared to the previous quarter, but growth remains too weak to cut unemployment any time soon. GDP, the value of all final goods and services produced in an economy, rose at an annual rate of 2 percent after climbing 1.7 percent in the previous quarter. Economists had expected a 2 percent growth. Also, consumer sentiment data from Reuters/University of Michigan showed the consumer mood darkened at the end of October, while the Chicago Business Barometer edged up from September and topped expectations.
DJIA 30 / 11,118.49 / +4.54 / +0.04%
The DJIA held onto a strong gain at the end of the trading session on Friday. Chevron fell 2.9 percent after the oil major’s third quarter earnings and revenue significantly missed analysts’ expectations. Merck dropped 2.2 percent as the company’s earnings excluding items topped estimates, but revenue fell short of forecasts. Microsoft was among the Dow’s best performers, with a 1.7 percent rise. The company’s first quarter profit rose 51 percent, benefiting from strong demand for Windows 7. Microsoft is also the Dow’s best performer this month, up 9.1 percent over the period.
S&P 500 / 1,183.26 / -0.52 / -0.04%
The S&P 500 closed flat at the end of the day. Among stocks in focus, Genworth Financial tumpled 9 percent. The life insurer’s operating earnings unexpectedly fell as stronger international operations could not offset weakness in life and mortgage insurance. S&P Equity Research cut its target price on Genworth’s shares following the report. Monster Worldwide surged 25 percent. The employment website operator reported stronger than expected forecast in its third quarter. The company has experienced growth in revenue, bookings, and deferred revenue since early 2008.
NASDAQ / 2,507.41 / +0.04 / +0.00%
The Nasdaq Composite Index closed in positive territory, as basic materials lead the advance with a 1.36 percent gain. 8 out of the 10 sectors rose at the end of the trading session. Health Care and Oil & Gas were the two sectors that declined, with a 0.34 percent and -1.18 percent fall respectively.
Contributed by: DailyFx
I remain short EURUSD from 1.39 and 1.3950 against the high at 1.4080, as I expect the pair may have made an important reversal. Thus far the position has not really gone very far as price moves sideways and that makes me a bit nervous. But I'll give this time to play out (as long as my stop isn't triggered). A big week of event risk ahead warns of major USD moves, and it's tricky to predict how the USD might react to the packed calendar.
Contributed by: DailyFx
Following up with the short EUR/USD trade from earlier this week, I am looking to maintain the position going into November as the pair continues to carve out a top, and the exchange rate is likely to face increased volatility over the following given the slew of market-moving event risks. I am still looking for a test of the 50.0% Fibonacci retracement from the 2009 high to the 2010 low around 1.3500, and will maintain the stop at 1.4001, the 10/13 high. For now, I am keeping a close eye on the GBP/USD to see if we will get a close above 1.6000 as the exchange rate rallies to a fresh weekly high of 1.6014, and I may look to buy into the recent strength behind the British Pound as investors expect the Bank of England to maintain its current policy in November.
Contributed by: DailyFx
Europe Session Key Developments
* Investors Still Uncertain About Quantitative Easing
* US GDP Meets Expectations
European Stocks Closed Mixed as Investors Question Potential QE Success
European Markets closed mixed at the end of the trading week as the Stoxx Europe 600 experienced its first October rally in three years. The benchmark gauge added 0.1 percent at the end of the day, but closed down 0.2 percent for the week. However, the index has risen 2.5 percent this month amid speculation of further quantitative easing by the Federal Reserve. Many investors feel that potential QE success has already been priced into the market and that there are still some question marks as to whether it will work. Also, the US economy grew at a 2 percent annual rate in the third quarter as consumer spending climbed the most in almost four years. The increase in GDP was in line with analysts’ expectations. Overall, national benchmark indexes fell in 11 of the 18 western European markets.
FTSE 100 / 5,675.16 / -2.73 / -0.02%
The FTSE 100 declined at the end of the trading session on Friday. The benchmark index fluctuated between gains and losses for much of the day as investors speculated whether the US Federal Reserve will next week announce sufficient measures to keep the recovery on track. Scottish & Southern Electricity Plc climbed 3 percent as the company announced it will increase natural gas prices. British Airways fell 3.1 percent even as the company reported earnings that topped analysts’ estimates.
CAC 40 / 3,833.50 / -1.34 / -0.03%
The French benchmark gauge fluctuated between gains and losses throughout the day. BNP Paribas SA ended two days of gains, losing 1 percent as banking stocks were among the worst performers in Europe today. Greece’s Piraeus Bank SA sank 6.4 percent after the company announced plans to raise 800 million Euros in a sale of new shares to boost its capital. Bollore advanced for a second day, rising 1.6 percent as the company posted a 27 percent increase in third quarter sales. Eutelsat Communications sank 4 percent after it reported the loss of a satellite because of “an anomaly” detected on the propulsion subsystem.
DAX / 6,601.37/ +6.09 / +0.09%
The German index experienced the biggest monthly gain since March, as investors attempted to gauge the impact of further stimulus by the Federal Reserve. Metro, Germany’s largest retailer, tumbled 1.5 percent as HSBC Holdings Plc cut its recommendation on the stock to “neutral” from “overweight.” Porsche preferred shares fell 1 percent after the carmaker had its rating reduced to “neutral” from “buy” at UBS AG. MorphoSys slumped 2.3 percent. The biotechnology company reported a decline in third quarter net income to 1.4 million Euros, from 2.6 million Euros in the year earlier. Bilfinger Berger SE slid 3.2 percent as the company appointed former Hesse state premier Roland Koch as CEO.
IBEX 35 / 10,812.90 / +59.40 / +0.55%
The Madrid benchmark index experienced the largest gain among the 5 major benchmark indexes. Banco Popular Esponol SA climbed 1.6 percent after the Spanish lender announced third quarter profit fell. Ferrovial SA gained 3.3 percent as the manager of airports and highways posted a nin-month profit of 315 million Euros. Gamesa Corporacion Tecnologica SA rose for a seond day, gaining 2.2 percent. Gestevision Telecinco SA rose for a second day as Iberdrola SA further increased its stake in the company.
S&P/MIB / 22,048.43/ -39.29 / -0.18%
The Italian index declined for the fourth straight day this week. Amplifon SpA managed to climb 0.5 percent as the Cheuvreux trimmed its price estimate on the world’s largest hearing-aid distributor to 4.7 Euros from 4.8 Euros. It reiterated an “outperform” rating. Intesa Sanpaolo SpA dropped 2.3 percent ast he company is a likely candidate to buy the assets of Polbank, the Polish unit of Greece’s EFG Eurobank. Credit Suisse Group AG trimmed its estimates on Italian banks before quarterly resorts, causing further decline in the banking sector of the Italian economy.
Contributed by: DailyFx
If you knew of two traders and Trader 1 consistently won 40% of their trades while Trader 2 consistently won 80% of their trades...who would be more profitable?
In reality, you cannot tell which trader is more profitable or even if either trader was indeed profitable. If Trader 1 consistently won 200 pips on each win and limited their loss to 100 pips on each losing trade, after a series of 10 trades they would be up about 200 pips. If Trader 2 won 25 pips on each win but lost 100 pips on each loss, they would be a breakeven trader after a series of 10 trades.
But many new traders are misled by win percentage. Winning most of your trades is exciting, but not if it does not lead to consistent profits. So keep this in mind when you hear about a strategy that wins 90% of the time. That does sound appealing, but the key is profitability. One does not always lead to the other. If your goal is to be consistently profitable, win percentage is not as important how much you win when you are right compared to how much you lose when your are wrong.
Contributed by: DailyFx
Next week will be critical for the EURUSD as the pair stands at the crossroads as of late. Indeed, price action is capped by 1.40, and after the break below the rising channel, which remained intact for approximately a month, my bias remains to the downside. Taking a look at the weekly chart, the EURUSD looks poised to close above the 200-day moving average for the third street week, and if price action holds above this level next week, this could spell trouble for the greenback in November. Not to overlook, the pair has stalled at the 50-day SMA on the monthly chart. All in all, downside risks remain so long as price action does not close above 1.40. The FOMC rate decision and the Nonfarm payrolls release from the world’s largest economy next week may serve to be the catalyst needed for the buck. At the same time, I am still short the EURGBP and my position is currently in the money. Going forward I will look to target 0.8650 as technical indicators continue to point to further losses in the pair; stop at 0.8830. GBP traders will shift their focus to the U.K. interest rate decision and asset purchase target.
Going forward, I will look to enter a long GBPUSD position on a break and close above 1.600. The BoE rate decision is on tap and may serve as the next push for British pound as the pair bounced off key support at 1.5600. Meanwhile, a long USDCHF position is on the horizon as the price action has worked its way into an ascending channel, and now looks poised to test parity next week. With reference to the AUDCAD, I closed out my position slightly out of the money as the pair will close below the 20-day moving average. Taking a short position at today's close, with a target of 0.9860 may suffice. Good luck trading!!!