Never miss a story from David Song

Subscribe to receive daily updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from DailyFX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to David Song

You can manage your subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

Talking Points

  • U.S. Dollar: Index Breaks 10,000, ISM Manufacturing on Tap
  • Euro: ECB Rate Cut On Tap, 38.2% Fib Up Next
  • British Pound: To Consolidate Further, BoE To Maintain Current Policy

U.S. Dollar: Index Breaks 10,000, ISM Manufacturing on Tap

The shift in risk-taking behavior spurred increased demands for the greenback, which pushed the Dow Jones-FXCM U.S. Dollar Index (Ticker: USDOLLAR) above10,000 for the first time since February, and the bullish sentiment underlying the reserve currency may continue to gather pace throughout the remainder of the year as the weakening outlook for the global economy weighs on investor confidence. As equity futures foreshadow a lower open for the U.S. market, we should see the risk-off environment carry into the North American trade, but the ISM Manufacturing report could spark a shift in trader sentiment should the data encourage an improved outlook for future growth. Beyond the report itself, market participants will certainly keep a close eye on the ISM’s employment component as we have non-farm payrolls on tap for later this week, and the USD may consolidate ahead of the labor report as the data is expected to cast a weakened outlook for the world’s largest economy.

Euro: ECB Rate Cut On Tap, 38.2% Fib Up Next

The Euro extended the decline from the previous week to reach an overnight low of 1.3312 and the single-currency may continue to retrace the advance from earlier this year as European policy makers struggle to restore investor confidence. Indeed, Greece approved a EUR 6.6B austerity plan, which will reduce the budget deficit to 6.8% of GDP, but the government still needs to meet the 6.5% deficit laid out in the bailout agreement with the troika in order to avoid a default. As fears surrounding the sovereign debt crisis continue to bear down on market sentiment, there’s speculation that the European Central Bank will increase its efforts to shore up the real economy, and investors expect to see a rate cut later this week as the region faces a growing risk of a double-dip recession. As the fundamental outlook for Europe deteriorates, the sharp decline in the EUR/USD looks poised to gather pace over the remainder of the year, and the exchange rate may fall back towards the 38.2% Fibonacci retracement from the 2009 high to the 2010 low around 1.3100 as it searches for support.

British Pound: To Consolidate Further, BoE To Maintain Current Policy

The British Pound broke out of its narrow range as the GBP/USD slipped to a low of 1.5479, and the sterling may face additional headwinds over the near-term as market participants anticipate the Bank of England to ease monetary policy further over the coming months. Indeed, a report by the U.K. Times said the r Institute of Directors will press the BoE for another GBP 50B in quantitative easing, and the central bank may show an increased willingness to employ additional monetary support as the region faces an increased risk of a double-dip recession. Although the MPC is widely expected to maintain its current policy in October, the meeting minutes due out on the 19th may show a growing shift within the committee, and an increasing number of the board may call for additional monetary support as Governor Mervyn King continues to see a risk of undershooting the 2% target for inflation. In turn, we may see the GBP/USD continue to consolidate in the days ahead, and the exchange rate may threaten the rebound from last September (1.5296) as the fundamental outlook for the U.K. deteriorates.

--- Written by David Song, Currency Analyst

To contact David, e-mail dsong@dailyfx.com. Follow me on Twitter at @DavidJSong

To be added to David's e-mail distribution list, send an e-mail with subject line "Distribution List" to dsong@dailyfx.com.

Will the EUR/USD Retrace The Advance From Earlier This Year? Join us in the Forum

Related Articles: Weekly Currency Trading Forecast

FX Upcoming

Currency

GMT

EDT

Release

Expected

Prior

USD

11:00

7:00

Fed's Richard Fisher Speaks on U.S. Economy

--

--

USD

14:00

10:00

ISM Manufacturing (SEP)

50.4

50.6

USD

14:00

10:00

ISM Prices Paid (SEP)

53.5

55.5

USD

14:00

10:00

Construction Spending (MoM) (AUG)

-0.2%

-1.3%

Currency

GMT

Release

Expected

Actual

Comments

AUD

22:30

AiG Performance of Manufacturing Index (SEP)

--

42.3

Lowest since June 2009.

GBP

23:01

Hometrack Housing Survey (MoM) (SEP)

--

-0.1%

Declines for the fifth month.

GBP

23:01

Hometrack Housing Survey (YoY) (SEP)

--

-3.5%

AUD

23:30

TD Securities Inflation (MoM) (SEP)

--

0.1%

Increases for the seventh time this year.

AUD

23:30

TD Securities Inflation (YoY) (SEP)

--

2.8%

JPY

23:50

Tankan Large Manufacturers Outlook (3Q)

3

4

Highest since 2Q 2008.

JPY

23:50

Tankan Large Manufacturers Index (3Q)

2

2

JPY

23:50

Tankan Non-Manufacturing Outlook (3Q)

2

1

First positive reading since 2Q 2008.

JPY

23:50

Tankan Non-Manufacturing Index (3Q)

2

1

JPY

23:50

Tankan Large All Industry Capex (3Q)

4.3%

3.0%

Rises for two straight quarters.

NZD

0:00

ANZ Commodity Price (SEP)

--

-1.3%

Declines for the fourth month.

CNY

1:00

Non-Manufacturing Purchasing Manager Index (SEP)

--

59.3

Two-month high.

JPY

5:00

Vehicle Sales (YoY) (SEP)

--

1.7%

First rise since August 2010.

CHF

7:15

Retail Sales (Real) (YoY) (AUG)

--

-1.9%

Declines for the third time this year.

CHF

7:30

SVME-Purchasing Managers Index (SEP)

50.5

48.2

Contracts for first time since August 2009.

EUR

7:45

Italian PMI Manufacturing (SEP)

46.5

48.3

Contracts for the second consecutive month.

EUR

7:50

French PMI Manufacturing (SEP F)

47.3

48.2

EUR

7:55

German PMI Manufacturing (SEP F)

50.0

50.3

EUR

8:00

Euro-Zone PMI Manufacturing (SEP F)

48.4

48.5

GBP

8:30

PMI Manufacturing (SEP)

48.5

51.1

Expands for the first time since June.