Hello Traders,
So, the USD corrected lower after the Commerce Department pointed to a contraction in the number of Building permits and housing starts. Worse still, the general housing market is hovering at a one year low. The number of approved permits stood at just 1.215M compared to August’s 1.272M. Housing Starts is an important metric and just before the housing bubble in late 2006, it was actually considered a leading indicator when it comes to gauging whether the economy was expanding or not. Today, it looks like that 4.7% dip, is a telltale sign that the economy might be slow to recover in Q3 as the south recovers from the two hurricanes. Also in the US, President Trump is seen as favoring Taylor and as a known hawk, we shall wait and see what happens if he takes over from Yellen who is due to hike rates one more time.
In the UK, average hourly earnings rose last month but was still lower on a YoY basis due to high inflation which stands at around 3.0%. Retail sales dipped despite the rise in wages reflecting the erosion in household purchasing power coming at a time where basic pay is stagnant and growth of real wages negative when inflation is factored in. As a matter of fact, observers point to a possible rate hike next month when the MPC meets. The main argument is the striking of balance between that the solid employment situation and the need to tame the current 5 year high inflation before adjusting rates. Probability of rate normalization stands at around 80% in the swaps market.
Technically, EURZAR is trending at over bought territory and last week’s candlestick closed with a sell signal. Since then, price action has corrected 60% in the 4HR chart and is oscillating around the 38.2% Fibonacci level drawn from last week’s Lo-Hi. At this very level, there is a sell signal in the 4HR chart and an obvious over extension above the upper BB in the last couple of hours. As a currency pair in my watch list, I will look to enter short now and place a stop loss above 16.
Trading will be as follows:
Sell: 15.97
Stop Loss: above 16
Take Profit: 15.15-especially if there is a break below support in weekly chart.
Have a good trading day

eurzar 4hr chart-19.10.2017

Source: Dalmas

eurzar weekly chart-19.10.2017

Source: Dalmas

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