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Industrial production declined 0.2 percent in September—the first monthly decrease since the recession ended in June of 2009. Utilities output dropped 1.9 percent and manufacturing production gave up 0.2 percent.

Mostly Unexpected Dip, Slow Growth Ahead

• Given the expansionary numbers we have seen in the ISM report in recent months, the decline in production comes as something of a surprise. However, the small decline in average weekly hours worked in the factory sector from the employment report did provide some clue that things could deteriorate somewhat. We still expect to see slower growth rather than outright declines in output for the fourth quarter.

Utilities, Manufacturing Output Both Down

• Utilities output fell 1.9 percent, but it only comprises 12 percent of total output. Manufacturing production makes up roughly three quarters of total output, and that measure showed a decline of 0.2 percent on the month.
• Capacity utilization fell slightly from an upwardly revised August level. There remains plenty of capacity in the system and at present levels there is little concern for inflationary pressure.

International Trading

Czech Republic

International Trading

EUR/USD Current Price: 1.3924

View Live Chart for the EUR/USD



EUR/USD spent most of the European session hovering around the old strong support at 1.3890, the 61.8% retracement of the 1.5140/1.1870 rally. Currently heading higher after a much better than expected TICS’ reading in the US, pair has a slightly bullish tone according to hourly chart, with price above 20 SMA (that holds a strong bearish slope anyway) and indicators heading north, yet below their midlines. Price needs at least to consolidate above 1.3935 to turn intraday bullish, while lose of 1.3880 should signal further falls for today.

Support levels: 1.3880 1.3840 1.3810 

Resistance levels: 1.3935 1.3970 1.4010

GBP/USD Current Price: 1.5874

View Live Chart for the GBP/USD (Select the currency)



 Pound has turned strongly bearish after losing 1.6000 price zone past week, with hourly chart still showing indicators heading south, below their midlines, while 20 SMA contains the upside around 1.5920. 4 hours chart however, is giving some signs of exhaustion to the downside that could keep downside limited. Still, lose of 1.5840 could trigger a bearish run with next strong support around 1.5770 support.

Support levels: 1.5840 1.5810 1.5770

Resistance levels: 1.5920 1.5960 1.6000

USD/JPY Current Price: 81.29

View Live Chart for the USD/JPY (select the currency)



Unchanged since last updates, pair holds a tight range with a persistent bearish tone as indicators in the hourly chart hold below their midlines, while 20 SMA acts as dynamic resistance area, limiting the upside for now. Double floor around 80.85 remains valid, with the neckline around 81.65: only above this last, pair could turn intraday bullish, aiming to test the 82.00/20 price zone. 

Support levels: 81.10 80.80 80.40

Resistance levels: 81.65 82.00 82.25 

USD/CHF: Current Price: 0.9576

View Live Chart for the USD/CHF (select the currency)



Back losing ground, the bearish trend remains intact in the cross, as long as below 0.9700 price zone; a daily close above that level could signal a bullish at least corrective movement, still not seen at this point. Approaching 0.9550 immediate support and daily low, hourly chart holds a bearish tone as per indicators aiming to cross their midlines, and price developing below 20 SMA. Lose of mentioned level will confirm the bias for today.

Support levels: 0.9550 0.9500 0.9460 

Resistance levels: 0.9590 0.9620 0.9660

International Trading

International Trading

USD/JPY 

EUR/USD 

EUR/JPY 

GBP/JPY

GBP/USD 

EUR/GBP 

• Download Full Weekly Technical Commentary - USD/JPY - EUR/USD
•  Download Full Weekly Technical Commentary - EUR/JPY - GBP/JPY
• Download Full Weekly Technical Commentary - GBP/USD - EUR/GBP

International Trading


 Of late the U.S dollar has experienced across the board downside pressure as the markets speculate over the size of the Federal Reserve’s second round of quantitative easing. Although, there are schools of thought argue the effects have been fully priced in, and that any disappointment on the size of asset purchasing will result in a dollar rally. After Ben Bernanke’s calculated speech on Friday the dollar has bounced off its lows as the prospect of a surprise diminishes, and the markets consider the validity of further dollar selling. 

• Yields on debt issued by some of the European Peripheral Nations have narrowed against the benchmark German bund, and the CDS market has eased. Improvements in the bond market coincided with ECB member Axel Weber’s hawkish rhetoric over the central bank’s role as buyers of debt resulted in EUR/USD temporarily breaching the 1.4000 handle at the end of last week’s trade. However, ECB president Jean-Claude Trichet failed to continue in a hawkish tone as he was quoted as saying that Weber’s views would be met with disagreement from other ECB members. The single currency is off the highs and is currently priced at 1.3900. 

• The Japanese Yen is the only major currency to trade slightly higher as the failed intervention by the Bank of Japan has led to a crisis of credibility for the central bank. After much jawboning, and a wasted $25bn the Yen continues to strengthen against the dollar. USD/JPY continues to grind higher despite the pair approaching the key 79.722 all time low. U.S dollar funded carry trades are growing in popularity as the Federal Reserve keep rates at all time lows, and eye further easing measures. 

• AUD/USD is trading off the parity highs as traders wait for the RBA minutes from October’s meetings. The RBA kept rates on hold at 4.50% as the stronger currency off-sets potential inflation. Australia and their currency have benefitted from China’s appetite for resources as they continue to out grow much of the developed world.

International Trading


On Tap This Week: Fed Speakers and Data on Manufacturing and Housing

The US data focuses on 2 key themes. The first is a slew of Federal Reserve Officials giving speeches. The data that is on tap this week will have to share the spotlight. On the data front, we get a look into manufacturing and housing. These are two key sectors and are on the mind of FOMC policy makers. While manufacturing helped spearhead the recovery, activity and job gains have cooled. Meanwhile, the housing market hit a rough patch following the end of the expiration of the government’s home-buyer tax credit.

The next important date for the US calendar will be the Fed’s Nov. 2-3 meeting. With the amount of Fed speakers on tap before then, it seems likely that the Fed will clarify the criteria that will trigger more easing, and perhaps offer some clues as to the size and scope of purchases.



Mid-Week: Fed Officials Make the Rounds and Beige Book

Tue 10AM FOMC Member Dudley – Due to speak at the Regional economic briefing, in New York.

7PM FOMC Member Duke – Due to speak at the Money Marketeers Club, in New York.

Wed 2PM Beige Book

Thu 2PM FOMC Member Bullard – Due to speak on the US economic outlook and monetary policy at the Federal Reserve Bank, in St Louis.

9:45PM FOMC Member Hoenig Speaks – Due to speak about the US economic outlook at the business and community leaders conference, in Albuquerque.

This week we have 4 member of the FOMC taking to the podiums and their comments will set the tone for the week as they embark on the messaging of more quantitative easing, and what triggers are needed for the FOMC to start more quantitative easing come Nov. 3rd. In addition to official speeches, the Fed will release its Beige Book on Wednesday. This compilation of anecdotal economic data is being prepared in advance of the November policy meeting, so this will be the most up to date information that the FOMC will be basing their decision.

Manufacturing – Industrial Production and Philly Fed Survey

On Monday, the Fed itself will report on industrial production and capacity for September. This indicators gives measures the output from the nation’s manufacturers, mines and utilities. The consensus is for a 0.2% rise, matching the gain seen in August. The capacity utilization rate – or the percentage of factories in use – is projected to edge up to 74.8% from 74.7%.



Here’s a look at the year-over-year change courtesy of tradingeconomics.com and we can see the sharp slide as the US fell into recession, and the healthy rebound and gains during 2010. However, now the pace of growth is slowing, as manufacturers more closely align their inventories to sales and the ratio between the two has more or less normalized.

In a second look at manufacturing, we get the Philadelphia Fed survey, a leading indicator as it measures October. Expectations are for the general conditions index to improve to 0.5 from -0.7 in September. The NY Empire index, which was released last week on Friday, was unexpectedly strong 15.7 (expectations had been a climb to 7.1 from September’s 4.1).

I wonder if the decline of the Dollar will show up in manufacturing data soon, as a weaker greenback can help spur exports growth.

Housing – Starts

Tuesday brings data on housing, a look at demand for new homes in the form of housing starts. The median forecast is for starts to fall 3.2% to an annual rate of 579K during September, after starts had jumped 10.5% in August. Building permits are projected to rise 1.2% to 578K.



The pace of new housing starts has been bouncing along the bottom since February 2009. While last month saw a decent bounce back of 10%, we are working from very depressed levels. So, while things may not be getting worse, we’ll see if the pace of starts falls back again in September.

A second report on housing, provided by the National Association of Home Builders, will give us a look at confidence of home builders. The housing market index for October is expected to edge up to 14 this month from a very low reading of 13 in September. This is a leading indicator compared to the housing starts data, and will actually come out first on Monday.

Our Weekly Look at Jobs

Another key data point will be Thursday’s weekly jobless claims because it will cover the pay period for the October employment report. Economists expect claims for the Oct. 16 week to total 455,000, not low enough to suggest strong hiring in October.



Claims have hovered between 450K and 490K for almost a year, but are now in the lower part of the range. Still until claims get below 450K we are not going to see the unemployment rate coming down.