Yesterday’s Goldman’s earnings should have hit the ball out of the park, with an impressive EPS of $5.25 vs. expectations of $4.18. Yet the USD failed to sell off in the manner we saw after JPMorgan’s numbers on Wednesday, and most major currencies actually lost ground against the USD immediately after the numbers. This may be the first indication that investor expectations have finally grown unrealistically high; an upside surprise is no longer enough to sate expectations, and remaining corporates will need to produce exceptional upside surprises to satisfy the market. Earnings are likely to represent the biggest focus for markets today as the timetable continues with General Electric, Merrill Lynch, Bank of America, and CIT Group Inc. Considering the precarious position CIT Group has found itself in for the last few months - balancing debt restructuring with the possibility of filing for bankruptcy protection - we feel that today’s report will be unlikely to carry the baton of impressive figures forward and could trigger a sharp correction in the USD. So far today, the DXY has managed to gradually recover somewhat to 75.60 (from its 75.22 lows post FOMC), and gold is moderating around the $1047-1053 levels for the time being. It seems that the aggressive USD sell-offs that have characterized the week my be finally experiencing some exhaustion, and with US data not presenting obvious directional bias to the USD anymore, expect positioning and technicals to dominate trading. That being said, the US calendar today will present TIC Flow data, Industrial Production (Sep) and U.Mich Consumer Confidence (Oct). The other major data to come in the session will be Canadian CPI (0.1% expected, 0.0% prior), but we feel that even though expectations are modest, positioning and central bank rhetoric is likely to prevent further dramatic pushes towards parity. This morning’s first main data release has been Swiss Retail Sales (Aug) which printed a extremely disappointing -1.0% YoY vs. +0.8% expected (1.0% prior); counter intuitively USDCHF sold off on the release but looking at the price action earlier in the morning, it seems there was a large spike about an hour before the release and the moves on the official release may have simply represented profit-taking.
Today's Key Issues (time in GMT):
09:00 EUR Trade balance, € bn (sa) Aug exp: 4.9 prev: 6.8
11:00 CAD CPI, % m/m (y/y) Sep exp: 0.1 (-0.9) prev: 0.0 (-0.8)
11:00 CAD Bank of Canada core CPI, % m/m (y/y) Sep exp: 0.2 (1.4) prev: 0.1 (1.6)
13:00 USD Net long-term TIC flows, $ bn Aug exp: 30.0 prev: 15.3
13:15 USD Industrial production, % m/m Sep exp: 0.2 prev: 0.8
13:15 USD Capacity utilization, % Sep exp: 69.8 prev: 69.6
13:55 USD University of Michigan consumer sentiment, index Oct exp: 73.3 prev: 73.5
The Risk Today:
EurUsdAfter EUR bulls took the pair through the major resistance at 1.4950, resistance at 1.4967 (level we highlighted yesterday) has capped the pair this morning, with the pair rangebound off intraday support at 1.4891. The trend remains bullish, and beyond 1.4967 and next major target is at the heady heights of 1.5346.
GbpUsdWe mentioned yesterday some upcoming resistance for GBPUSD at 1.6272 and although there was a 50 pip downmove after the pair's first visit, the level remained under attack all day and finally broke through overnight, moving swiftly to the upper end of the resistance zone at 1.6381. Just as with EURUSD and USDCHF, expect some consolidation between these levels as the market eagerly anticipates the mother of all global corporate earnings, General Electric, due out today before the US market open.
UsdJpy We spoke yesterday about a new short term uptrend developing in USDJPY and no sooner had we mentioned the possibilty of a small trading range between the trend lines had the pair kicked into second gear and the uptrend players were out in force, breaking the steep 10 week downtrend in the process. So, looking at the bigger picture today to find the next level for short interest, it is clear to see the medium term trend is still down. There is a likelihood of some fresh USDJPY selling at the upper channel which now lies in the vicinity of resistance at 92.50 / 93.10. Intraday players may want to look at 91.80 for a brief pullback and short term longs playing the uptrend can look at 89.50/70
UsdChf Pretty much an inverse picture of EURUSD in the last 24 hours with new ground being covered to the downside before consolidation back to the breakdown level at 1.0186. The 2 week downtrend channel comes in just above at 1.0210 and more notable short term resistance at 1.0250.
Resistance and Support
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot|