Forex News and Events:
Markets are relatively quiet today, as traders pause before Wednesday's FOMC rate announcement. The USD remains firm in the Asian session, as Asian regional equities are largely unchanged. In FX, majors were also in a mixed sentiment, as the EURUSD and the Cable were digesting their recent sell off. Markets are now watching 1.4000 and 1.6435, as the key supports. A break of these levels will cut short the pairs' bullish run and open the door for a move to 1.3850 and 1.6100, respectively. The USDJPY failed to follow through on Friday's big move and is trending lower on Ichimuko daily cloud resistance. In the EM space, we are vigilantly watching the USDRUB. The darling of carry traders has recently come under selling pressure, as an influential Russian official stated (Friday) the ruble needed to be devalued 20-30% in order to get the economy back on track. In addition, implied vols are again heading northwards, while the Q2 GDP is expected to show a contract of -10.1%. While we expect the RUB to regain strength, recent events have kept us especially vigilant to unwind scenarios. Yesterday's rating pressure continued to affect the Baltic countries, as S& P cut Latvia 's credit rating for the 4th time this year (Baltic economic conditions look terrible). There was significant selling across Scandies, especially in the SEK. Expect the sell off to continue in the near term. Overnight UK data was supportive of the recovery story. The UK RICS house price indexes continued to improve to -8 from -18, while the BRC retail sales increased 3.6% y/y. The sterling failed to rally around the stronger figures, as today's trade data has capped any optimism. And in China, a string of July's data failed to impress the market, although the readings were decent. The highlight was the further rebound in private spending, while new loans, which came in at CNY355.9bn against expectations of CNY500.0bn, disappointed. However, it was not low enough to generate concerns that less access to credit will obstruct Chinese growth. The daily flow of news is still taking a backseat to the USD reaction to Friday's NFP. There is a clear deviation from recent trading pattern, which has the USD weakening on stronger US economic data. This shift from a risk appetite trade to a growth differential story will be tested at tomorrow's FOMC meeting. The market expects that the Fed will see the positive NFP as a vindication that economic recovery is entrenched and tightening can begin in the far, yet not too distant, future. Today, Germany will release the final consumer price index data. From the UK, the visible trade balance will be released and from the US we have Non-Farm Productivity for the Q2, unit labor cost, and Wholesale Inventories.
Today's Key Issues (time in GMT):
00:00 JPY BoJ rate announcement, %
00:00 JPY USDFOMC meeting begins (to Aug 12)
05:00 EUR BoJ press conference Aug
06:00 EUR Germany: Wholesale prices, % m/m (y/y) Jul -0.0 (-9.7) exp
06:00 EUR Germany: Final CPI, % m/m (y/y)Jul -0.1 (-0.6) exp
06:00 SEK Germany: Final HICP, % m/m (y/y)Jul 0.0 (-0.6) exp
07:30 GBP CPI, % m/m Jul -0.7 (-1.1) exp
08:30 USD Trade balance, £ bnJun -6.6 exp
12:30 USD Productivity, % q/q ar (y/y)Q2 p 4.7 (1.9) exp
12:30 USD Unit labour costs, % q/q ar (y/y)Q2 p -2.0 (2.4) exp
14:00 JPY Wholesale inventories, % m/m (y/y)Jun -0.9 (-8.7) exp
23:50 Corporate goods price index, % y/y Jul -8.7 exp
The Risk Today:
EurUsd After catching a brief bid at the first support at 1.4178 the pair continued lower to the uptrend channel at 1.4120/35 late yesterday evening. As the pair moved lower the RSI 60 minute was throwing up some positive divergence and from the trendline the pair has caught a firm bid. The most interesting thing for the bulls is the break through the 60 minute RSI downtrend so short term it may be that the pullback is over and the medium term bulls are back in charge with stops below yesterdays low. First resistance at 1.4178 and lots of noise to contend with between there and 1.4240. Long sweet spot at 1.3965 where the lowest uptrend channel comes into play..
GbpUsd Just looking at the daily chart for a brief reminder of exactly how large the trading opportunities are here. 1.7029 has been confirmed last week as a major level to clear - downtrend channel; resistance from October 9th 2008; top of 6 month uptrend; and huge RSI divergence - the pair has gone down in pretty much a straight line to 1.6460 ever since. There is a level slightly lower at 1.6272 that should see a firm interest from the short-medium term sterling bulls but with Bob Prechter, the world renowned Elliot Wave Theorist, calling a bottom in USD and the beginning of a multi year bull run to new highs for the dollar index, expect macro money to cap any big upside in GBP. The 50% retracement and the very last downtrend channel at 1.7309 looks like one of the best trading opportunities for short sellers of the last few years.
UsdJpy Still the easiest chart to play and, as noted yesterday, a pullback was needed to attract any attention from the 5 week uptrend players. The pair has found support at 96.57 where the uptrend mid channel has come into play but the big money will likely be patient waiting for a retest of the 2 year down trend breakout at 96.19 or 96.06. Either way, a break below 96 would spell disaster for the Yen bears and the whole risk aversion trade could be considered over. In the meantime however, the medium term USD JPY bulls are in charge with 97.541 as the major obstacle.
UsdChf After yesterdays fairly straightforward shorting opportunity on USDCHF negative divergences, today poses a problem whether to play the trend channels or the support and resistance. 1.0819 has caught a bid this morning on both minor support and one of the uptrend channels but below there 1.0797 is a vital intraday level to keep your eyes on - failure there would be looking at the pair to move to 1.0764 or lower at 1.0739 where the pair also meets one of the lower uptrend channels. 60 minute stochastics are indicating an oversold situation but any buying should meet fierce resistance at 1.0891 and 1.0929. Lots of 20-30 pip intraday opportunities (as always with USDCHF).
Resistance and Support:
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot|