Forex News and Events:
Analyst's forecasts are shifting faster than the Hamptons tides. Just yesterday, with the equity markets falling on the back of Friday's disappointing US economic data, pundits globally were calling the end to equity markets rally and resurgence of prolonged USD strength. Today, well, perhaps the “double dip” and demise of the V-shaped recovery will have to wait. Risk appetite stabilized in the Asia session, with the Shanghai index up 1..40% and European indexes trading safely higher, assisted by yesterday's late session report that US Empire State manufacturing survey (current activity) was up 12.1 versus consensus 3.0. As expected, the USD and JPY have come under decent selling pressure, with the Cable and AUD as two of the largest gainers. On a side note, the important positive intraday correlation between Shanghai composite and EURUSD is unaltered, providing traders with a good indicator of risk sentiment. Today, the RBA released their August 4th meeting minutes (hold at 3.00%), which further lessened the probability of a rate cut (i.e. increased the probability that the next move would be higher). The bank stated that should the economy continue to growth at the forecasted rate, the RBA would in due course need to adopt a less expansionary policy stance. The AUD continued to trade alongside China and risk sentiment more than growth differentials. In the European session, the UK's CPI printed higher than expected at 1.8% y/y, core 1.8% y/y vs 1.5% exp. The higher than expected inflation numbers has traders thinking that the BoE might be interested in reigning in QE and pushed the sterling higher. And on the continent, German ZEW also showed improvement, as August economic sentiment index printed at 56.1 vs 45.0 cons, 39.5 prior reading. After yesterday's nervous trading, we question the recent sustainability of the markets current stability. We are keeping a very open mind and will continue to use equity markets as a barometer for FX direction.
AUD Note: The medium term uptrend remains intact, with the pair catching a solid bid yesterday on one of the lower uptrend channels at 0.8160. First resistance for the bulls is 0.8286 and thereafter 0.8339, where one can expect to see some shorting. 0.8394 is shaping up as the short sweet spot for the AUD bears. For now, the medium term trend is up, with long entry at 0.8182. Intraday shorting opportunities at the levels mentioned.
Today's Key Issues (time in GMT):
07:30 SEK Industry Capacity Utilization, % Q2 78.1 prior
08:30 GBP CPI, % m/m (y/y) Jul -0.3 (1.5) exp, 0.3 (1.8) prior
08:30 GBP RPI, % m/m (y/y) Jul) -0.2 (-1.7) exp, 0.3 (-1.6) prior
08:30 GBP RPIX, % m/m (y/y) Jul (0.9) exp, 0.3 (1.0) prior
08:30 ZAR GDP (Annualized) 2Q -3.3 exp
09:00 EUR Germany: ZEW economic expectations index Aug 45.0 exp, 39.5 prior
12:30 USD PPI, % m/m (y/y) Jul -0.2 (-5.8) exp , 1.8 (-4.6)
12:30 USD Core PPI, % m/m (y/y) Jul 0.1 (2.8) exp, 0.5 (3.3) prior
12:30 USD Housing starts, thous Jul 598 exp, 582 prior
12:30 USD Building permits, thous Jul 573 exp, 570 prior
14:00 TRY CBT Rate Announcement 18-Aug 7.75% exp, 8.25% prior
23:20 AUD RBA Assistant Governor Edey speaks
The Risk Today:
EurUsd After triggering stops yesterday sub 1.4100, the pair fell 50 pips within 1 hour and spent another 4 hours in an accumulation phase at the 1.4051 support level. With Asia looking to open higher late last night the pair showed signs of life and has now moved up to the first part of the resistance between 1.4135 and 1.4178. Expect 1.4178 to pose a small problem intraday as we have a downtrend channel at that level and thereafter 1.4240 still remains a key level for the bulls to take out if they want to resume the medium term uptrend. Support levels at 1.4051 and below there the final uptrend channel and support at 1.4010 / 34. Notice how close those levels are suggesting some strength building down there.
GbpUsd After visiting the support at 1.6272 (low of 1.6276) the pair has made a brief rally to 1.6410 where it faces resistance at 1.6435. Looking at a 60 minute chart there is a very clear downtrend to contend with at 1.6467 so a break out and 60 minute close above that level should give the bulls renewed hope. Failure of 1.6272 to the downside targets 1.5947 and would potentially be the start of a multi month head and shoulders but more about that if and when it happens.
UsdJpy Well, by the skin of its teeth the pair held the support at 94.45 yesterday afternoon and is now facing resistance at the mid downtrend channel at 95.16 where shorts can be expected. More shorts expected at the upper downtrend channel and resistance at 95.66 / 85. With 60 minute RSI hitting overbought levels and 60 min stochastics around 91, there is a tone of short entry points being sought. Short term the bears are in control of the trend until the 60 minute bar closes above 96.00
UsdChf Resistance at 1.0844 continued to put a cap on any upmove but the pair has now broken it's 10 day downtrend. This morning the pair has retested the trend breakout at 1.0750 and from here the bulls have control of the medium term uptrend with 1.0739 as the lower uptrend channel
Resistance and Support:
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot|