There is a plethora of data coming up today including US Durable Goods Orders and New Home Sales, plus rate decisions from Norway and New Zealand. The Norges Bank rate announcement will likely see Norway follow Australia as the second G10 economy (and first in Europe) to begin tightening monetary policy since the onset of the financial crisis, with markets expecting a move of 25bps to 1.50%. The RNBZ should also prove to be a hawkish affair, as data in the past month has provided compelling arguments for policymakers to drop their dovish bias; latest Retail Sales figures for Aug were 1.1% MoM (vs. 0.5% expected), Q3 Consumer Prices rose 1.3% QoQ (0.8% expected), and September Business PMI figures revealed the first expansion in 18 months (51.7 vs. 48.8 in Aug). Yet despite these positive developments for both NOK and NZD, there is a sense that a USD resurgence could well overshadow gains in individual currencies. The recent wobble in equity markets and weak Consumer Confidence figures from the US yesterday (47.7 vs. 53.5 expected) have allowed the USD to recover a footing against its major counterparts and we believe there may well be further rebound to come.
This morning’s Australian Q3 CPI beat estimates with a 1.0% increase QoQ (vs. 0.9% expected), however despite the initial spike higher to 0.9207, the rally has since been sold down to 0.9056; price-action that seems indicative of a loss of risk appetite in the FX markets. This has been echoed in the lower closes across most Asian equity indices, and indeed European stock markets have started the day in the red, with US futures portending a lower open to come. With the first measure of US Q3 GDP due tomorrow it seems investors have become nervous about the prospects of a correction after enjoying a stream of good news out of corporate earnings season. Risk appetite correlated trades are looking fragile at this point, with gold shying below $1040 and testing downside support at $1032.80 yesterday, and EURUSD looking vulnerable to a further correction to 1.4500.
So far this morning Scandinavian data has dominated price action; despite slightly better than expected Swedish Consumer Confidence, Retail Sales for Sep missed estimates (0.2% MoM vs. 0.5% expected), and there were downward revisions to the month prior (-2.3% from -2.1%), which caused a sharp sell-off in SEK. USDSEK rallied off the lows at 6.9470 to touch a high of 7.0025, and EURSEK revisited resistance around 10.3600. This was soon followed by Norwegian AKU Unemployment Rate that unexpectedly grew to 3.2% (3.1% forecast, 3.0% last month), causing a rapid spike higher for both USDNOK and EURNOK. USDNOK is now hovering just below 5.7000 but resistance should come in around 6.7200, and currency direction from here will be largely guided by the tone of the statement that accompanies today’s rate announcement.
Today's Key Issues (time in GMT):
12:30 USD Durable Goods Orders, % m/m Sep exp: 1.0 prev: -2.6
12:30 USD Durables Ex Transportation, % m/m Sep exp: 0.7 prev: -0.3
13:00 NOK Norges Bank interest rate announcement, % Oct exp: 1.50 prev: 1.25
14:00 USD New Home Sales, % m/m Sep exp: 2.6 prev: 0.7
20:00 NZD RBNZ Interest rate announcement, % Oct exp: 2.50 prev: 2.50
21:45 NZD Trade Balance NZD bn 12 Mth YTD Sep exp: -1803.0 prev: -2365.0
The Risk Today:
EurUsd After taking out stops through one of our medium term uptrend channels 1.4850 / 75, 1.4850 now serves as first resistance to the topside, with 1.4967 as a fairly decent resistance zone above there. 1.4760 is thenear-term support, but another leg down to the lower channel at 1.4684 would not be surprising if USD strengthens again today.
GbpUsd GBP is still a fundamentally troubled currency and technically 1.6484 should serve as a primary resistance today with 1.6272 a potential neckline in a very short term head & shoulders. If this formation does pan out to be a H&S within the second shoulder of a longer term H&S then the moves will start to become extremely dramatic into the year end. For now, intraday shorts expected at 1.6484 and longs at 1.6272. Any break lower and one can expect 1.6038 in the coming days.
UsdJpy Absolutely no change on USD JPY apart from a second move to the upper trend line and therefore more space to the downside. Long entry expected from the short term players at 90.60 / 85 and the major resistance at 92.50 / 93.00 hasn't gone anywhere.
UsdChf USDCHF has remained in a tight range between 1.0125 support and 1.0250 resistance since Monday evening, and it looks like it will continue to range between 1.0170-1.0250 today. The 1.0250 level is a significant resistance so any break above there would confirm the end of this push towards parity, targetting the next significant level at 1.0360.
Resistance and Support
|S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot|