FX markets continue to trade in ranges, as fresh fundamental information is lacking to drive prices. However, the natural drift on the USD crosses has placed these pairs at interesting technical crossroads (see tech report), which could provide some opportunities near term. In the EURUSD, traders focus will remain on the1.4338 trend high, while the GBPUSD sees an initial resistance at 1.6558, which could be the trigger for a test of 1.6740 trend high. Risk appetites are holding firm, which, in turn, has significantly benefited risk correlated trades. Yesterday's UK June MPC minutes showed a dovish BoE. The key takeaway was the insight that the committee viewed the current level of asset purchases to be adequate and would need clear evidence to justify expansion. This report dampened speculation that expansion of the asset purchases would happen in August and was deemed GBP positive. Today's UK retail sales jumped on discounted goods to 1.2% m/m vs. 0..3% m/m exp. The BBA reported that 35.2k mortgages were approved in June, an increase of 3.3k. The optimism surrounding the sterling has increase significantly, with the GBP seeing fresh buying today. On a side note, Moody's is reportedly examining up to six Norwegian banks for possible downgrades. The CAD continues to gain strength on risk appetite, rally in commodities (specifically oil), the BoC member's pullback on currency concerns and yesterday's better than expected retail sales. Today, the CAD resiliency will be tested with the BoC releasing its monetary Policy Report, which is expected to echo the statement from Tuesday meeting. Today in the US session, initial jobless claims data is due and markets are buzzing that the recent fall in the last two figures was inflated by seasonal adjustment problems. Therefore, markets have been pricing in a strong rebound in initial jobless claims, which then raises consensus, although not reported. Quarterly earning reports will continue to be release today. However, with analysts forecasting already low-balling earnings, we see the hurdle as too low for most corporate to miss. More hype around better than expected earning will only fuel the speculative rally and therefore USD selling.
Today's Key Issues (time in GMT):
07:30 SEK Unemployment rate, % Jun 10.2 exp
08:00 EUR Current account, ¤ bn (sa) May -5.9 prior
08:30 GBP Retail sales, % m/m (y/y) Jun 0.5 (2.3) exp, -0.7 (-1.7) prior
08:30 GBP BBA mortgage approvals, K Jun 31.2 prior
08:30 GBP BBA net mortgage lending, £ bn Jun 2.3 prior
08:30 GBP BBA net consumer credit, £ bn Jun -0.1-
12:30 USD Initial jobless claims, thous (4wk mvg avg) 18-Jul 565 (568) exp
14:00 USD Existing home sales, mn saar Jun 4.80 exp, 4.77 prior
14:00 MXN Core CPI, % 2w/2w Jul 0.17 exp
14:30 CAD Bank of Canada Monetary Policy Report is released
23:50 JPY Index of all industry activity May 0.9 exp, 2.6 prior
The Risk Today:
EurUsd In the last couple of days the market has pierced the 1.4250 level 4 times and traded straight back below by the end of the hour and even back down to the 1.4161 support before making fresh attempts at breaking higher. This now means that many of the stops have already been taken out of the trade so there is little from a trade perspective to propel the pair up to 1.4338, but if reached expect even more intense resistance. We would still like to see a retest of the 2 year downtrend at 1.4050 where we expect a very strong bid from all angles.
GbpUsd Patience must be wearing thin for those waiting for the cable breakout. While 1.6272 provides very strong support, the rangebound action continues with 1.6550 as a significant ceiling and 1.6663 thereafter. A break and close above these levels should see huge momentum to the upside but for now the only real action is intraday.
UsdJpy After a couple of days of consolidation between 93.376 and 94.600 the pair's short term uptrend has been confirmed after catching a bid and attacking 94.600 once again. Intraday things are looking a little overbought so expect a small pullback from the 94.60 level before launching a fresh assault. Good support and uptrend at 93.865, a break below there would target 93.376 and a close down there would signal the end of the short term uptrend, but for now the pair feels like it has stamina in its move higher.
UsdChf The 1.6033 level has held strong and as suspected has caught a very strong bid, most likely from the SNB. Intraday the pair looks like it has moved too much too quickly pushing the stochastics to very overbought levels. The RSI however is in breakout territory so expect some exciting action in the next day or two. Resistance is not far away at 1.0692 and 1.0707 (prior support level broken) as the key level to get past. 1.0654 providing minor support level built over the last few days.