Currency Movers for September 03, 2015

3 September, 2015

EURUSD, Daily

EURUSD is trading near the upper weekly Bollinger Bands (20) after peaking higher last week. The move reached a high of 1.1714 and was reversed at a pivotal low from November 2005. This rejection brought the pair down to a level that resisted price moved higher in the beginning of August. This level also coincides with a rising trendline suggesting there is currently more potential in the upside while the immediate downside potential is limited. This view is supported by the Stochastics Oscillator (7,3,3) being oversold and starting to creep higher. The nearest support and resistance levels are at 1.1156 and 1.1369. The 1369 resistance is a daily high from Aug 27th and a pivotal candle low.

Today’s Currency Movers

The ECB is widely expected to keep policy unchanged, leaving the focus on the updated set of staff projections and the press conference. With growth forecasts overshadowed by concerns about China and lower than expected oil prices keeping headline inflation down, both growth and CPI forecasts are likely to be scaled back. In the base scenario the central bank is pretty much expected to remain on hold into next year, and Draghi will highlight the heightened risks to growth and highlight that the ECB stands ready to act should these risks materialise. Lower than expected inflation meanwhile is almost entirely due to lower oil prices and core inflation is rising, in tandem with money supply growth and a stabilisation in loan growth. If Draghi follows Constancio’s argument that the central bank needs to see through short term volatility caused by energy prices markets are likely to register disappointment, especially as some will be betting on a surprise move already today. So the EUR may rise again.

The IMF is warning the Fed not to tighten policy in a note to policymakers ahead of the weekend’s G20 gathering in Ankara. The Fund argued that the Fed should “remain data-dependent” and not take hasty action “with little evidence of meaningful wage and price pressures so far.” The IMF also calls on the ECB to extend QE, and for the BoJ to stand ready to do the same with its QQE program. The Fund is concerned about low inflation in major economies, arguing that “monetary policy must stay accommodative to prevent real interest rates from rising prematurely,” and also stressed that risks to the global economy have risen.

As central bankers ponder their next policy moves, Bank of International Settlements and IMF take very different views of persistent monetary policy accommodation and the fact that markets continue to rely on central banks. The IMF once again called on the Fed to refrain from hikes and the ECB to expand QE, while the BIS in its latest annual report called on policy makers to shift the view from short term stimulus to longer term growth measures to boost sustainable growth. Even ECB vice president Constancio said recently that monetary policy can only support not create growth and we tend to agree. Furthermore, as the BIS highlighted “signs of growing financial imbalances around the globe highlight the risks of accommodative monetary policies”. Adverse reactions even to the possibility of not so much monetary tightening but a reduction of the still very substantial degree of monetary accommodation highlight the challenges central banks will face when trying to return to more normal conditions. In this situation additional easing may only exacerbate the problem especially as low inflation is more than ever a function of oil prices, rather than the sign of broad based deflation risks, at least for Europe.

2015-09-03_1339

Currency Movers Charts

Worries over Chinese economic growth are once again proving too hard for the buyers of AUD. The pair is down against all the competitors while the metals markets are down as well. AUDUSD is trading near a huge bottoming formation from year 2008 but at the moment there are no signs of this helping to support price. NZD has been rallying against the AUD today. According to newstalkzb.co.nz the price of milk powder rallied by over 12% a couple of days ago. This translated into AUDNZD dropping lower from a resistance level near the upper daily Bollinger Bands (20). The pair is now trading near a potential support in sideways range. EURAUD is trading above January 2015 highs but just below a resistance created in May 2008. That explains the strong reaction lower from 1.6340.

Significant daily support and resistance levels for these pairs are:

2015-09-03_1421

Main Macro Events Today

  • Eurozone Jul retail sales rose 0.4% m/m, less than we expected, but with June revised up to -0.2% m/m from -0.6% m/m reported initially, the three months trend rate still picked up to 0.4% from 0.3% in the three months to June. The annual rate meanwhile jumped to 2.7% from 1.7% in June. The data confirms that consumption trends continue to support growth in Q3, which ties in with improving labour market and the rise in real disposable income also thanks to the low inflation environment.
  • Canada Trade Balance: We expect a widening in the trade deficit to -C$1.0 bln in July (median -C$1.1 bln) from -C$0.5 bln in June. The key for the report will be exports, for which we have penciled in for an 0.3% m/m gain in July after the 6.3% surge in June. A mix of factors were present in July, as oil prices tumbled and the Canadian dollar depreciated. At any rate, further growth in exports would offer key support to the BoC’s constructive outlook for second half growth, especially in the wake of the 0.5% bounce in June GDP.
  • US Initial Jobless Claims data for the week of August 29th and should reveal an increase to a 278k (median 272k) headline from 271k in the week of August 22nd. Claims are poised to average 272k, steady from July when potential auto retooling distortions were at play. We expect August employment to reveal a 215k headline with the unemployment rate ticking down to 5.2% from 5.3% in July.
  • US Non-Manufacturing ISM: Service sector producer sentiment is out today to finish off the August sentiment measures. We expect a decline to 58.0 (median 58.2) from 60.3 in July. Other sentiment measures for the month were much weaker and the ISM declined to 51.1 from 52.7. Overall, we expect the month’s ISM-adjusted average to drop to 51 after holding at 53 in both July and June.

2015-09-03_1417


Source link  
Stock market recovery continued

Still, U.K. and U.S. futures are also moving higher, indicating that abating fears over North Korea are keeping markets underpinned, while earnings optimism...

NZDJPY beneficiary of Asian session

With a the NZD is overvalued on one side and Sabre rattling between North Korea and the US continuing overnight there was really only...

Euro above 1.18 against the dollar

Asian stock markets moved higher, with a rally in banks underpinned by earnings reports and helping to offset pressure on exporters and automakers...


Gold support at 1258 but rolled over 15m

Gold remains bullish having posted at high over 1265 yesterday. My bias remains long and I entered again at 1258 last night. However, the intraday...

FOMC held rates steady

The Fed’s reluctance to commit to a time for QT beyond “relatively soon” and the fact that the Fed appeared to be moderately more concerned...

FOMC decision to outline its balance

U.S. markets will have a lot on their plates this week as they continue to assess the June jobs data, global developments in the aftermath of the G20 meeting...


Dollar majors have been challenged

EURUSD has settled around 1.1350, modestly above the five-session low posted yesterday at 1.1336. USDJPY has been trading on either side of 113.00...

Yen crosses keep ascending

The yen is coming under pressure across-the-board, with the 0% yielding yen converting back to the funding currency of choice in the forex market...

Oil prices hold above USD 44 per barrel

Asian stock markets mostly headed south, with Australia’s ASX a notable exception. Elsewhere markets followed Wall Street lower...

  


Share: