15 September, 2015
EURUSD moved sideways yesterday creating a spinning top candle. This took place at 1.1334 resistance that we identified in the previous TCM report. A spinning top that takes place at a resistance after a move higher is a reversal sign. Stochastics Oscillator is oversold and rolling over which supports the view that price reversal is likely to take place. Intraday support is currently at 1.1282, while there is resistance at 1.1328. The next support level is at 1.1214. The Fed meeting being so near price movements are likely to remain small.
FOMC Forecast revisions at this week’s FOMC meeting should reveal sharp reversals of the June FOMC revisions for GDP and the jobless rate, as growth prospects should be boosted despite global market volatility. We expect all the 2015 GDP forecasts to be raised by 0.4%-0.6% after June’s downward bumps of 0.4%-0.8%, while all but the lowest jobless rate estimates are lowered 0.1% across the 2015-2017 period after 0.1%-0.2% June boosts in the lower end estimates. There is a possibility that policymakers low-balled their estimates in June to facilitate upward revisions at this month’s meeting that would help to justify rate lift-off. The 2015-16 PCE chain price estimates were also low-balled in June, but the ensuing oil price plunge eliminated the need for revisions. The core PCE chain price figures have tracked official projections, though forecast ranges may be narrowed. We expect big downward bumps in the high-end Fed funds estimates, as officials “tap down” rate expectations in keeping with a “one and done” 2015 rate strategy. See our policy outlook page for a table of our assumptions for the Fed’s revised forecasts.
French August CPI came in below expectations at a six-month low of 0% y/y, ebbing from the +0.2% rate seen in July. The median forecast had been for a rise of 0.2%. The EU harmonized figure slipped to +0.1% y/y from 0.2% in the previous month, where it had been expected to remain. The data follows a string of disappointing data out of France, while recent energy price declines will be further feeding disinflationary conditions.
RBA minutes (Sep 1 meeting) indicated policy remains neutral, but officials warned that international economic developments (mainly from China) had raised financial market volatility and global risks. On the other hand, the depreciation of AUD due to declining commodity prices, was expected to support growth. The minutes also indicated officials weren’t sure on which assets Chan had been sold as authorities worked to devalue the yuan, or which assets were being purchased by those looking to take capital out of the country. AUD-USD is slightly lower non the dovish minutes.
Canada ran a surprise C$1.9 bln surplus in the previous fiscal year, according to the Finance Department’s Annual Finance Report for FY2014-15 that ended on March 31. The Harper government had projected a C$2.0 bln deficit in the April budget outlook. The unexpected surplus was due to better than expected revenue growth. The challenge, of course, is for the current fiscal year, for which the government projected a C$1.4 bln surplus.
Currency Movers Charts
The fact that the BoJ maintained a steady, but accommodative policy stance has moved funds into JPY as it is up against all the major currencies after the Asian session. Many still see additional stimulus from the BoJ next quarter.
USDJPY is rolling over after creating a pin bar and spinning top in the daily time frame last week. AUDJPY is reacting lower from a resistance at 86.05. EURJPY is also falling after pivoting just below 137. At the time of writing price is trading below yesterday’s low.
Significant daily support and resistance levels for these pairs are:
Main Macro Events Today
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Asian stock markets moved higher, with a rally in banks underpinned by earnings reports and helping to offset pressure on exporters and automakers...
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...
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...
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...
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...
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