fallenDC

Macroeconomic indicators

The table below provides recent data on the main macroeconomic indicators and is an extremely valuable resource for any trader.

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Westpac: bearish on NZD/USD

On Monday NZD/USD trades close to a 5-week low below the $0.8000 mark and the 200-day MA. The kiwi remains under pressure because of the negative Chinese data and the euro crisis tension.

Support for NZD/USD is seen at $0.7930 (100-day MA), $0.7840/60 (support area of the June July sideways channel) and at $0.7800, while resistance – at $0.7997 (200-day MA), $0.8014 (June 21 maximum), $0.8053 (July 19 maximum) and $0.8073 (July 5 maximum).

According to specialists at Westpac, the pair targets $0.7800 and $0.7550. Australian GDP (Wednesday) and ECB meeting results and Australian labor market data (Thursday) may pull the pair down.

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Chart. Daily NZD/USD

EUR/USD: technical update

EUR/USD is consolidating in the $1.2585/60 area on Friday after testing new highs above $1.2600 on Friday. Here we also see some divergence on H4 MACD, though the short-term uptrend remains intact.

Commerzbank: resistance for EUR/USD is getting serious. The bulls may fail at $1.2657 (downtrend resistance line of August 2011) and $1.2748 (June maximum). In this case EUR/USD will resume its decline heading to the levels below $1.2406 (August 2 peak).

NAB: “EUR/USD has reached our interim (end Q3) target of 1.26, while AUD/EUR has similarly reached our forecast of 0.82. While volatility is set to rise through October, risk now is that some of the additional gains we anticipated during Q4 will materialize sooner. We can see EUR/USD trading up to at least 1.28 this month and AUD/EUR down to test 80.0.”

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Chart. H4 EUR/USD

GBP/USD: technical comments

GBP/USD consolidates close to the level of its opening ($1.5877) following a spike on positive British manufacturing PMI data (49.5 in August vs. forecasted 46.1 and 45.2 in July). The pair traded within the sideways channel in June-July before breaking its upper boundary ($1.5750) on August 21. GPB/USD trades above the 50-, 100- and 200-day MAs. On the H4 chart upward-directed MAs create a rather strong support for the pair.

Next resistance lies at $1.5900, $1.5911 (August 23 maximum) and $1.5928 (February 8 maximum). Support is seen at $1.5800, $1.5770 (August 30 minimum) and $1.5750 (upper boundary of the flat channel, August 28 minimum and a 100-day MA).

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Chart. Daily GBP/USD

USD/JPY is under bearish pressure

USD/JPY is trading in the 78.40/18 area after sliding by 30 pips on Friday.

The pair is now trading below support line connecting the recent minimums which is now providing resistance for the pair. There’s more of resistance at 78.65 (lower border of daily Ichimoku Cloud) and 78.80 (38.2% retracement of the decline from August 20 maximum to August 22 minimum; last week’s highs).

USD/JPY didn’t manage to regain the pivotal 79.00 barrier. The pair remains under negative pressure. We see bearish convergence on H4 MACD, but the general outlook remains bearish.

Nomura: “The dollar may be supported by likely buying from Japanese importers in the near term. But I do think it will test 78 yen.”

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Chart. H4 USD/JPY

UBS, HSBC: Grexit is not an option

Many analysts say that the odds of Greece leaving the euro area have diminished considerably ahead of the Troika (the European Commission, the IMF and the ECB) review of Greek finances and its progress in meeting its repayment require¬ments to its European lenders. The final report is expected by the beginning of October.

UBS: “In the short time span between March and today, the euro crisis has escalated to such an extent that, even theoretically, a Greek exit is no longer an option. The risk would be very high that it could lead to the euro¬zone unravelling altogether, because markets would see little reason why Greece can exit but Portugal, Spain and Italy cannot.”

At the same time, the ECB meeting on September 6 distracts the market’s attention from the Troika.

HSBC: “In more normal circumstances, the Troika report would be at the sharp end of market focus. But the reason it might not be is because there is so much else going on at the same time, with the ECB and Federal Reserve meetings taking place, so there are rather large distrac¬tions that might diminish the market’s fixation. If it were a quieter time, we would be hanging on every word of the Troika review. If the money for Greece is released then it is one less banana skin for the euro, so if the Troika report is positive, or at least neutral, then that will be good for the euro. If it isn’t, that would be a real headache for the mar¬ket because we have got used to the idea that Greece is a manageable crisis. If it looked like bail-out money would be stalled indefinitely, you would open up another unpleasant chapter in the crisis. For that reason it is not the most likely out¬come.”

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This image by the anonymous artist known as Colonel Flick aka Willimabanzai7

FX majors from top forecasters

Here are the forecasts for EUR/USD, GBP/USD, USD/JPY, USD/CHF and EUR/JPY from top forecasters. Data were submitted on August 31.

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Source: FX Week

AUD/USD keeps on falling

During the last days the Australian dollar has been a weak performer. AUD/USD has left the June-August upward channel and decisively moves down. On Monday the pair opened a new 5-week minimum at $1.0240 on the negative data releases. The pair trades below the 200-day MA. Next support lies at $1.0205 (100-day MA), $1.0176 (July 25 minimum) and $1.0100 (July 12 minimum). On the H4 chart we can see a bearish convergence, so a correction towards $1.0340 is possible.

Most analysts are bearish on the pair’s longer term prospects. For example, specialists at UBS expect AUD/USD to reach parity before the end of 2012. In their view, falling commodity prices and worrying China economic data will weigh on the pair. Strategists at Westpac also believe the pair is moving towards $1.0000/0100.

Tomorrow the RBA will hold a meeting for a policy decision. According to most economists, the regulator is likely to keep the cash rate at 3.50%.

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Chart. Daily AUD/USD

BMO: CAD is approaching extreme levels

USD/CAD keeps trading close to 3-month minimum at 0.9840 hit on August 21. A breach of 0.9800 would be a very bearish signal. Yet, as this is the bottom of a significant consolidation area, it will be hard for the bears to push the prices lower.

Resistance: 0.9900, 0.9950, 1.0000, 1.0050.

Support: 0.9840, 0.9800, 0.9730.

BMO Capital Markets: “Investors, including central banks and sovereign wealth funds, have favored the loonie to diversify their holdings and as a haven from the debt crisis in the euro region. Canadian dollar is approaching extreme price levels where it is going to have an impact on the domestic economy. The recent strength is going to be hurting the demand we have seen. CAD should become weaker versus the US dollar and fall to around C$1.03 per USD by the end of the year, which would be a more comfortable level for the Canadian economy to operate at.”

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Chart. Daily USD/CAD

CFTC trader positioning data

The latest Commitments of Traders (COT) report for week ended on August 28 was released on Friday, August 31, by the Commodity Futures Trading Commission (CFTC).

Speculative investors turned against the greenback for the first time in nearly a year. Investors held net short USD positions against seven major currencies worth $1.59 billion. EUR shorts fell to the smallest level in about 4 months. The net long JPY position nearly doubled as yen was bought as a safe haven. In recent weeks the market had shown a clear preference to extend long speculative positions in CAD and AUD. In the latest reporting period, CAD was the only one to stay in such favor. The net long AUD position fell by about 10%.

Take a look at the following table.

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It’s necessary to note that the figures cited above are always a week old at the time of their release. Never the less, CFTC data gives a good oversight into how the market is positioned and if/how these positions are being unwound. Although the CME speculators represent a small fraction of trading in the currency markets, their trades are widely seen as typical of hedge fund investors' currency movements.

September 3: forex news

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On Monday the risk aversion is high. AUD/USD opened a new 5-week minimum at $1.0240 on negative data releases. Worse than expected China manufacturing PMI released on Saturday made the pair open with a gap lower on Monday. Pressure on the Aussie increased after the much worse than expected Australia retail sales data (-0.8% in July vs. a +0.3% forecast and a revised +1.2% in June). Later on the pair bounced back to the $1.0270 levels. NZD/USD also opened with a gap lower and touched $0.7980, but then rebounded towards $0.8015. USD/CAD declines for a second consecutive day.

EUR/USD remains relatively flat around $1.2580, close to a two-month high. GBP/USD consolidates above $1.5850. Meanwhile, USD/JPY moves on a downside as demand for safe currencies increased on the back of concerns on concerns the global growth slows down. Demand for the greenback was limited on speculation the Fed will expand stimulus measures which tend to debase the US currency.

Today watch for important PMI releases in Spain, Italy, Great Britain and the EU and the ECB president Mario Draghi will speak at 13:30 GMT. There are bank holidays in US and Canada.

Bernanke didn't rule out more QE

The Fed’s Chairman Ben Bernanke made the case for further monetary stimulus at his speech in Jackson Hole on Friday.

Bernanke said that high unemployment was a “grave concern” and that further bond purchases under quantitative easing remained an option. The Chairman defended the central bank’s $2.3 trillion in bond purchases since 2008, estimating they helped to create more than 2 million jobs.

According to consensus forecast, US economy will add fewer jobs in August than in July (cons.: 121K; prev.: 163K). The economists expect US jobless rate to remain at 8.3%.

The next Fed’s meeting will take place soon – on September 12 and 13.

Bernanke finds himself under severe political pressure: if the Federal Reserve announces further stimulus, Republicans could accuse Bernanke of interfering in politic; if it doesn’t, Democrats could reproach him for standing by at a time of 8.3% unemployment.

The Dow Jones Industrial Average added 90.13 points to 13090.84 after rebounding from an initial pullback. Gold prices rose to 5-month maximum of $1,684.60 an ounce. The greenback weakened versus the majority of its counterparts.

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Photo from msnbc.msn.com

Market talk: Buba's Weidmann may resign

There’s talk of Bundesbank President Jens Weidmann’s potential resignation.

It’s a common knowledge that Weidmann has negative attitude towards the ECB’s bond purchase program as he sees it “too close to state financing via the money press.”

To satisfy Bundesbank, the ECB President Mario Draghi might have to put a lot of conditions in the program risking diminishing its impact considerably. A Bundesbank spokesman declined to comment on a report in the Bild newspaper.

Weidmann told Der Spiegel on Sunday: “I can do my task best if I stay in office. I want to work to ensure that the euro is just as hard as the mark was.” We think the odds are that Weidmann won’t give up keeping pressuring Draghi.

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Chris Ratcliffe/Bloomberg

EUR/USD close to 8-week highs

EUR/USD rose to 100-day MA at $1.2582, but then declined as the sell orders clustered in the $1.2580/00 area come into play.

According to flash estimates released today, euro zone’s CPI edged up to 2.6% in August (cons.: 2.5%; prev.: 2.4%). Euro zone unemployment rate remained unchanged in July at 11.3%.

Euro increased ahead of Ben Bernanke’s speech in Jackson Hole. US dollar weakened against all but two of its 16 major counterparts after Atlanta Fed President Dennis Lockhart said that US central bank has a tough decision on whether to add further stimulus to promote a stronger economic recovery.

Still…

"We're not expecting him (Bernanke) to announce that QE would start any time soon," Christian Schulz, senior economist at Berenberg Bank. "We expect him to announce that the Fed stands ready to act if things deteriorate but there's no sign of that at the moment. Those people who are betting on QE to start imminently will be disappointed and, yes, that would mean that markets would turn south.”

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Daily EUR/USD

USD/CHF: technical picture

USD/CHF is consolidating between 0.9260 and 0.9550 after a powerful decline made at the start of last week when the pair’s trading range shifted about 150 pips lower.

If US dollar manages to rise above 0.9635 (this week’s high), it will be able to get to 0.9660 (August 22 maximum, June 29 high). This level and the 50-day MA at 0.9696 will provide a considerable resistance. Only the break above this level will mean that the decline from July highs is over.

Support for the greenback lies at 0.9550/38 (100-day MA, last week’s minimum). Below these levels the descending trend will be confirmed and the pair will be poised for a decline to 0.9460. Area of 0.9420 will likely provide grounds for a correction back to 0.9550. Moreover, there’s a 200-day MA nearby, 0.9388.

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Gaitame: levels for AUD on the downside

Analysts at Gaitame.com Research Institute think that AUD/USD may drop in September to the minimal level since the end of June.

Aussie closed yesterday below the 200-day MA of $1.0315. The specialists say that if the pair slides below $1.0219 (38.2% retracement of the advance from June to August), it will get vulnerable for a slide to $1.0098 (50% retracement).

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Chart. Daily AUD/USD

The Day of Ben or Big Ben Day

This day has finally come. Remember last year when we were also counting days to Jackson Hole and Bernanke neither ruled out further stimulus, nor signaled an impending move? Well, there certainly is the risk that Bernanke will be vague this year as well saying that the Fed is actively considering another round of monetary easing, but stopping short of signaling another bond-buying program is imminent.

Analysts at BNP Paribas and JPMorgan claim that as the last FOMC meeting minutes were dovish – many of the FOMC admitted the need of action in the absence of the substantial and sustainable economic recovery – it would be difficult for Bernanke to sound firmer, because this would be considered as pre-emptive action on his part of the FOMC next meeting on September 12-13.

Stock markets will be disappointed in case of the lack of concrete detail on the likely course of action as they have gained so far on the expectations of intervention from both the Fed and the ECB.

According to Reuters’ poll released yesterday, only 44% of investors surveyed expect the Fed to announce QE3 in September, down from 70% in July.

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Photo from topnews.in

August 31: forex news

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Demand for safe havens flared as Spanish Prime Minister Mariano Rajoy delayed seeking a sovereign bailout for his country. Moody’s Investors Service said its review of Spain’s debt rating (Baa3) will continue through September and reiterated the risk of a possible downgrade.

USD/JPY has tested today support line at 78.38 yen. Yen held its weekly gain even after a report showed that core CPI fell by 0.3% y/y in July, while industrial production unexpectedly declined in the same period increasing the odds of more easing from the BOJ.

AUD/USD closed below 200-day MA at $1.0308 yesterday, so did NZD/USD (0.7986). USD/CAD is trading on the upside around 0.9925. Canada’s GDP is released at 12:30 GMT.

EUR/USD returned to $1.2500 after testing this week resistance around $1.2575 earlier this week. In Europe watch for German retail sales at 06:00 GMT, Italian unemployment 8:00 GMT and flash EU CPI and unemployment rate at 09:00 GMT. Later in the US Chicago PMI is released at 13:45 GMT.

All eyes are focused on Ben Bernanke’s speech titled “Monetary policy since the crisis” at 14:00 GMT at the Fed’s symposium in Jackson Hole. The speculation about whether the Fed’s chief will announce more easing continues; the greenback is supported.

EUR/USD: failure is a matter of time

EUR/USD keeps moving sideways in the $1.2575/20 area. At the same time, such calm won’t obviously last long. The closest support is provided by the 100-hour MA at $1.2528, while the closest resistance is created by the very short-term resistance line around $1.2568. There’s more resistance at $1.2587 (100-day MA), $1.2592 (23.2% Fibo retracement of 2012 decline). Support also lies at $1.2500, $1.2475, $1.2435, $1.2385 (50-day MA).

UBS: “There is still scope for upside in the near-term. A break above 1.2595 would open the way to 1.2664/95.”

Commerzbank: The medium term outlook for EUR/USD will remain bearish as long as it’s trading below $1.2740 (June maximums). If euro drops below the uptrend support around $1.2382, its decline will accelerate.

Societe Generale: “Recession and more monetary accommodation isn't a recipe for a turnaround, so further weakness is just a matter of time.”

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Chart. Daily EUR/USD

GBP/USD: technical & fundamental

British pound is moving up versus the greenback. GBP/USD has left the daily Ichimoku Cloud last week and crossed 200- and 100-day MAs bottom-up – now these lines and the top of consolidation range around $1.5750 play the role of support for sterling.

For the last 2 days the pair is trading in a narrow range of $1.5840/10 ahead of the Fed’s meeting in Jackson Hole. Any hints from Ben Bernanke on further stimulus would hit US dollar pushing GBP/USD to 3-month maximum at 1.5912 reached last week.

Analysts at Morgan Stanley expect GBP/USD to strengthen in the near-term to $1.6050. The specialists, however, claim that the medium-term outlook is negative due to concerns about UK economic weakness. Britain is still in recession, so the Bank of England may do more QE later in the year.

There’s strong resistance for sterling around $1.6000 (top of the weekly Ichimoku Cloud, downtrend resistance line connecting highs of 2011 and 2012). In addition, investors may be selling sterling versus euro ahead of the ECB meeting next week.

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Chart. Daily GBP/USD

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Chart. H1 GBP/USD

IFR: the chance to buy AUD/NZD

Analysts at IFR Markets underline that AUD/NZD has visited trend line support so far and recoiled up managing to close yesterday above 50/200-day MAs around 1.2890. Today the pair revisited yesterday minimums.

The specialists recommend buying Aussie at the current levels. According to IFR, the pair has completed the 3-wave correction from July maximums and is now to resume its advance and break above 1.3050.

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Chart. Daily AUD/NZD

RBS: EUR may slide vs. AUD, CAD

The markets are stirred ahead of Bernanke’s speech tomorrow and the ECB meeting next Thursday. Analysts at RBS, however, say that there’s “no reason to take the gambles and run large risk over the events.” In their view, it’s necessary to “wait and see, have the events out of the way.”

In the medium term, RBS still favors selling euro versus commodity currencies such as Australian and Canadian dollars. The specialists are worried about the “ever ballooning” ECB balance sheet, and he thinks more liquidity will help the commodity currencies.

RBS thinks that EUR/AUD could fall to the 1.1200 range in the next couple of months adding that euro may experience “similar moves against the Canadian dollar.”

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Chart. Weekly EUR/AUD

Nomura: Beige Book and Jackson Hole

The Fed released the Beige Book yesterday – the assessment of current economic conditions. According to the central bank, US economy continued to expand “gradually” in July and early August as improvement in housing and retail sales helped outweigh weakness in manufacturing.

Nomura: “The Beige Book suggests the anemic pace of growth in the economy continued into the third quarter, an assessment that does not seem to qualify as the sort of ‘substantial and sustainable strengthening’ needed to dissuade many FOMC members that ‘additional monetary accommodation’ would be needed. It does not alter expectation for the Chairman’s remarks at Friday’s Jackson Hole Summit, nor does it alter our judgment that the FOMC will eventually embark on QE3 in response to persistently high unemployment and greater downside risks in H2 2012. We expect the chairman's remarks to reinforce the key themes from the minutes of the last FOMC meeting, which include absent a significant improvement in the outlook further easing will be warranted, and large-scale asset purchases remain the most effective tool available to the FOMC.”

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Key options expiring today

Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (2 p.m. GMT).

Here are the key options expiring today:

EUR/USD: $1.2400, $1.2410, $1.2415, $1.2500, $1.2520, $1.2550;

USD/JPY: 78.50, 78.70, 80.00;

USD/CHF: 0.9600;

AUD/USD: $1.0250, $1.0350, $1.0400;

NZD/USD: 0.8100.

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August 30: forex news

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The markets were going through consolidation phase in Asia. Equities remained weak as Japanese retail sales fell by 0.8% in July and investors are now in doubts that the Fed will announce further stimulus soon.

AUD keeps moving down affected by the declining iron ore price as it accounts for 20% of Aussie exports. In addition, a report showed that home-building approvals dropped by 17.3% in July from a month earlier, the largest decrease since November 2002. AUD/USD approached 200-day MA at $1.0308. NZD/USD was supported by 0.8000 and went higher.

USD/JPY is trapped in the 78.80/45 area. GBP/USD is moving sideways in the $1.5840/10 zone. USD/CHF is consolidating above 0.9550. EUR/USD was once again stopped by resistance around $1.2575, though the pair remains well supported.

In Europe all attention will be focused on Italian 10-year bond auction. Also watch for German unemployment change at 07:55 GMT. The President of the European Commission Jose Manuel Barroso speaks at 09:00 GMT. The ECB President Mario Draghi said in German weekly Die Zeit yesterday that it’s in Germany’s interest to consent to extraordinary steps to preserve the single currency. In US watch for the unemployment claims and consumer spending (cons.: +0.4%; prev.: 0.0%). The Jackson Hole symposium finally starts today.