fallenDC

NZD/USD: technical comments

On Tuesday NZD/USD reached $0.8130, moving up for a second consecutive day. The pair, therefore, once again bounced from the upper boundary of the July sideways channel ($0.8067).

However, on the upside NZD/USD is limited by a strong resistance line, connecting July 2011 and Feb. 2012 maximums. Further there is a strong resistance around $0.8200. Support lies at $0.8067, $0.7975 (200-day MA) and $0.7840 (July minimums).

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Chart. Daily NZD/USD

EUR/USD jumped above $1.2400

EUR/USD jumped to the levels above $1.2400 getting above the 55-day MA to the downtrend resistance line from May maximums. EUR/JPY reached 6-week maximum at 98.60 yen.

Euro is supported as the meetings of the euro zone’s leaders which will meet later this week ignited hopes will agree to extend Greece’s fiscal adjustment program. Nomura is optimistic: “They will get there. The euro could move higher. Riskier assets are doing OK.”

In addition, Fitch’s Managing Director Riley said that the ECB might act even without the Bundesbank and showed an optimistic outlook regarding Europe adding that Italy doesn’t need more austerity.

The key resistance for EUR/USD lies at $1.2450. Commerzbank recommend watching whether the pair will be able to close above the 55-day MA today in New York. There are many sell orders in the $1.2430/50 area, and above it one finds more buy stops.

At the same time, it seems that the gloom will never leave the region’s horizon. Standard Chartered warns that “this is a period of calm before a resumption of the bear trend for euro.” The bank predicts EUR to slide to $1.18 by the end of September.

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Chart. Daily EUR/USD

AUD/USD extends the upside

AUD/USD rocketed t0 $1.0510 on RBA meeting minutes and risk-on market sentiment. The pair, therefore, managed to bounce back from the lower boundary of an upward channel, existing since June.

If AUD/USD manages to close the day above the $1.0500 level, in a near-term further growth towards $1.0600 will become likely. On the upside the pair is limited by the resistance line, connecting 2011 and 2012 maximums. On a downside support lies at $1.0475 (beginning of the May downtrend) and $1.0290 (200-day MA).

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Chart. Daily AUD/USD

What’s new in the euro zone?

Here we try to systematize the latest events

1. On Monday the ECB finally voiced its displeasure at the weekend report by Der Spiegel on capping periphery EU bond yields to bring down borrowing costs for troubled governments, saying it was misleading to report on decisions that hadn’t been made.

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2. Also yesterday the Bundesbank criticized the ECB’s potentially unlimited bond purchasing program, saying that such decisions should be made by national governments or parliaments, not by central banks.

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3. Luxembourg Prime Minister Jean-Claude Juncker visits Greece on Wednesday to discuss with Prime Minister Antonis Samaras the country’s request for a 2-year extension to its fiscal adjustment program. Then Samaras will go to Berlin to see Angela Merkel on Friday and to Paris on Saturday for a rendez-vous with Francois Hollande.

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Antonis Samaras. Photo by Chris Ratcliffe/Bloomberg

4. Greece is still considering 11.5 billion euro ($14.2 billion) of spending cuts for the next 2 years, according to the nation’s Finance Minister. The package will be ready by the time the Troika (ECB. EU, IMF) returns to Athens at the beginning of September.

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Photo: Bloomberg

5. The leaders of Germany and France will meet on Thursday trying to reconcile their different views on how to get on in combating the region’s debt crisis. Merkel is expected to underline that Greece has to fulfil its obligations under the most recent 130-billion euro rescue program and shouldn’t expect Germany to approve another bailout.

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Photo from marketnightshift.wordpress.com

August 21: forex news

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It’s another typical summer holiday trading day.

EUR/USD is moving gradually up today trading in the $1.2360 area. There are no major EUR-related data releases. Spain will offer 4.5 billion euro in 12-18 month bills. Spanish 10-year yields hit yesterday 7-week minimum at 6.16%. The series of important meetings begins in the euro area; follow our updates.

GBP/USD has risen above 200-day MA ($1.5713) and is moving up towards the 100-day one. Let’s see if sterling manages to hold its grounds today. Public sector net borrowing figures are released today in the UK at 8:30 GMT.

USD/JPY recoiled down from the 100-day MA returning to the 200-day one (79.22), the key near-term support.

Risk sentiment remains high. AUD/USD rose to $1.0480 levels after the RBA minutes showed the regulator think domestic economic growth will offset the global outlook. The central bank didn’t signal any intervention is needed to curb the Aussie’s strength. The Australian and New Zealand dollars were also supported by expectations talks among European leaders this week will lead to stronger measures to counter the region’s debt crisis, boosting risk demand. NZD/USD trades above $0.8100. USD/CAD trades below parity and close to a four-month low on the back of the improved economic growth prospects.

August 21-24: economic events

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Tuesday, August 21

Australia: The RBA will release monetary policy meeting minutes (1:30 GMT). The central bank may warn about the high level of Australian dollar which is close to 30-year highs. Few economists expect the RBA to intervene in order to contain Aussie’s advance. The central bank is more likely to cut interest rates if it finds the strong national currency is actively damaging Australian economy. For the moment, the RBA is signaling that it’s happy with interest rates where they are. Analysts at CMC Markets think that “traders will be looking for clues that the rate easing cycle is already over.”

New Zealand: The RBNZ’s inflation expectations survey (3:00 GMT). Westpac says that “often an interest rate market mover, the 2-year number may fall from 2.4% to 2.2%, a headwind for swap rates and the New Zealand dollar.”

Britain: Public sector net borrowing (8:30 GMT). After a large deficit in the June reading, the markets are predicting a surplus in July. This would be bullish for the pound.

Japan: Trade balance (23:50 GMT). Trade deficit is expected to widen in July to 460 billion yen from 300 billion yen in June.

Wednesday, August 22

Euro area: Luxembourg’s Prime Minister and the head of Euro Group Jean-Claude Juncker will will meet with Greece’s Prime Minister Antonis Samaras to discuss a 2-year extension of the indebted nation’s fiscal adjustment program.

Canada: Retail sales (12:30 GMT) increased by 0.3% in May after 0.5% drop in April, while the core reading added 0.5% after sliding by 0.4%. According to the forecasts, retail sales may have gained 0.2% in June, while core sales – added 0.4%.

US: Existing home sales (14:00 GMT). The annual adjusted reading fell from a revised 4.62 million in May to 4.37 million in June. An increase to 4.52 million is expected this time (July). The FOMC meeting minutes (18:00 GMT). Societe Generale claims that “the minutes will give additional hints on the FOMC stance”. Credit Suisse says that the possibility of the Fed announcing QE3 next month has declined to 50%.

Thursday, August 23

China: HSBC flash manufacturing PMI (2:30 GMT). The index rose from 48.2 in June to 49.3 in July. This time August reading is released. A reading below 50.0 indicates industry’s contraction.

Euro area: French, German and euro area’s PMIs. Rabobank underlines that “confidence indicators from the euro zone likely to receive the most attention this week as they provide a timely snapshot of sentiment across a range of sectors.” Saxo Bank expects that readings will be weak and the pressure on ECB President Mario Draghi to act will strengthen. Societe Generale, on the contrary, claims that “the euro area manufacturing PMI will post the first rise in 6 months, increasing to 45.0 in August, while the service sector index should increase to 48.6. Despite the improvement both indices remain well below the critical 50 level, which in turn should be consistent with another contraction in euro area GDP in Q3 in line with our current forecast.”

German Chancellor Angela Merkel is due to meet French President Francois Hollande.

US: Unemployment claims (12:30 GMT) will likely come little changed around 365K. New home sales (14:00 GMT) may have risen from the lowest level in more than a year of 350K in June to 362K last month.

Australia: The RBA Governor Stevens speaks (23:30 GMT). Deutsche Bank says that “the rhetoric from the RBA indicates a very high hurdle to moving policy from here. For now they appear quite comfortably on hold and this week’s communication will likely reinforce that.”

Friday, August 24

Euro area: Greece’s Prime Minister Samaras meets Merkel in Berlin ahead of the return of the Troika (EU, IMF and ECB) to Athens in September. On Saturday Samaras will meet Francois Hollande.

Britain: Revised GDP (8:30 GMT). The first revision of GDP is likely to show a better outcome than the preliminary pessimistic reading of a 0.7% contraction. Economic growth in Q2 is predicted to shrink by only 0.5% due to a smaller than estimated drop in construction activity and industrial production.

US: Core durable goods orders (12:30 GMT). The indicator may have climbed by 0.5% after losing 1.4% in June.

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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Table. Main macroeconomic indicators

RBS: trading GBP

Analysts at RBS claim British pound has switched to buy signal versus most of the rest of the G10 currencies, except USD (GBP/USD keeps testing 200-day MA), NOK, SEK and CAD. Such assumption is based on a simple 5- vs. 20-day MA momentum trading strategy. The biggest potential gains may be achieved in GBP/JPY and GBP/AUD.

The specialists note that although GBP/JPY may be over one standard deviation expensive, it’s difficult for the pair to move back towards fair value as the UK/JP 2-year rate spread has moved in favor of GBP since the BoE inflation report (the reduction in the BoE easing expectations) and the risk tone is positive.

If forex markets can play catch up to moves in other asset classes, AUD and NZD will be best placed to benefit vs. GBP.

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Chart. Daily GBP/JPY

Morgan Stanley: buy EUR/JPY

Morgan Stanley recommends buying EUR/JPY at 97.00 with stop at 95.70 and target at 101.60 yen.

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Chart. Daily EUR/JPY

Wells Fargo: GBP/USD growth is limited

On Monday GBP/USD extends the downside for a second consecutive day, but trades within the August uptrend. The pair trades below the 200-day MA ($1.5715).

Strong resistance for the pair lies at $1.5768/80 (June and July maximums – a two-month resistance, 50% Fib. retracement of a May drop) and at $1.6302 (2012 maximum). Support is seen at $1.5392 (July minimum), $1.5267 (June minimum) and at $1.5233 (2012 minimum).

According to specialists at Wells Fargo, in a near-term a brighter European and global market outlook could keep supporting the pair, but the medium-term prospects for the upside are limited.

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Chart. Daily GBP/USD

AUD/USD extends gains

On Monday AUD/USD trades on the upside above $1.0450 and close to the lower boundary of the upward channel, existing since June. The pair needs to fix above $1.0530 (August 17 maximum) to show the downward correction is over. On the upside strong resistance for AUD/USD lies at $1.0600 and at $1.0660 (resistance line, connecting 2011 and 2012 maximums).

Аnalysts at Westpac expect the pair to slide towards $1.0300 in the near-term on the back of falling iron prices and waning QE3 hopes. On the way towards this levels strong support lies at $1.0410 (August minimum).

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Chart. Daily AUD/USD

Commerzbank: levels for USD/JPY

Technical analysts at Commerzbank think that USD/JPY is targeting 79.64 (May 1 minimum) and 79.92/80.15 (June 11 maximum, July maximums and May 22 maximum). In their view, support for the pair lies at 79.22 (200-day MA), 79.08 (55-day MA) and 78.80 (August 9 maximum). Above the latter, there’s the immediate upside momentum.

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Chart. Daily USD/JPY

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 17.

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Source: FX Week

CFTC traders positioning data

The latest Commitments of Traders (COT) report, released on Friday, August 17, by the Commodity Futures Trading Commission (CFTC), showed that on a week ended August 14:

Non-commercial large futures traders, including hedge funds and large speculators, cut their total US dollar long positions to $8.92 billion on August 14 from a total long position of $11.7 billion on August 7. Speculator sentiment for the euro dipped last week after improving for three consecutive weeks. Net short British pound positions shrank last week and reached a virtually neutral level against the US dollar. Japanese yen net long positions edged up slightly following a dip the previous week. Swiss franc net short speculative positions increased after improving for two consecutive weeks. Loonie, ausie and kiwi net long positions keep on rising.

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.

In the COT report all the market players are divided into three categories: hedgers (commercials), big speculators (non-commercials) and small traders (non-reportable positions). We analyze only non-commercial positions (mainly, these are banks and investment funds).

We recommend you paying attention to:

Extreme Positions: If everyone is already long or short it is a strong indication price may reverse because there is no one left for buyers to buy from and no one left for sellers to sell to.

Changes in Market Positions: When large speculators change their position and go from net long to net short or vice versa, there typically is a good reason they do this.

Changes in Open Interest: Rising or falling open interest may reflect directional commitment or lack thereof and therefore indicate strength or potential reversal of a particular price trend.

Find more at the CFTC website http://www.cftc.gov/dea/futures/deacmesf.htm

Scotiabank: trading opportunities alert

Analysts at Scotiabank note that while EUR/USD was trading sideways last week, there are many other trading opportunities.

“EUR/CAD at new record lows; USD/JPY finally breaking out of its 16-session 88-point range; AUD/CAD collapsing lower. No time for the sidelines,” the specialists say.

The bank draws particular attention to Canadian dollar: “CAD has strengthened beyond where oil or interest rates would justify. There have been CAD positive flows this week that might have pushed it too far. Watch Canadian political landscape, since upcoming provincial elections could create some event risk.”

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Image from theoptionstradingcourse.com

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: $1.2250, $1.2400, $1.2450;

USD/JPY: 79.00, 79.15, 79.25;

AUD/USD: $1.0300, $1.0350, $1.0570, $1.0600;

NZD/USD: $0.8100, $0.8150;

EUR/JPY: 98.00:

AUD/JPY: 81.00.

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August 20: forex news

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The high-yielding currencies strengthen before the European leaders meet this week. The ECB may set limits on yields of euro zone sovereign debt by pledging unlimited bond purchases, what will support investor appetite for riskier assets. However, demand for AUD and NZD is tempered as the Fed meeting minutes on Wednesday may lower expectations for further monetary stimulus. Australia will release the RBA meeting minutes tomorrow. AUD/USD trades around $1.0450 and close to the lower boundary of the upward channel existing since June, while NZD/USD trades above the strong support at $0.8065.

The market’s attention this week is focused on the European politics: Greece’s Prime Minister Antonis Samaras meets Luxembourg’s Prime Minister Jean-Claude Juncker on Wednesday, German Chancellor Angela Merkel on Friday and French President Francois Hollande on Saturday. On Friday there will also be Hollande-Merkel meeting.

Last week EUR/USD was moving sideways in the $1.2260/2385 area. Today the pair is little changed from Friday’s close at $1.2334. The day is quite uneventful. Spanish 10-year yields ended last week at 6.44%, while Italian ones – at 5.78%, below the critical maximums.

USD/JPY was steadily rising last week and managed to rise above 200-day MA, but now stalled around resistance at 79.60 yen (100-day MA). Yen’s weakening is limited by demand for Japanese government bonds as Japan has the highest real interest level after Italy in G7.

GBP/USD is trading sideways around $1.5700. Last week it closed below 200-day MA at $1.5713.

Merkel: Germany is in line with ECB to save the euro

According to German chancellor Angela Merkel, her country is committed to doing everything it can to preserve the euro and called once more for fiscal discipline. Mrs. Merkel praised the European leaders for making progress, but underlined the time is pressing.

These days Angela Merkel is passing through difficult times. As leader of Europe’s largest economy and the biggest single contributor to euro-region bailouts, Merkel is facing pressure from Italy and Spain to pool debt and to bring down bond yields, from Greece to back an easing of its austerity timetable and from the ECB for politicians to take the lead in fighting the crisis. She also faces domestic pressure from her coalition partners to refuse any more aid for Greece.

Next week Merkel starts a new round of political activity: Germany hosts French President Francois Hollande on August 23, one day before Greek Prime Minister Antonis Samaras visits Berlin for talks.

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Source: Bloomberg

AUD/USD: ready for a further drop

On Monday AUD/USD tested the lower boundary of the upper channel which exists since June after the RBA dovish comments. The pair trades around $1.0435 (the lowest level since July 27) after a slide lower.

As can be seen from the daily chart, AUD/USD is forming a “rounded top” pattern since late July with a neckline at $1.0435. A close below the level will pave the ground for a further decline to $1.0290 (200-day MA).

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Chart. Daily AUD/USD

MIG Bank: trading USD/CHF

Analysts at MIG Bank recommend placing buy limit at 0.9630 and targeting 0.9730/0.9980/1.0300 and with stop at 0.9530.

Yesterday USD/CHF breached support line going up from August minimums. However, the specialists believe that support around 0.9660 is strong and able to make the pair recoil upwards: “We view the structure present since 0.8931 as being strongly positive and look for an eventual break back over 0.9972 to target 1.0300 initially and then higher.” The outlook will stop being bullish if the greenback dips below 0.9425 (June minimums).

We’d like to add that 1.0300 (200-week MA) represents a very strong resistance: the last time US dollar traded above it on a sustainable basis was in 2002.

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Chart. Daily USD/CHF

Commerzbank: levels for EUR/USD

Analysts at Commerzbank note that EUR/USD is testing the 55-day MA at $1.2395. In their view, if the pair overcomes this level, it will be able to rise to $1.2440 (August maximum). According to the bank, the latter will contain at least in the near-term.

On the downside, the specialists think euro will become vulnerable for a slide to $1.2162/33 (mid-July minimum and the current August trough) and $1.2042 (July minimum) only if it falls below $1.2255 (Thursday’s minimum).

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Chart. Daily EUR/USD

SocGen: EUR/USD in the $.2100/2500 area

Analysts at Societe General made an attempt to clarify on what grounds euro stands. The Specialists note that EUR/USD has moving sideways between $1.2100 and $1.2500 for the past few weeks.

“Euro is caught in between two opposing forces. On the one hand, the market is waiting to see if there will be a Greek holiday regarding them servicing their debt. On the other side, we have US data outperforming the G5 peers at the moment.”

Societe General recommends waiting for a sign that investors’ sentiment is really changing. According to the bank, this may happen as soon as Federal Reserve Chairman Ben Bernanke’s speech at Jackson Hole.

“If the euro breaks above 1.2500, it would probably mean that there is action coming from the ECB or the Spanish government, in other words, that something has happened to make us say there’s more room for appreciation in the euro. On the contrary, if EUR/USD breaks below $1.2100, it would mean that we’ve been disappointed by the ECB, so the US data and higher US yields are leading the direction.”

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Chart. H4 EUR/USD

Aspen Trading: buy EUR/AUD

Analysts at Aspen Trading Group are bullish on the euro vs. the Aussie. They recommend buying EUR/AUD at current levels, with a stop at 1.1650 and a target at 1.2000.

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Chart. Daily EUR/AUD

EUR/AUD moves on the upside

On Wednesday the Australian dollar weakens versus its major counterparts. EUR/AUD has already moved up from 1.1730 to 1.1830 levels. Today’s EUR/AUD rise may be the start of a new trend. If the pair manages to fix above 1.9000, we’ll see the bottom formed at 1.6000.

According to analysts, the pair follows the AUD/USD sharp decline caused by some aggressive Aussie selling. It’s important to remember that the RBA is concerned by Aussie's strength, so bearish comments from the regulator are possible.

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Chart. Daily EUR/AUD

USD/JPY: bullish view (Barclays)

Analysts at Barclays claim that USD/JPY may rise to 85 yen in 3 months. The main reason why the specialists are bullish on the greenback is that they think that American economy bottomed out in Q2 and its recovery will gain pace in Q4.

Yen tended to appreciate in August. This year, however, that may not be the case as US dollar is driven higher with the help of rising US yields. 10-year Treasury yield rose on Thursday to 3-month high 1.862%. Barclays underlines that many stock markets started rising already in June, while but Treasury yields kept falling until the end of July and reversed up only when Spanish yields eased off the record highs on the ECB’s pledges to do all it can to save the euro.

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Chart. US 10-year Treasury yield (blue) and 10-year JGB yield (red)