fallenDC

UK GDP may be revised upwards

According to many economists, the 0.7% UK GDP drop in Q2 may be a little too pessimistic. Last week the BoE Governor Mervyn King also spoke out on this subject: he said he expected the official GDP data to be better.

Data released this week are in contradiction with the output data: retail sales were a positive shock for the markets and the employment is rising. For this reasons the Q2 GDP contraction may be revised to 0.4% The figure is still negative, but obviously looks less threatening.

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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: $1.2200, $1.2275, $1.2300, $1.2350, $1.2400;

GBP/USD: $1.5760;

USD/JPY: 78.35, 78.50, 79.00, 79.05, 79.10;

AUD/USD: $1.0405, $1.0600;

EUR/JPY: 97.00, 97.05, 98.00;

EUR/GBP: 0.7800, 0.7950;

AUD/JPY: 83.00.

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August 17: forex news

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Asian markets are on the rise this week and higher-yielding AUD and NZD head for weekly gains versus yen. These currencies, however, are on the defensive against the greenback this week as US dollar strengthened due to positive American data.

EUR/USD keeps trading sideways in the $1.2370/2260 area. Euro is pressured by the rumors that Spain may ask for sovereign bailout earlier than expected. Spanish government meets today, so there’s the risk of some announcement. EUR/JPY is trading close to the 6-week high reached on Thursday around 98 yen as Germany signaled its support for the ECB’s approach to resolve the debt crisis. In Europe watch for Germany PPI at 06:00 GMT, euro zone’s current account at 08:00 GMT and the region’s trade balance at 09:30 GMT.

USD/JPY managed to close above 200-day MA yesterday – the sign that the bulls are gathering strength and will now have stronger support. The 2-year yields spread between US and Japanese bonds widened to 19.4, the maximal level since July 3.

USD/CAD breached support of 0.9900. Canada released July CPI data today (12:30 GMT).

Minneapolis Fed President Narayana Kocherlakota said yesterday that despite continued high unemployment the Fed may need to raise interest rates sooner than late 2014. Today in the US watch for August consumer sentiment data (13:55 GMT).

Morgan Stanley: global economy under threat

According to specialists at Morgan Stanley, the global economy has fallen deeper into the twilight zone that divides slow economic rebound from renewed recession.

Specialists explain the cuts by the rise in policy uncertainty, mainly in the US, Europe and Japan and by the out-of-date emerging market economic models. In their view, EM policymakers chose the wrong economic path, what caused problems in China, India and commodity-exporting countries. It is interesting to note that the emerging markets suffer more than the developed markets as they vulnerable to extremely weak incoming data.

Specialists have cut their GDP growth forecasts to 3.2% in 2012 and to 3.5% in 2013 over the past three weeks.

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EUR/USD is seen under pressure

The single currency keeps descending from this week’s maximum at $1.2385 hit on Tuesday. On the fundamental front European data disappointed, while American, on the contrary, were better than expected.

Investors await details on a new ECB scheme to help reduce the borrowing costs of Spain and Italy that the central bank is now considering. According to Reuters’ poll, conducted at the beginning of August, economists expect the euro zone’s central bank to start purchasing Italian and Spanish bonds in September and cut benchmark rate to new record minimum of 0.5%.

Standard Chartered: “EUR/USD is in a range for now but we still expect it to move lower in September on the prospect of more headlines out of Europe, a lot of event risk in September, and rate cuts as well. Our forecast for EUR is $1.18 by the end of the quarter.”

Nomura: According to the data, "central banks have been strongly accumulating US dollars. If this trend continues, demand for dollars will outpace that of euro, so it will be hard for EUR/USD to bounce meaningfully".

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USD/JPY needs to close above 200-day MA

The greenback is rising versus Japanese yen for the fourth day in a row. USD/JPY has tested the levels above the 200-day MA for the first time since the middle of July. Today the pair renewed 1-month maximum rising to 79.36. We think that US dollar has to close today above the 200-day MA at 79.20 for the bulls to keep pushing the pair up towards 80.60 (June maximum). If this line is only pierced, the pair could drift lower aiming at 78 yen.

Here’s what other analysts say.

Standard Chartered: The greenback may rise to 80 yen in the short term.

CBA: When non-Japanese yields start rising, then you get more Japanese investors putting money offshore. This and low volatility are “very supportive of the yen’s weakness”.

Mizuho: In any case US dollar will find it tough to break above the 79.50 yen to 80.00 yen region unless there is another strong catalyst, given the potential for dollar-selling by Japanese exporters at such levels.

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Chart. Daily USD/CHF

Analysts: comments on BoE easing prospects

Positive July UK retail sales figures (+0.3% vs. consensus 0.0%, June reading was revised to +0.8%) together with yesterday’s labor market data made many investors more optimistic on Britain’s economic prospects. However, specialists at ING and Rabobank still expect the BoE to continue monetary policy easing.

ING: The uncertainty over the UK data, coupled with worries about Europe and the US fiscal cliff will keep the BoE wary. We expect the central bank to introduce more stimulus in November.

Rabobank: The BoE's QE expansion is possible at the end of 2012. We acknowledge the positive UK employment and retail sales data, but on balance the UK economy is providing little cause for celebration.

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US Treasuries: Japan’s catching up with China

For now China remains the top holder of US debt, but if both countries continue buying at their respective paces until the end of 2012, Japan will end the year with more Treasuries. Japan’s buying US dollars trying to contain yen’s appreciation.

Japan bought $10.4 billion of Treasuries in June. All in all, the nation purchased $61.3 billion of American debt in 2012. Japan’s total holdings of Treasuries account for $1.1193 trillion.

China increased its portfolio of US government securities by $300 million in June. This year’s purchases are equal to $12.4 billion. All in all, China’s holdings of Treasuries account for $1.1643 trillion.

While China’s holdings have fallen by around $143 billion in the past year, Japan has boosted its portfolio by $237 billion in the same period.

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AUD/USD: technical comments

AUD/USD trades below $1.0500 mark after falling to $1.0453 yesterday. The pair still remains in a correction mode. At the same time, uptrend borders are intact for now and Aussie has chances to further gains as long as it’s staying above support in the $1.0440/50 area (August 1, 3, July 30 minimums, July 19 maximum).

It makes sense to look for opportunities to buy AUD/USD at $1.0530 and higher. Note that resistance for the pair lies at $1.0600 (psychological level, recent maximums), $1.0660 (downtrend resistance line connecting 2011 and 2012 maximums).

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Chart. AUD/USD

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, $1.2300, $1.2320, $1.2335, $1.2500 (large);

USD/JPY: 78.85, 78.90, 79.25, 79.50;

GBP/USD: $1.5550, $1.5730;

AUD/USD: $1.0300, $1.0445, $1.0480, $1.0510;

EUR/JPY: 95.00.

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QE3: analysts' reasoning

The expectations that the Federal Reserve will launch QE3 as early as in September weakened after amid better-than-expected July retail sales and industrial production figures.

Standard Chartered: “We are seeing increasing signs of stabilization in the US. The U.S. improvement is in contrast to the persistent weakness elsewhere. So that's dollar positive because (interest) rate spreads move in favor of the dollar.”

At the same time, there are more data releases ahead. And in case of disappointments the economic pessimism and the talk of more easing from the Fed may return very quickly.

Mizuho: “It's too early to celebrate with both hands in the air. Corporate sentiment provides the best gauge of current conditions. You have to think about what might happen if the Philly Fed index turns out to be weak. That could change the trend again.”

Empire State manufacturing index released on Wednesday slid to -5.9. Watch for Philly Fed manufacturing index at 14:00 GMT.

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news58.ru

August 16: forex news

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US dollar strengthened versus its major counterpart after better-than-expected industrial production data (+0.6% m/m in July). The market has started to take out a little bit of pricing for QE3 in the near term.

High-yielding currencies were also affected by negative foreign direct investment figures from China showing a decrease by 3.6% y/y. AUD/USD trades below $1.0500 mark after falling to $1.0453 yesterday. NZD/USD remains close to the key $0.8060 levels. New Zealand business manufacturing index slid to 49.4, indicating industry contraction. USD/CAD reached a new three-month low around 0.9880.

EUR/USD slid yesterday below $1.2300. Today euro revisited this area, but then dived to the levels around $1.2280. In Europe the most important publication is one of the CPI at 09:00 GMT. Spanish debt auction was canceled. GBP/USD is consolidating this week above $1.5660. Watch for UK retail sales data at 8:30 GMT.

USD/JPY managed to keep pushing higher: the pair rose above the 200-day MA as US bond yields climbed to more than 6-week maximums.

US housing data (building permits, housing starts) are released today at 12:30 GMT. Stronger than expected figures will further decrease the odds of QE3, especially after more solid industrial production reading came on Tuesday. As usual on Thursdays, watch for US unemployment claims, also at 12:30 GMT.

US data disappoints

Why can’t US data be unambiguous? Today’s figures disappointed the market after positive data released yesterday.Lower inflation and tumbling manufacturing activity is just what the Fed has been worried about. The fig

ures increase the odds of QE3. Does anyone here want certainty at last?

US consumer prices were unchanged in July (vs. +0.2% expected). Core CPI, which excludes the volatile categories of food and energy, rose by 0.1% (vs. 0.2%) expected. Empire State manufacturing index fell to -5.9 in August from 7.4 in July, showing the biggest miss in 14 months.

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RBC: UK economic paradox

Analysts at RBC note a strange inconsistency between the UK GDP (-0.7% in Q2) and the positive employment figures. In their view, it would be similar if the US NFP rose by 300K a month for three straight months along with the GDP contraction. However, the improvement of employment figures may be due to a short-term effect from the London Olympics.

Despite the fact that all the MPC members voted to leave the current monetary policy unchanged, many market participants still believe the BoE will opt for more monetary easing in the coming months to aid an economy struggling in a deep recession.

On Wednesday GBP/USD trades on the upside after the MPC minutes and the positive labor market data, but still remains below the $1.5700 mark. The pair remains capped in a sideways channel and below the 200-day MA resistance.

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Chart. Daily GBP/USD

EUR/GBP: reasons for a drop

Despite the recent bullish correction of the EUR/GBP, we see enough reasons to remain bearish on the pair in a longer term.

As can be seen from the H4 chart, last week EUR/GBP broke below the short-term bullish support line, hinting that the upward retracement is over.

What’s more, we can see a head-and-shoulder pattern with a neckline at 0.7825. This pattern marks a significant top in the market and would be confirmed by a break below the neckline.

Taking into consideration the reasons cited above, we recommend selling EUR/GBP at 0.7820 (just below the neckline), targeting 0.7760 (lowest level since August 2008) and with a stop at 0.7885 (above the right shoulder of the pattern).

From a fundamental point of view, euro zone’s debt woes are reviving with renewed vigor as the summer comes to an end. On August 20 Greece faces redemption of a 3.2 billion-euro bond held by the ECB. Note that the British pound may find support after we’ll see the first economic results of the London Olympics.

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Chart. H4 EUR/USD

JPY: contrary prospects

The yen issue doesn’t leave us. The views, as always, differ.

Nomura says that global risk-on environment suggests a higher possibility of JPY weakness in the near future. The specialists have already proposed to buy GBP/JPY. “US yields are always one of the most important determinants for USD/JPY and yield movements ahead of the next FOMC meeting in September may increase volatility.” Tuesday’s strong retail trade figures “could also be seen as an encouraging sign of a risk rally in the near future.”

RBC reminds yen tends to strengthen in August. The specialists say that although this hasn’t happened yet, things may change. “With a heavy concentration of US Treasuries coupon payments this week repatriation flow is likely to pick up against a background of depressed liquidity, particularly so given the Obon holidays (August 11-19) in the early part of the week.” According to the analysts, USD/JPY declined by an average of 137 pips every August through 2005.

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Photo from brecorder.com

Olli Rehn: Spain may ask for sovereign bailout

European Economic and Monetary Affairs Commissioner Olli Rehn signaled yesterday that Spain’s government is considering a request for a sovereign bailout after earlier accepting 100 billion euro of aid to help the nation’s banks, reports Bloomberg.

“The Spanish government has an open mind on this issue, but no decision has been made. We stand ready to act if there is a request,” said Rehn.

Spanish 10-year bond yields reached record maximum of 7.62% on July 24. Yesterday yields eased to 6.72%. Another euro zone’s nation, Belgium, on the contrary, sold 3-month bills at negative yield. In other words, investors paid to lend Belgium money. Rehn underlined that this is “not a healthy phenomenon”, but a “sign that the euro-zone economy is not doing well”.

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Olli Rehn, EU Commissioner for Economic & Financial Affairs

Photo from forexturtle.com

USD/JPY is up from the recent range

The technical picture improved. The pair USD/JPY rose yesterday above 20-day MA and reached 1-month high at 78.93 helped by positive American data. Today the bulls pushed the pair through the resistance line at 78.75 connecting March, June and July maximums.

Commerzbank: The greenback will rise to 79.01 (55-day MA) and 79.19 (200-day MA). The pair should close above 79.19 to get chance to rise to 80.63 (June maximum) in the coming weeks. If USD/JPY fails to overcome this obstacle, it will be vulnerable for a slide to 78.03/77.90. The resistance at 200-day MA is traditionally strong.

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Chart. Daily USD/JPY

BofA: bearish on NZD/USD

According to technical specialists at Bank of America, NZD/USD may fall after descending from the top of its year-long downward range.

The kiwi broke below the important support (previous resistance) at $0.8067, confirming the slide from the top. The pair again and again repelled from this level in 2011 and 2012. Strategists expect the pair to decline to $0.7841 and then to $0.7489.

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Chart. Daily NZD/USD

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: $1.2200, $1.2210, $1.2225, $1.2300, $1.2350;

GBP/USD: $1.5675;

USD/JPY: 78.00, 78.10, 78.25;

EUR/JPY: 97.00;

EUR/GBP: 0.8000.

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August 15: forex news

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High-yielding currencies weaken amid concerns US data will reduce the expectations for QE3. Demand for Aussie was also tempered after the Westpac consumer sentiment index fell amid prospects the RBA will keep interest rates unchanged. AUD/USD trades below $1.0500, while NZD/USD – below $0.8100. USD/CAD consolidates around 0.9920.

EUR/USD is trading below the week’s maximum ($1.2385), in the narrow range of $.1.2320/30, between 50- and 100-hour MAs. Markets in many European countries are closed due to the Assumption Day celebration. No data releases are scheduled in Europe; there even are no debt auctions.

The main attention this afternoon will be focused on the UK. At 8:30 GMT Britain will publish labor market data (jobless claims, unemployment rate) and the MPC meeting minutes. GBP/USD spiked to $1.5728 yesterday, but was contained by the 200-day MA.

USD/JPY rose yesterday above 20-day MA and reached 1-month high at 78.93 helped by positive American data.

Today the US will continue releasing important indicators: core CPI and Empire State manufacturing index at 12:30 GMT and industrial production at 13:15 GMT. The data is expected to support the greenback.

US data comes more solid than expected

Things in the US aren’t that bad after all, are they?

After mixed (more negative than positive) news from Europe, US data came better than expected.

American retail sales rose by 0.8% m/m (cons.: +0.3%; prev.: -0.7%). Core indicator increased by 0.8% (cons.: +0.4%; prev.: -0.8%). PPI added 0.3% m/m last month (cons.: +0.3%; prev.: +0.1%). Core indicator increased by 0.4% (cons.: +0.2%; prev.: +0.2%).

Wells Fargo: “Overall, foreign exchange markets continue to show a lack of conviction, although with global equity markets and European bond markets showing gains, we have a slight bias towards yen and US dollar weakness, and strength in most other foreign currencies.”

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NZD/USD: technical comments

On Tuesday investors are indecisive on the NZD/USD, but all in all the pair demonstrates a weekly decline. The kiwi has approached a strong support (previous resistance) at $0.8065 – the pair again and again repelled from this level in 2011 and 2012.

As can be seen from the daily chart, the pair remains in a channel, created by two lines: the upper connects 2011 and 2012 highs, the lower - the bodies of these candles). Today NZD/USD trades slightly above the lower. If the pair breaks it on a downside, it will target the lower boundary of the upward channel, existing since June. Support can be seen around $0.7960 (MA’s crossing) and $0.7810 (July 25 low).

If not, the pair will fluctuate towards the upper channel-forming line. Further strong resistance lies at $0.8200, $0.8317 (April 13 maximum) and $0.8470 (February 29 maximum).

Note that on a daily chart we can see a bullish divergence.

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Chart. Daily NZD/USD

USD/CAD: technical update

Last week USD/CAD breached downtrend support line which started to act as resistance. In addition, the pair went below the uptrend support line at 0.9955 connecting 2011 low and April 2012 minimum. This too will strengthen resistance.

The greenback is now consolidating above 0.9900 (psychological level which has acted several times as support during the past 2 years). If this support fails, USD/CAD will slide to 0.9800. At the same time, daily RSI is close to the oversold area.

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Chart. Daily USD/CAD

On the H4 chart we see bearish convergence on MACD – bullish signal. However, 50-, 100- and 200-day MA are sloping down providing resistance for the pair.

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Chart. H4 USD/CAD

Resistance: 0.9955 (previous support line), 1.0000 (psychological level), 1.0050 (February, April maximums, December 2011 minimum), 1.0100 (200-day MA).

Support: 0.9900, 0.9860, 0.9840 (February, March minimums), 0.9800.

We think that USD/CAD will be moving lower, but think that support at 0.9800 is very strong, so one should be looking for a chance to enter longs down there.

Analysts: what supports the Aussie?

Despite the risk negative environment, the Australian currency is enjoying a big increase in net long positions. What’s the reason?

According to some economists, the Aussie is supported by policy easing expectations: the ECB is likely to launch a massive bond-buying program, while the Fed seems to be close to a third round of QE.

"As global central bank policy has diminished tail risk and crushed volatility traders are adding to risk positions," say strategists at Scotiabank.

However, strategists at RBC are less optimistic. In their view, the Aussie is to weaken after the RBA expressed concerns about the impact of a strong national currency on the economy. Specialists add that the net long positions growth was too quick (investors were short on the Aussie in early June).

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