Daily Markets News From FBS

[⭐ kaito kid]

July 10: currency review

EUR/USD is trading near 3-month low at $1.2755 hit on Tuesday. Euro has weakened this month amid speculation the ECB may add to stimulus while the Fed tightens policy. The ECB Executive-Board member Joerg Asmussen speaks today after yesterday he said that the central bank’s policy will remain accommodative for an extended period. Later today the FOMC will release its last meeting minutes (18:00 GMT) and the Fed’s Chairman Ben Bernanke is due to speak on economic policy at 20:10 GMT. In Europe pay attention to French industrial production (06:45 GMT).

USD/JPY dropped to 100.40, breaking through the 100.80 support. Japan is scheduled to release core machinery orders tonight. Japan tertiary industry activity index for May rose by 1.2% m/m vs. expected 0.7% rise. GBP/USD is trading in the $1.4900 area after hitting $1.4813 yesterday on grim industrial data. USD/CHF is consolidating slightly below the yesterday’s high of 0.9750.

AUD/USD extends the upside for a third consecutive day despite the downbeat data, recovering to $0.9220. Australia Westpac consumer sentiment fell by 0.1% in July (June: +4.7%). RBA assistant Governor Debelle is scheduled to speak in Sydney at 7:30 GMT. NZD/USD strengthened to $0.7875. According to NZ finance minister English, the economy is gaining momentum, so interst rate will rise “not if, but when”. The Chinese trade data below expectations ($27.1B vs. forecasted $27.8) did not affect AUD and NZD significantly. USD/CAD slid to the levels just above 1.0500. The pair’s declining for the third day in a row.

http://www.fbs.com/analytics/2013-07-10/23066-july-10-currency-review

[⭐ kaito kid]

July 11: Asian session

USD plummeted versus all major counterparts as the yesterday’s FOMC meeting minutes and Ben Bernanke’s words have put the highly anticipated QE tapering under question. According to Bernanke, the unemployment rate understates weakness in employment market. “Highly accommodative monetary policy for the foreseeable future is what’s needed in the U.S. economy”, he said.

As a result, EUR/USD surged by 400 pips in two days, touching $1.3205. As of writing the pair edged lower below $1.3100. GBP/USD jumped from $1.4900 to $1.5190 before returning to $1.5110. USD/CAD dropped to $1.0350. USD/CHF fell to 0.9400 before returning to 0.9480.

AUD/USD strengthened to $0.9310. Australia released contradictory employment data: employment rose by +10.3K (vs. expected flat at 0.0), while unemployment rate increased to 5.7% (vs. expected 5.6%). NZD/USD rose to $0.7970.

USD/JPY fell by 300 pips in two days, touching 98.20. The pair has recovered to 98.90 as of writing. Bank of Japan left its monetary policy unchanged on today’s meeting, but upgraded the assessment of its economy.

[⭐ kaito kid]

US jobless claims above forecast

EUR/USD and GBP/USD are trading lower following the release of worse than expected US unemployment claims (360K vs. forecast 342K and previous 344K). Import prices also missed the expectations, falling by 0.2%. The greenback strengthens despite the fact that data confirm the US economy is not strong enough to taper QE.

[⭐ kaito kid]

USD/JPY: levels to watch

Though no one knew what Ben Bernanke was going to say, USD/JPY has so far has been moving in accord with the scenario which we outlined yesterday. After retracing 76.4% of the decline from May to June US dollar has travelled down through the daily Ichimoku Cloud. The greenback almost hit the Cloud’s lower border at 98.15 (today’s minimum lies at 98.21) before returning to the area of the 55-MA at 99.33.

The level of 98.15 remains a key one on the downside. Ahead of this point there’s an important support at 98.90/70. The loss of 98.15 will turn the focus to 97.75, 97.50 and 96.10. On the upside the most important level to watch is the psychological mark of 100.00. The bulls are also struggling in the 99.50 zone. Below this handle the bulls will keep feeling very uncomfortable. Further obstacles lie at 100.55 (top of the Cloud), 100.85 and 101.40/50.

Chart. Daily USD/JPY

[⭐ kaito kid]

AUD/USD: up, but on shaky grounds

AUD/USD rose today to 2-week high at $0.9305 after the Fed’s Chairman Ben Bernanke signaled there would be no immediate reduction in US stimulus. Analysts still aren’t sure about how to evaluate this comment: many think that the market has overreacted and USD will keep strengthening versus its counterparts.

As for the news from Australia, the nation’s economy unexpectedly added workers in June, while the unemployment rate rose by 5.7%, the highest in nearly 4 years. Analysts at Westpac point out that the growth in employment was due to the increase in jobs part timers, while employers cut back on full time workers. The specialists expect the RBA cut in August.

Aussie retreated from highs to levels just above $0.9200 at the moment of writing. We stick to the cautious view and believe that AUD/USD is having nothing more than a correction within the general downtrend.

Resistance lies at $0.9300, $0.9325, $0.9350 and $0.9400. Support is at $0.9180, $0.9145 and $0.9040.

Chart. Daily AUD/USD

[⭐ kaito kid]

Analysts comment on the Fed

Westpac: “I don't blame the market as seeing (the comments) as surprisingly dovish. It is a big setback for dollar bulls.”

Saxo Bank: “The economy is doing well enough to encourage equity markets about future earnings, but not too hot to cause the Fed to remove accommodation.”

Citigroup: “Despite the Fed’s cautiousness last night, the US growth story is still the most compelling among the major economies. The US cyclical leadership will continue to support the dollar. We think that it would take significant deterioration in US.data to see Fed actually backing away from scaling back or withdrawing quantitative easing.”

Bank of Tokyo-Mitsubishi UFJ: “The many FOMC voices seem all over the map, yet they do agree the labor market improvement looks more sustainable now than it did at the time of the QE launch. This means to us that the program’s days are numbered.”

BNP Paribas: “There’s still a clear bias to taper but I think they’ve taken just a baby step back from the strength of that bias and data will matter from here. It’s not just hiring, it’s GDP and inflation that will factor into the equation.”

HSBC: “There had actually been very little difference in Bernanke's wording compared with last month’s Fed press conference, and that the volatility was down to markets' habit of overreacting.”

[⭐ kaito kid]

July 12: Asian session

US dollar headed for a weekly decline versus most of its major counterparts as comments from Federal Reserve policy makers caused investors to push out expectations for when the central bank will reduce stimulus. St. Louis Fed President James Bullard is due to speak today at 17:00 GMT.

EUR/USD declined to $1.3070 after peaking to $1.3206 yesterday. Watch the euro area’s industrial production data at 09:00 GMT (a 0.2% decline is expected). S&P revised Irish sovereign credit rating forecast up from stable to positive. GBP/USD slid to $1.5170 after peaking to $1.5221 yesterday. USD/JPY is consolidating around 99.00, having formed a clear triangle on the hourly chart. USD/CHF strengthened by 20 pips to 0.9480. Yesterday the pair touched a low at 0.9400, but later rebounded to 0.9460.

AUD/USD is consolidating around the daily highs of $0.9180 after having touched $0.9135 earlier in the day. Australia May home loans for came at +1.8% m/m (vs. expected +2.2%). Yesterday the pair formed a long-shadowed candle, closing at $0.9185. NZD/USD is quietly trading in the positive territory around $0.7860 after the yesterday’s highly volatile trade. USD/CAD is trading in the 1.0360 area after hitting $1.0325 yesterday.

[⭐ kaito kid]

Key currency options

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 (14:00 GMT).

Here are the key options expiring today:

USD/JPY: 98.00, 98.20, 98.80, 99.00, 99.50, 99.75, 100.00, 100.50, 101.00;

EUR/USD: $1.2900, $1.2940, $1.2980, $1.3000, $1.3050, $1.3065, $1.3100, $1.3200;

GBP/USD: $1.4800, $1.4900, $1.4925, $1.5000, $1.5100;

AUD/USD: $0.9060, $0.9100, $0.9200;

NZD/USD: $0.8000;

USD/CAD: 1.0500.

[⭐ kaito kid]

Chinese data and demand for USD

US dollar declined this week versus most of its major counterparts. However, on Friday the greenback managed to pull back a bit as the markets grew cautious ahead of Chinese growth data release on Monday.

According to the median forecasts, Chinese GDP growth slowed to 7.5% in Q2. Many experts think that this figure may come lower due to the recent disappointing readings from China.

Brown Brothers Harriman points out that “the market is looking for some new good or bad factors, but there’s not so much information, except for US Treasury yields.” USD follows the dynamics of American yields. Benchmark US 10-year yields reached a 23-month high on Monday, but then fell sharply after Bernanke said on Wednesday that a highly accommodative monetary policy was needed for the foreseeable future.

Note that now investors probably won’t be so eager about buying USD. JPMorgan warns about the increased risk of deeper pullback.

[⭐ kaito kid]

UBS: BOJ won’t ease policy in 2013

Analysts at UBS think that the Bank of Japan is unlikely to further ease its monetary policy this year.

“We think current inflation expectation is consistent with 2% inflation within 2 years. But it has become clear that BOJ will not ease further as long as USD/JPY remains at around 100.00 and the stock market stays upbeat”, said the bank.

Nikkei 225 stock index (source: Yahoo Finance)

[⭐ kaito kid]

Analysts: bullish on USD/CHF

Analysts at major banks remain bullish on USD/CHF despite the recent sharp fall on dovish Fed.

Nomura strategists recommend buying USD/CHF at 0.9332 with a target at 1.0000 and a stop at 0.9100. They expect a broad-based cyclical USD rally in the second half of 2013.

Analysts at Deutsche Bank are also targeting 1.0000 by the year-end: “With our confidence on the dollar outlook building and no change from the SNB on the back of a very benign inflation outlook, we see conditions as ripe for a breakout in both USD/CHF and EUR/CHF targeting 1.0000 and 1.2700 respectively over the rest of the year”. Barclays goes even further and targets 1.0300 by the year-end.

Chart. Weekly USD/CHF

[⭐ kaito kid]

AUD/USD: time to join sellers

AUD/USD rose to 2-week high at $0.9305 on Thursday, but then returned down to the minimal levels since 2010 at $0.9038/37 hit last week.

Aussie got under renewed pressure due to the bets that the Reserve bank of Australia will cut interest rates in August from an already record low of 2.75%. According to swaps data compiled by Bloomberg, traders estimate the possibility of a cut by 75%.

Bank of America Merrill Lynch point out that AUD/USD has failed to extend more to the topside, while Shanghai Composite, gold and copper showed good gains. In their view, it’s time to sell Aussie. Any jumps to $0.9200/9250 will be a good selling opportunity. The specialists recommend setting stop at $0.9310 and targeting $0.8664 and probably $0.8066.

Credit Suisse says that Australian dollar is still overvalued and that the fair exchange rate for AUD/USD is $0.7000.

Chart. Weekly AUD/USD

[⭐ kaito kid]

July 15: Asian session

EUR/USD is a bit down, in the $1.3070 area. There will be no important data in the European agenda. Weshould mention political instability in Spain where Prime Minister Rajoy is facing renewed calls to resign after a newspaper published text messages allegedly linking him to the man at the centre of a secret payments scandal. Later today in the US watch for the Empire State manufacturing index and retail sales (12:30 GMT).

GBP/USD is trading just above $1.5100. USD/JPY is consolidating in a tight range around 0.9930. July 15 is the national holiday in Japan (Marine day). USD/CHF recovered to 0.9470.

AUD/USD strengthened to the 0.9100 mark from the Friday’s 3-months low of 0.9000. Data showed Australia new motor vehicle sales came at 4.0% in June (previous: revised up to 0.3%). NZD/USD recovered above 0.7800. Tonight New Zealand will release CPI figures. USD/CAD is in the 1.0385 area. The pair was capped by 1.0400 during the Asian session.

Today’s release showed China’s GDP growth slowed to 7.5% y/y (forecast and previous: 7.7%). Other figures showed June industrial production slowed from 9.2% to 8.9% y/y. Chinese officials added to concerns, saying that the country faces a “relatively big” economic downturn pressure.

[⭐ kaito kid]

Key currency options

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 (14:00 GMT).

Here are the key options expiring today:

EUR/USD: $1.2875, $1.2950, $1.2975, $1.3040, $1.3080, $1.3150, $1.3200;

GBP/USD: $1.5100, $1.5225, $1.5275;

USD/JPY: 98.00, 98.50, 99.00, 99.50, 100.00, 101.00;

AUDUSD: $0.9000, $0.9150;

USD/CHF: 0.9665;

USD/CAD: 1.0375;

EUR/CHF: 1.2450, 1.2500.

[⭐ kaito kid]

AUD: factors to watch (July 15-19)

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JPY: factors to watch (July 15-19)

[⭐ kaito kid]

EUR/USD: Elliot wave analysis

Monthly. The pair may have finished forming the wave B of the rising Zigzag А-В-С. Wave B is in the form of the Triple Three [w]-[x]-[y]-[x]-[z]. EUR/USD currently keeps forming wave C. Let’s analyze the wave’s structure in detail.

Chart. Monthly EUR/USD

Daily. The single currency keeps forming impulse wave (С). At the moment we see the formation of the rising corrective wave II. When it’s finished, the downtrend will resume.

Chart. Daily EUR/USD

H4. The wave II is probably taking a form of an upward Zigzag. Strong and rapid wave [A] of this Zigzag is already formed. Taking into account the strength of the wave [A], the wave may take a form of the long horizontal correction. The market will likely keep forming this wave during the whole week.

Chart. H4 EUR/USD

[⭐ kaito kid]

GBP/USD: Elliot wave analysis

Weekly. On the weekly chart there’s a global Zigzag A-B-C. The pair keeps forming the wave С which aims at the level 1.1 where the pair was last seen in 1985.

Chart. Weekly GBP/USD

H12. The pair has finished impulse (I) and is now forming a rising wave (II). Let’s examine its structure in detail.

Chart. H12 GBP/USD

H4. The second wave may be taking form of the a-b-c Zigzag. At the moment pound keeps forming corrective wave b of this Zigzag. After this upside movement will resume.

Chart. H4 GBP/USD

Roman Petuchov for FBS

[⭐ kaito kid]

USD/JPY: Elliot wave analysis

Daily. The wave 1 which looks as a wedge keeps forming. US dollar will probably renew the previous high. After that we’ll see a decline in the wave 2. Still we can’t rule out an alternative variant, according to which the wave 1 is already over and we are now seeing only a corrective falling wave 2.

Chart. Daily USD/JPY

H4. According to our base scenario, the market’s forming corrective wave IV. This wave may be over either in the recent days or later. Alternative scenario is shown on the picture with a question mark. In this case the fourth wave will take the shape of the long horizontal correction.

Chart. H4 USD/JPY

H1. The detailed marking on H1 shows that the pair keeps forming corrective wave [X] which may be taking a form of a triangle. After this wave is finished, the decline will resume in the wave [Y].

Chart. H1 USD/JPY

Roman Petuchov for FBS

[⭐ kaito kid]

AUD/USD: Elliot wave analysis

Weekly. The pair keeps forming the wave III of the downside impulse. This wave looks powerful, stretched and rapid – just as it has to be.

Chart. Weekly AUD/USD

Daily. The marking on the daily chart shows that the pair keeps forming the wave [3] of III.

Chart. Daily AUD/USD

H8. We are probably witnessing the formation of the wave (4) of [3] of III. The pair will likely go up in the rising wave and after the wave (4) ends, the decline in the wave (5) will resume. It’s quite dangerous to open longs at such market.

Chart. H8 AUD/USD

Roman Petuchov for FBS

[⭐ kaito kid]

July 16: Asian session

Investors pared bets on gains in the greenback before the Fed’s Chairman Ben Bernanke testifies to Congress this week.

EUR/USD edged a bit higher to $1.3070. Yesterday the single currency tested levels below $1.3000, but managed to close around $1.3060. Euro’s supported before German data forecast to show investor sentiment in Europe’s biggest economy improved. GBP/USD is just above $1.5100 after it tested $1.5027 yesterday. UK will release inflation data today at 08:30 GMT – CPI growth is expected to accelerate from 2.7% to 3.0%. US CPI will come out at 12:30 GMT.

USD/JPY is consolidating around 99.75, edging lower from the yesterday’s high of 100.50. Japan finance minister Aso repeated today that the weaker yen supports the exporters. USD/CHF keeps consolidating around 0.9475.

AUD/USD is a big mover in the Asian session, strengthening by 100 pips to $0.9190. The Reserve Bank of Australia’s meeting minutes, released today, showed the RBA sees the current policy appropriate with a scope for further easing. NZD/USD rose to $0.7840. New Zealand Q2 CPI rose by 0.2% q/q (vs. +0.3% expected) and by 0.7% y/y (vs. +0.8% expected). CPI remains below the RBNZ’s 1-3% target range. USD/CAD is little changed today, in the $1.0430 area after adding 40 pips yesterday.

Today’s article in China Securities Journal says that China can tolerate slower economic growth in order to get structural adjustment. It is also stated that the current levels of growth are ‘significantly’ above the growth floor. Meanwhile, Asian Development Bank has cut China 2013 forecast by 0.5% to 7.7% and 2014 forecast to 7.5%.

[⭐ kaito kid]

Key currency options

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 (14:00 GMT).

Here are the key options expiring today:

EUR/USD: $1.3000, $1.3050, $1.3055, $1.3070, $1.3100;

GBP/USD: $1.5000, $1.5120, $1.5225;

USD/JPY: 99.50, 99.60, 100.00, 103.00;

USD/CHF: 0.9500

AUD/USD: $0.9000, $0.9060, $0.9200;

EUR/CHF: 1.2315.

Edited July 16, 2013 by kaito kid

[⭐ kaito kid]

EUR: factors to watch (July 15-19)

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GBP: factors to watch (July 15-19)

[⭐ kaito kid]

USD/JPY: daily update

USD/JPY failed to close above 100.00 yesterday, though it almost tested 100.50. The pair’s trading on the downside, in the 99.60/50 area.

Resistance lies at 100.00, 100.50, 100.80 and 101.40/50 (74.6% Fibo). Support is at 99.40 (55-day MA), 99.05, 98.70, 98.15 (bottom of the daily Ichimoku Cloud).

We’ll probably see further choppy trading in the 98.15/101.50 range. Commerzbank suspects that the overall risk is on the downside. Ben Bernanke’s semi-annual testimony to US Congress tomorrow will be the main risk event this week. Also watch the Bank of Japan’s monetary policy meeting minutes released on Wednesday.

Chart. H4 USD/JPY