28 September 2011
Komoditi Minyak melemah setelah pada perdagangan kemarin mengalami reli terbesar dalam 4 bulan terakhir. Harga Emas hitam ini terkoreksi karena investor berspekulasi para pemimpin Eropa akan terpecah pendapat dalam rencana meredam krisis utang. Harga minyak tergelincir setelah Financial Times melaporkan beberapa negara di kawasan Euro menuntut kreditor swasta menyerap kerugian yang lebih besar dalam kepemilikan di obligasi Yunani. Sentimen tersebut dikhawatirkan mengancam perlambatan ekonomi dan permintaan bahan bakar. Data tahunan BP Plc menunjukkan kontribusi Uni Eropa dalam permintaan minyak global mencapai 20% di tahun lalu. Selain itu, koreksi harga minyak juga terjadi setelah American Petroleum Institute melaporkan stok bensin AS meningkat 4,6 juta barel per pekan lalu. Ini level tertinggi dalam lima minggu. Stok minyak mentah juga dilaporkan naik 568.000 barel.
Komoditi Emas mengalami rebound ditengah pelemahan dollar AS terhadap mata uang utama dunia lainnya dan membaiknya minat investor pada aset beresiko. Penguatan Emas dibarengi kenaikan bursa saham Amerika sebesar 1% dan juga penguatan Euro terhadap dollar AS yang ditunjang oleh optimisme bahwa petinggi Uni Eropa akan meningkatkan dana talangan guna menangani krisis hutang. Sementara itu permintaan Emas secara fisik dari kawasan Asia dilaporkan mengalami lonjakan sangat tinggi diantaranya di Hongkong dan Singapura yang mencapai level tertinggi sejak Februari didominasi permintaan dari ritel dan konsumen pelaku industri. Permintaan dari India sebagai salah satu konsumen terbesar Emas dunia juga terus meningkat menyambut musim pembelian emas secara tradisional untuk menghadapi festival‐festival tahunan.
Mata uang tunggal Eropa Euro mengalami pelemahan terhadap dolar AS, Euro bergerak retreat terhadap rivalnya ini didorong oleh kekhawatiran bahwa langkah-langkah yang diambil para petinggi Eropa untuk mengatasi krisis akan kurang memberikan hasil yang diharapkan. Kekhawatiran bahwa krisis keuangan Eropa akan mengakibatkan melambatnya ekonomi mengakibatkan tekanan jual yang lumayan besar terhadap mata uang tunggal di Eropa. Para pelaku pasar terpecah setelah beberapa petinggi Eropa menyatakan keenganan untuk meningkatkan pemberian bantuan bagi negara-negara bermasalah. Di perkirakan Euro pada perdagangan hari ini berpotensi mengalami penurunan lanjutan.
Bursa saham Hongkong pada perdagangan di hari Rabu pagi mengalami pelemahan yang cukup signifikan, bursa saham Hongkong mengabaikan kenaikan yang terjadi di bursa saham Wall Street menyusul kembalinya harapan mengenai penyelesaian krisis Eropa. Sentimen negatif kelihatan cukup kental di bursa saham Hongkong pagi ini disebabkan oleh melemahnya saham-saham di sektor properti. Di perkirakan Indeks Berjangka Hangseng hari ini berpotensi mengalami pelemahan tapi terbatas.
- Regulators Weaken Dodd-Frank Draft Regs, Allow More Risk (propublica.org)
- Daily US Opening News And Market Re-Cap: September 27 (zerohedge.com)
- Plunging Currencies Complicate Inflation Fight (blogs.wsj.com)
- Stocks, Metals Gain on European Crisis Outlook; Dollar Weakens (businessweek.com)
- Deflation fears are back (money.cnn.com)
- Oil falls to below $87 amid stronger US dollar (seattletimes.nwsource.com)
- Oil Surges Most in Four Months on European Debt-Crisis Efforts (businessweek.com)
- Rachel Lewis: Wall Street Vampires (huffingtonpost.com)
Dollar on Edge with Deficit Deadline, ISM Report Stokes Volatility
By John Kicklighter, Currency Strategist
- Dollar on Edge with Deficit Deadline, ISM Report Stokes Volatility
- Euro Drawn Between Dollar Volatility, EU Trouble, Upcoming ECB Decision
- Australian Dollar Readies for RBA Decision as Risk Trends Pick Up
- British Pound Tumbles with Risk, Helped Along by Manufacturing Contraction
- Japanese Yen Looking at More Volatility as Intervention Rhetoric Heats Up
- Swiss Franc Solidifies Gains After Economics Minister Says Strength to Stay
- Gold Ramps up the Volatility as Market Debates US Financial Rescue Effort
Dollar on Edge with Deficit Deadline, ISM Report Stokes Volatility
Given the volatility the FX and capital markets demonstrated through the close on Friday and the running countdown for the US to surpass the legal limit on its deficit; excitement was guaranteed through for the opening day of the new trading week. Volatility on the dollar-based majors and broader capital markets stepped it up yet again – though direction is still as lacking as ever. Through Monday’s open, the greenback was once again under pressure as risk appetite started off strong. In fact, S&P 500 futures gapped up 1.2 percent on the Asian open from Friday’s close. In contrast, the dollar didn’t produce such a dramatic jump; but it did lose ground through much of the Asian and early European sessions as news that Congressional leaders reached a compromise on the budget deficit that could offer quick relief to tense financial and credit markets. Though, the fact that the Dow Jones FXCM Dollar Index (ticker = USDollar) slipped as a viable debt solution seemed to be in the works should reflect on the skepticism that is still prevalent in the markets.
This cynicism that a debt deal would be pushed through or that it would offer the dollar an immediate boost could have weighed the greenback indefinitely had a wave of risk aversion not leveraged the currency’s battered safe haven appeal. As the day wore on, data from China, Australia, Japan, the Euro Zone and the United Kingdom reflected a slowing in factory activity that seems to be reflecting a downshift in global growth. The concern was nagging; but fear that a serious economic slump could be in the works didn’t really set in until the US ISM manufacturing activity survey for July crossed the wires. The 50.9 reading was a substantial miss (below even the lowest economist forecast from Bloomberg) and threatened the primary source of growth the US economy has drawn from since the recovery was established back in 2009. In turn, the S&P 500 Index would turn a remarkable bullish gap on the open into an eventual 2.5 percent retracement through the first half of the day.
The ISM indicator, along with the other manufacturing readings from the around the world, are an important reminder that economic activity is cooling. The feeble health of the developed world’s consumer is finally meeting the global shift towards austerity (China, Euro Zone, UK). That leaves the US in a unique position: either join the stimulus withdrawal and suffer the economic slowdown; or pursue financial responsibility and potentially turn a slowdown into a double dip recession. This is another layer of complication to the deficit debate at hand. According to the original timeline; the window is supposed to close by the coming session. That said, it seems that the revised two-stage program that has garnered support from Congressional leaders and already passed the House looks to have a good chance of making it all the way through. Yet, it is still under heavy debate as to whether the planned cuts would be enough to prevent a downgrade by the major credit rating agencies. Such an outcome would surely be dollar negative. Though if this effort tips the global economy, there could be a redeeming value to the greenback.
Euro Drawn Between Dollar Volatility, EU Trouble, Upcoming ECB Decision
Fortunately for the euro, headlines about the US deficit debate are still crowding out many of the updates surrounding the Euro Zone’s own troubles. Notable for the day was the fact that the Italian 10 year government bond yield closed at a record high 6.00 percent while the Spanish equivalent advanced to 6.20 percent. Remember, Greece, Ireland and Portugal required bailouts not long after breaching the 7.00 percent level. In the meantime, volatility in risk trends contributed to dramatic losses for European benchmark equity indexes. It will be interesting to see how this combination of funding troubles and the economic slowdown influences the ECB’s decision later this week. Can then keep ignoring it?
Australian Dollar Readies for RBA Decision as Risk Trends Pick Up
We are quickly approaching the RBA rate decision; and rate expectations are somewhat mixed. Looking at overnight index swaps; we see that there is a 16 percent probability of a 25 bps rate cut yet the 12 month forecast is pricing in 27 bps of easing. If we recall the last meeting, Governor Stevens leveraged the importance of CPI; and the 2Q figures a two-and-a-half year high 3.6 percent. Is that enough to make a call?
British Pound Tumbles with Risk, Helped Along by Manufacturing Contraction
It seems much of the world is on the same path of austerity and economic slowdown that the UK pioneered with its self-imposed deficit efforts. Under these circumstances, it isn’t good to be first; because it is exponentially harder to recovery from a slowdown that was ahead of the global curve. We were reminded of this Monday when the UK factory activity reading turned negative for the first time since September 2009.
Japanese Yen Looking at More Volatility as Intervention Rhetoric Heats Up
Talk of Japanese intervention is picking up amongst policy officials, economists and traders. According to Nikkei news group, the central bank is preparing for FX intervention; and an independent move could be quickly followed by a coordinated effort. Should we take these warnings seriously? The short-term impact can certainly generate volatility; but fighting larger trends (like dollar selling) is always a losing game.
Swiss Franc Solidifies Gains After Economic Minister Says Strength to Stay
There are many examples of failed efforts of intervention; but some of the worst results have to fall to the Swiss National Bank which has come under significant scrutiny due to the losses on its reserves fighting the market tide. The futility of this effort seems to be setting in, however, as we had the nation’s Economic Minister warned the high exchange rate is here to stay and it means “extremely tough years” for exporters ahead.
Gold Ramps up the Volatility as Market Debates US Financial Rescue Effort
Like the US dollar and Treasuries, gold put in for an exceptionally volatile session through Monday. Through that same comparison, though, the metal was just as lacking for direction. To stoke capital flows into the metal once again (or away from it should there be palatable deficit resolution); we need an unmistakable view of the United States’ fiscal position: destined for downgrade or slow return to prudence.
**For a full list of upcoming event risk and past releases, go to www.dailyfx.com/calendar
Next 24 Hours
|1:30||AUD||House Price Index (YoY) (Q2)||-3.0%||-0.2%||Lower expected house index may suggest softening real estate sector|
|1:30||AUD||House Price Index (QoQ) (Q2)||-1.0%||-1.7%|
|1:30||AUD||Building Approvals (MoM) (JUN)||3.0%||-7.9%||A mild recovery in building recoveries despite prices fall points to future recovery|
|1:30||AUD||Building Approvals (YoY) (JUN)||-10.3%||-14.4%|
|1:30||JPY||Labor Cash Earnings (YoY) (JUN)||0.4%||1.0%||Japanese labor market still soft|
|4:30||AUD||Reserve Bank of Australia Rate Decision||4.75%||4.75%||Major event of the day: Q2 CPI came in higher than expected despite record-high AUD; RBA may change their commentary on rate hikes|
|6:30||AUD||RBA Commodity Price Index (JUL)||109.4||Commodities price index may hit new high on record strength of metals|
|6:30||AUD||RBA Commodity Index SDR (YoY) (JUL)||28.2%|
|7:15||CHF||Retail Sales (Real) (YoY) (JUN)||-4.1%||Previous was lowest since March 2009|
|7:30||CHF||SVME-Purchasing Managers Index (JUL)||52.5||53.4||PMI expected to be hurt by strong franc|
|8:30||GBP||Purchasing Manager Index Construction (JUL)||53.1||53.6||Index may fall due to government cuts|
|9:00||EUR||Euro-Zone Producer Price Index (MoM) (JUN)||0.1%||-0.2%||Index correlated with consumer prices expected to weaken on a long-term basis on slower recovery, demand|
|9:00||EUR||Euro-Zone Producer Price Index (YoY) (JUN)||5.9%||6.2%|
|12:30||USD||Personal Income (JUN)||0.2%||0.3%||Consumption driver of the US economy expected to stay relatively flat as overall economy still weak, uncertain|
|12:30||USD||Personal Spending (JUN)||0.2%||0.0%|
|12:30||USD||Personal Consumption Exp Deflator (YoY) (JUN)||2.5%|
|12:30||USD||Personal Consumption Exp Core (MoM) (JUN)||0.2%||0.3%|
|12:30||USD||Personal Consumption Exp Core (YoY) (JUN)||1.4%||1.2%|
|21:00||USD||Total Vehicle Sales (JUL)||11.85M||11.41M||A small pick-up in vehicle sales may be due to beginning of 2nd half purchasing by institutions|
|21:00||USD||Domestic Vehicle Sales (JUL)||9.25M||8.95M|
|23:01||GBP||BRC Shop Price Index (YoY) (JUL)||2.9%||Retail sales index may indicate CPI|
|23:30||AUD||AiG Performance of Service Index (JUL)||48.5||Service sector at post-recession levels|
|GBP||Halifax Plc House Prices s.a. (MoM) (JUL)||0.0%||1.2%||House prices watched by BoE may support further lax policies to support economic recovery|
|GBP||Halifax House Price (3MoY) (JUL)||-2.8%||-3.5%|
|GMT||Currency||Upcoming Events & Speeches|
|12:30||USD||Annual Revisions: Personal Income and Spending|
SUPPORT AND RESISTANCE LEVELS
CLASSIC SUPPORT AND RESISTANCE – 18:00 GMT
CLASSIC SUPPORT AND RESISTANCE –EMERGING MARKETS 18:00 GMTSCANDIES CURRENCIES 18:00 GMT
|Resist 2||13.8500||1.8235||7.4025||7.8165||1.3650||Resist 2||7.5800||5.6625||6.1150|
|Resist 1||12.5000||1.7425||7.3500||7.8075||1.3250||Resist 1||6.5175||5.3100||5.7075|
|Support 1||11.5200||1.6500||6.5575||7.7490||1.2000||Support 1||6.0800||5.1050||5.3040|
|Support 2||11.4400||1.5725||6.4295||7.7450||1.1800||Support 2||5.8085||4.9115||4.9410|
INTRA-DAY PIVOT POINTS 18:00 GMT
INTRA-DAY PROBABILITY BANDS 18:00 GMT
Written by: John Kicklighter, Senior Currency Strategist for DailyFX.com
- US Dollar Traders Have to Monitor Debt Talks, Euro Market, Risk Trends (managemenresiko.wordpress.com)
- FOREX: Dollar Can’t Recover Ground on Holiday Trading Conditions (managemenresiko.wordpress.com)
By David Rodriguez, Quantitative Strategist
Euro trades Sharply Higher on Greek Deal – What’s Next?
Fundamental Forecast for the Euro: Neutral
- European leader’s summit sends euro sharply higher against US Dollar
- Key euro technical support resides at 1.4300 for next week
- German Consumer Price index data is a top forex event in week ahead
The Euro rallied sharply against the US Dollar on a breakthrough agreement on further aid for Greece, closing a great deal of uncertainty surrounding the at-risk country and for the broader euro zone. Officials released details of a far-reaching agreement and offered concrete details on further fiscal aid for periphery nations. A pronounced rally across European bond markets and the euro itself underlined that plans were well-received, but a key week for European economic data could ultimately decide euro price action in the days ahead.
Euro zone periphery debt crises are far from over, but the recent agreement ostensibly puts market focus back on economic fundamentals and not on government solvency. Key German Unemployment Change, Consumer Price Index, and Retail Sales figures could subsequently force sharp moves across euro pairs.
The euro had strengthened significantly against the US Dollar and other major counterparts as markets predicted the European Central Bank would be among the most aggressive to raise interest rates from record-lows. Indeed, the ECB has since hiked target rates by 0.50 percent, and Overnight Index Swaps have priced in another 33bps through the coming 12 months. The US Federal Reserve, by comparison, has left interest rates at record lows and traders predict a mere 17bps in interest rate increases through the same stretch. Interest rate differentials favor further EURUSD strength, but it will be important to see momentum remain in favor of further euro gains—especially on key data.
Expectations call for German and broader European Consumer Price Index inflation remained above the ECB’s official target of 2.0 percent through July, and central bank president Jean Claude Trichet has been resolute in calling for fairly aggressive monetary policy measures on elevated price pressures. It will be important to watch for surprises in CPI results as well as employment figures, as both are likely to figure into future ECB moves.
Ultimately, the euro’s direction against key counterparts should depend on traditional fundamentals—not ongoing struggles with periphery nation debt. There remain details that need to be sorted out with the new deal on Greek debt, and individual parliaments must ratify the deal. Yet the long-term nature of the deal suggests troubles with Greece are less relevant to day-to-day price action. Spanish and Italian bond yield surges remain a concern, but stability at or around current levels would decrease fears of further debt stresses.
The Euro/US Dollar has traded to key resistance at a falling trendline from May lows, and whether or not the pair can move above $1.44 could set the tone for the coming months of trade. We will watch European data with great interest, while ongoing developments surrounding US debt ceiling concerns could likewise affect USD pairs. – DR
- How Greece’s Ongoing Drama Could Undo the Euro (time.com)
- Will Greece, the IMF and the ECB figure things out in time? (beta.tradingfloor.com)
- Economix: Economist Q.&A. on Europe’s Debt Accord (economix.blogs.nytimes.com)
- News Analysis: E.C.B. May Be Winner in Debt Talks (nytimes.com)
- Euro Zone Moves Toward Greek Deal – Wall Street Journal (news.google.com)
- 6 Month Euro Forecast: Looking for the EURUSD at 1.25 (managemenresiko.wordpress.com)
US Dollar Traders Have to Monitor Debt Talks, Euro Market, Risk Trends
By John Kicklighter, Currency Strategist
22 July 2011 21:54 GMT
US Dollar Traders Have to Monitor Debt Talks, Euro Market, Risk Trends
Fundamental Forecast for the US Dollar: Neutral
The countdown for the US is getting serious. We have concluded another weak where the US government has failed to come to a compromise on its deficit troubles. Further creating troubles for the greenback, we have seen the European funding market (a source of liquidity costs that plays to the dollar’s safe haven status) come into at least a temporary period of relief with a massive bailout effort by the EU; while risk appetite trends have taken a considerable jump to defer that long-threatened collapse. That said, all of these headwinds will do more to anchor the currency than necessarily generate a meaningful trend over the next week.
Heading into the new trading week, the deficit debate carries the greatest potential sway over the dollar. Depending on how this situation evolves; it could have a sweeping effect over the single currency and even the broader financial markets. Yet, it is prudent to work within reasonable probabilities to interpret how this matter will influence the dollar. If our outlook were for two weeks, it would be a virtual guarantee that the greenback is in for significant volatility and even a significant trend. However, our outlook is just for the upcoming week. That being the case, the outlook is far more fluid. Considering the deficit ceiling will be officially breached on August 2nd, there is time for political maneuvering as Democrats and Republicans gain points for sticking to their guns. It is a severely low probability that this situation ends in a technical default and the likelihood of a solution before next weekend is high.
How the deficit solution impacts the dollar and capital markets is a function of what is agreed to. If the limit is simply lifted to avoid the pain of a default event, it could offer temporary relief to capital markets and the greenback in equal parts. That said, the follow through would likely be limited as ratings agencies have warned the reasoning for a downgrade runs beyond just the quick fix and to the lack of long-term fiscal plan. Alternatively, should there be proposal that targets significant deficit reduction over a reasonable timeframe through a revenue (taxes) focus, an expenditure (spending) focus or a mix of both; it could be seen as an effort to pump the break on the economy and withdraw the very stimulus that has driven confidence and capital markets since the Great Recession – which would weigh on risk appetite which adds a safe haven appeal to the dollar as it garners attention for improved outlook for stability. If we end the week without a clear solution; expect volatility to grow increasingly unstable as rumors and headlines spur fear and speculation.
Another major driver for the dollar that fits within the ‘theme’ category is the blowback the greenback bears from the perception of the Euro Zone’s credit health. This past week, officials announced sweeping policy agendas to smother the sense of crisis contagion in the sovereign and private lending markets. There were major efforts adopted; but there are also significant shortfalls. Ultimately it comes down to market sentiment. If the steps taken don’t boost confidence or if risk aversion is an engrained and global driver, the euro will continue its slide and thereby boost its most liquid counterpart: the dollar.
When it comes down to it, these more pervasive and vague problems will determine the dollar’s activity level and general direction. However, there are a few scheduled events that can stir short-term volatility and perhaps even contribute or detract from existing trends. We have consumer confidence and housing sector data; but the real market-mover is the first reading of 2Q GDP. Depending on how risk trends are behaving, the outcome for the dollar can follow risk trends or speculation for additional stimulus. – JK
- Dollar Ignores Budget Headway, Earnings and Suffers for Risk Rally (managemenresiko.wordpress.com)
- FOREX: Dollar Can’t Recover Ground on Holiday Trading Conditions (managemenresiko.wordpress.com)
- Euro Sovereign Debt Crisis Further Deteriorates, So Why the Bounce? (managemenresiko.wordpress.com)
- Forex: Euro Rebound Could Be Short-Lived, Sterling At Risk (businessinsider.com)
- Euro Rallies Versus Dollar as European Summit Eases Debt Turmoil (businessweek.com)
6 Month Euro Forecast: Looking for the EURUSD at 1.25
By David Rodriguez, Quantitative Strategist
The Euro has done well through the first half of 2011, rallying to fresh multi-year highs against the US Dollar and strengthening against almost all G10 counterparts. There remain clear fundamental risks for the single currency in the second half of 2011, and we look for the Euro to fall. The major concern is whether several at-risk countries can remain stable despite clear debt crises. The European Central Bank’s next actions may prove pivotal—especially as the Euro has strengthened on robust interest rate forecasts and is at risk of losses on any significant downgrades. The number of risks to the Euro arguably outweighs those to the US Dollar, leaving us watching for further EURUSD declines. We look for the EUR/USD to end 2011 below 1.25.
European Sovereign Debt Crisis – Where Did We Start and Where Do We Stand?
The euro zone financial debt crisis continues to threaten EUR stability and remains a key risk through the second half of the year. At the forefront of traders’ minds is Greece—can the southern European state withstand market pressures and remain solvent?
Despite a €110 billion three year bailout agreement with the European Union and International Monetary Fund, Greece has yet to see the light at the end of the tunnel. The difficulty lies in the structure of the bailout deal. When the International Monetary Fund agreed to loans, it required that the Greek government return to the debt markets for its borrowing needs as soon as 2012. At the time, this request seemed reasonable. With backstops from the EU and IMF, international investors would be more likely to buy Greek debt. Yet the continuing sell-off in Greek bonds underline that few are willing to hold existing Greek debt—much less buy any newly-issued debt.
The cost to insure against a Greek debt default has recently hit record-highs as seen through Credit Default Swaps, and current sovereign debt ratings imply a 50 percent chance of a Greek default within the coming five years.
A further bailout seems increasingly necessary and likely, but uncertainty over Greece’s ability to repay debts could likewise spread to other at-risk government treasuries.
Spain and Portugal Outlook Uncertain on Funding Needs
The key risk with periphery debt crises has and will always be contagion—will Greece’s troubles affect other periphery nations and even spill into the core through higher bond yields? In absolute terms, bailouts for Greece, Portugal, and Ireland have cost relatively little. Together, the three economies comprise approximately 5 percent of total euro zone Gross Domestic Product. If EMU titans Spain (8.9 percent of GDP) and Italy (12.8 percent of GDP) fall into trouble, however, European coffers may not be able to cope with the required fiscal aid.
The spread between benchmark Spanish and German government bond yields has recently widened to its largest since the inception of the euro—implying that Spain’s relative debt risk is worsening. And though a 10-year Spanish government bond yield of approximately 5.5 percent is low by historical standards, the widening gulf could further exacerbate government deficits. Much the same can be said for Italy. A key question is whether bond troubles in periphery nations can spread to the core, truly threatening the stability of the single currency zone.
Of course, there have been plenty of reasons that the euro has strengthened despite these readily apparent sovereign debt crises.
European Central Bank – Can They Continue to Hike Rates?
Expectations that the European Central Bank will be among the most aggressive central banks in raising interest rates has driven speculative interest in the euro, pushing the price up in the first half of this year. A key question will be whether the ECB will follow through on lofty forecasts and continue to raise interest rates, further supporting the currency.
Robust interest rate forecasts have driven the euro higher against the US Dollar and Japanese Yen—currencies that hold the dubious honor of the two lowest-yielding among the industrialized world.
Overnight Index Swaps, a tool used by major financial institutions to bet on and hedge against interest rate moves, show that traders expect the ECB could raise rates three times through the second half of 2012 in order to head off inflation in the Euro Zone. This compares to forecasts that the US Federal Reserve will leave interest rates roughly unchanged through the same stretch. The Bank of Japan is similarly forecast to leave monetary policy effectively unchanged and to keep Japanese short-term interest rates near zero.
Yet in markets nothing is guaranteed, and indeed we might argue that the euro has seen about all of the yield-linked support it will enjoy. That is to say, it would likely take a material improvement in ECB forecasts (and subsequent rate hikes) to continue driving EUR gains.
Can the European Central Bank continue to set hawkish monetary policy despite clear economic and fiscal struggles in periphery nations? ECB President Jean Claude Trichet has continued to emphasize that the central bank sets policy for the whole of the monetary union and cannot ignore mounting inflationary pressures. Yet with fiscal austerity packages guaranteed across the euro zone, demand-driven inflation could quickly abate and lessen the need for tightened policy.
All else remaining equal, the euro would almost certainly fall on a sharp downgrade in ECB interest rate expectations. Of course, nothing ever remains equal in financial markets and there are a number of mitigating factors that could strongly affect the single currency.
Financial Markets Continue to Drive Currencies
The euro remains a currency closely linked to equities markets, with the EUR/USD tending to rise with stocks, and tending to fall when stocks fall. Further market turmoil could almost certainly derail the recent EUR strength. The correlation between the Euro/US Dollar currency pair and the US Dow Jones Industrial Average has recently been trading near record levels; Dow variation has theoretically explained up to 45 percent of Euro movements. Part of this relationship is the US Dollar’s appeal as the currency of many popular “safe” investments—most notably US Treasury Bonds. On the other side of it, the euro is arguably among the most at-risk assets in financial market upheaval as debt market difficulties could further exacerbate the current European sovereign debt crises.
The Dow Jones Industrial Average limped into the second half of the year, declining for six consecutive trading weeks and posting its worst performance in nearly a decade. It should come as relatively little surprise that especially sharp equities sell-offs forced EURUSD weakness, and indeed a continuation could see the US Dollar further regain ground against its high-flying European counterpart.
Euro in Favorable Long-Term Trend but with Considerable Risks in the Second Half of 2011
The Euro remains well within a decade-long uptrend against the US Dollar, but the medium-term outlook is fraught with risk as doubts remain about euro zone economic and political stability. Of course, the US Dollar is not without its own issues and actual EURUSD price action will depend on a great number of different dynamics.
Whether or not the euro remains in its broader uptrend will greatly depend on developments in sovereign debt crises and market expectations regarding the European Central Bank. It seems that risks generally favor Euro losses, and indeed our forecast remains bearish into the end of 2011.
- ECB Bond-Buying Halt Tested as Italy Plans Auction: Euro Credit (businessweek.com)
- Currencies: Dollar, yen gain ahead of euro-zone meeting (marketwatch.com)
- Currencies: Dollar gains on euro on Greece contagion fears (marketwatch.com)
- Gold and Dollar Pop on Euro Debt Crisis (businessinsider.com)
- China rate hike talk takes the edge off risk in Asia (tradingfloor.com)
- IIF’s Dallara: Euro Zone Has Taken Big Step (online.wsj.com)
- Europe considers Greek default (theglobeandmail.com)
- Euro sovereign risk spreads jump wider ahead of ECB (tradingfloor.com)
- Dollar Can’t Recover Ground on Holiday Trading Conditions
- Euro: Positive Turn in Greece Funding Curbed by Another S&P Warning
- Australian Dollar Misses Risk Run, Moving on to RBA Decision
- British Pound Marks a Slow Start to an Event-Heavy Week
- Swiss Franc Tumbling Quickly as Specific Safe Haven Appeal Fades
- Japanese Yen Fortified by BoJ’s Positive Outlook, Eased Political Pressure
- Gold Recovery Lacking for Momentum Until Fiat Demand Weighed
Dollar Can’t Recover Ground on Holiday Trading Conditions
The opening trading day to the week was an unusual one. On the one hand, we had significant fundamental event risk headed up by the ongoing Greek bailout saga. Alternatively, liquidity conditions were distorted by the absence of US market participation due to the extended Independence Day holiday weekend. The combination of these two atypical developments was a market high on volatility but low on meaningful follow through. This is the type of frustrating mix that draws many traders into what-looks-like appealing trades that never gain traction after posting an initial signal for entry. Looking to the dollar, we can see the full effect of this market-imposed lethargy. Despite the early morning attempt to post its first bullish close in five trading days, the Dow Jones FXCM Dollar Index (ticker = USDollar ) ended Monday in the red. A look across the majors gives us clear representation of this greenback-centered weakness. Gains from the core EURUSD and GBPUSD pairs were measured but well-established in an underlying (though decelerating trend); the safe haven balanced USDJPY and USDCHF pairs were mostly unchanged but still dollar negative; and the yield-tipped NZDUSD was pushing new record highs into the beginning of Tuesday’s session.
Much of the currency’s weakness for the opening session can be chalked up to the carryover of selling momentum from the previous week. When there are is a lull in liquidity; the ability to generate a new trend is exceptionally handicapped – especially when the prevailing winds are generally backing a larger selling effort. Essentially, we should look at Monday as a write-off. Assumptions of trend, breakouts and fundamental shifts should be overlooked as they don’t reflect the conviction of the broader markets. If that is the case, we can approach Tuesday’s session as the opening trading day for the dollar. If that is the case, we can draw forward the prominent fundamental considerations that would will determine the benchmark’s bearing through the rest of the week. Risk appetite trends are still but follow through decelerated between the Asian and European sessions Monday; and it is likely to carry this breaking effort into today’s session.
Risk trends are a considerable burden for the dollar when they are positive; but they have offered limited support when negative. This speaks to an underlying truth of the greenback: that the currency is not a pure safe haven but rather a source of liquidity when funding markets freeze up. That being the case, we note that with the passage of Greece’s fifth round of financial support from the European Union, we have temporarily alleviated the threat of a global crisis. In turn, the credit markets have improved and the greenback’s primary appeal has diminished. The European-based sovereign debt issue is still the most immediate threat; but it will be supplanted through the immediate future the approach of the ECB rate decision. This will take a lot of wind out of any offensive that the dollar tries to mount on risk trend from now until Thursday.
Related : Discuss the Dollar in the DailyFX Forum , Today’s Video : ECB Decision versus Greek Financial Crisis for EURUSD Traders’ Attentions
Euro: Positive Turn in Greece Funding Curbed by Another S&P Warning
Another projected outcome was confirmed for euro traders over the weekend; and the support it is offering the currency is visibly wearing thin. After Greek Prime Minister George Papandreou won the confidence vote, it was heavily expected that the country would pass through its additional 78 billion euro austerity measures and secure the fifth tranche of its first bailout package. Indeed, EU Finance Ministers voted this past weekend to release the additional 12 billion in aid (provided the IMF distributes its own portion – which it is expected to approve this Friday). However, from here, the outlook grows a little blurry. Next Monday, the topic of a supplementary bailout package will come up again. In the meantime, Standard & Poor’s threatens to disrupt the quick-fix regime by repeating it would still see a private Greek debt rollover as a default.
Australian Dollar Misses Risk Run, Moving on to RBA Decision
Despite a buoyant start to the week for investor sentiment, the Australian dollar would close Monday out with its first bearish print in five trading days. Considering this weakness was particularly prevalent on AUDNZD, it was clear that the first sub-3.0 percent reading on the TD inflation reading in 11 months along with weak retail sales and approvals weighed the currency specifically. This sets up a dangerous RBA letdown .
British Pound Marks a Slow Start to an Event-Heavy Week
This week is heavy for UK-based scheduled event risk ; but Monday started us out with something of a mix. The economy’s housing sector took another step back with a weaker-than-expected construction sector reading and ongoing 5.8 billion sterling deficit on housing equity withdrawal. Both indicators are indicative of an important sector that will add additional weight to austerity measures and future stimulus/ratings issues.
Swiss Franc Tumbling Quickly as Specific Safe Haven Appeal Fades
The franc is quickly retreating against most of its most liquid counterparts – but is this reason enough to call a top? To determine whether the Swiss currency is indeed retreating from its record or near-record highs requires a fundamental position change. The unit is now finding much of its selling pressure through a reversal in safe haven flows from central Europe to the banking economy; but that in itself is not yet a stable driver.
Japanese Yen Fortified by BoJ’s Positive Outlook, Eased Political Pressure
Economic indicators have limited impact on the yen; and even major swings in growth potential seem to leave the currency little fazed. The real concern is changes to its place as a funding currency. Monday morning, the BoJ upgraded its growth outlook slightly while Finance Minister Noda suggested the government was backing off some of the pressure for further stimulus. These developments modestly diminish that role.
Gold Recovery Lacking for Momentum Until Fiat Demand Weighed
If were just a move posted against the dollar, then we could ascribe gold’s advance Monday to thin markets and a speculative effort to curb bearish speculation through the end of last week. However, the metal posted gains across the board. Fundamentally, confidence in fiat currency has not truly gained much traction. More interesting: net speculative futures positioning dropped last week the most since September 2008.
**For a full list of upcoming event risk and past releases, go to http://www.dailyfx.com/calendar
N ext 24 Hours
|1:30||AUD||Trade Balance (Australian dollar) (MAY)||1900M||1597M||Exports to NZ expected to increase|
|1:30||JPY||Labor Cash Earnings (YoY) (MAY)||-0.6%||-1.4%||Slower fall brings better outlook for market|
|2:30||CNY||China HSBC Services PMI (JUN)||54.3||Survey expected to follow official lower|
|4:30||AUD||Reserve Bank of Australia Rate Decision||4.75%||4.75%||Commentary will be the most important|
|7:45||EUR||Italian PMI Services (JUN F)||49.6||50.1||Although Italian services industries expected to start shrinking, overall composite numbers expected stagnant|
|7:50||EUR||French PMI Services (JUN F)||56.7||56.7|
|7:55||EUR||German PMI Services (JUN F)||58.3||58.3|
|8:00||EUR||Euro-Zone PMI Composite (JUN F)||53.6||53.6|
|8:00||EUR||Euro-Zone PMI Services (JUN F)||54.2||54.2|
|8:30||GBP||PMI Services (JUN)||53.5||53.8||Government cuts, weakness hurting sector|
|8:30||GBP||Official Reserves (Changes) (JUN)||-$103M||Sharply fallen as bank buys pounds|
|9:00||EUR||Euro-Zone Retail Sales (MoM) (MAY)||-1.0%||0.9%||Decline in retail sales may not stop this week’s rate decision, but may dull any further hawkishness|
|9:00||EUR||Euro-Zone Retail Sales (YoY)(MAY)||-0.6%||1.1%|
|14:00||USD||Factory Orders (MAY)||1.0%||-1.2%||Recovery may lead manufacturing sector|
|23:01||GBP||BRC Shop Price Index (YoY) (JUN)||2.3%||Retail sales steadily climbing|
SUPPORT AND RESISTANCE LEVELS
CLASSIC SUPPORT AND RESISTANCE – 18 :00 GMT
CLASSIC SUPPORT AND RESISTANCE – EMERGING MARKETS 18 :00 GMT SCANDIES CURRENCIES 18:00 GMT
|Resist 2||13.8500||1.6575||7.4025||7.8165||1.3650||Resist 2||7.5800||5.6625||6.1150|
|Resist 1||12.5000||1.6300||7.3500||7.8075||1.3250||Resist 1||6.5175||5.3100||5.7075|
|Support 1||11.5200||1.5040||6.5575||7.7490||1.2145||Support 1||6.0800||5.1050||5.3040|
|Support 2||11.4400||1.4725||6.4295||7.7450||1.2000||Support 2||5.8085||4.9115||4.9410|
INTRA-DAY PIVOT POINTS 18:00 GMT
INTRA-DAY PROBABILITY BANDS 18:00 GMT
Written by: John Kicklighter , Senior Currency Strategist for DailyFX.com
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The information contained herein is derived from sources we believe to be reliable, but of which we have not independently verified. Forex Capital Markets, L.L.C.® assumes no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person’s reliance upon this information. Forex Capital Markets, L.L.C.® does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. Forex Capital Markets, L.L.C.® shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation losses, lost revenues, or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results.
DailyFX provides forex news on the economic reports and political events that influence the currency market.
05 July 2011 00:30 GMT
- Sterling finds favour as funding currency (theglobeandmail.com)
TODAY’S ANALYSIS FOREX
Dollar Australia menghentikan penurunan 2 hari berturut-turut pada hari Jumat setelah Kanselir Jerman Angela Merkel sepakat untuk berkompromi dan bekerja sama dengan European Central Bank dalam mengupayakan paket bailout baru untuk Yunani, yang memulihkan permintaan untuk aset beresiko.
Saturday, June 18, 2011 2:08 pm
TODAY’S FOREX ANALYSIS
The Australian dollar stopped down 2 days in a row on Friday after German Chancellor Angela Merkel agreed to compromise and cooperate with the European Central Bank in seeking a new bailout package for Greece, which restore the demand for risky assets.
Aussie also has recorded the biggest weekly gain in a month against the U.S. currency after China was reported to increase industrial productivity.
“Germany has softened and they would not formally ask for a private party for Greece, so we can see the sentiment against the risk of getting better,” said Charles St-Arnaud, abalis forex at Nomura Holdings Inc. in New York. “The appreciation of the Australian dollar this week was driven more by growth factors in China that do not seem to slow down as quickly as anticipated.”
Productivity of China’s industrial sector increased by 13.3% in the last month, which exceeded expectations of economists, with retail sales rising 16.9%, according to the statistics bureau report. The consumer price index also recorded an increase of 5.5% percent, which according to market expectations.
While banks have been instructed to set aside more money as reserves.
However, strengthening the currency of South Pacific countries that had higher yield this still seems to be limited as U.S. data weaker than expected prompted speculation that the recovery of the world’s largest economy was being shaken.
Currently AUD / USD traded at $ 1.0615, or about 0.5% higher than the opening price on Friday.
- Greek debt: Europe at the crossroads (independent.co.uk)
- Greek PM makes rival finance chief to shore up support – Reuters (news.google.com)
- Greek PM replaces finance minister (financialpost.com)
- European Finance Chiefs Split on Bondholder Role in Greek Rescue (businessweek.com)
- Greek Default: The Day After (blogs.wsj.com)
- Greek Default And The Markets (ritholtz.com)
- Euro Strengthens as Germany Signals Compromise on Greek Crisis (businessweek.com)
- Darkest before the Dawn (businessinsider.com)
- Trichet:Must Avoid Compulsion,Credit Event,Default For Greece (forexlive.com)
- Greek chaos fuels markets’ worst fears (ctv.ca)
Euro Pulih Ditengah Debat Hutang Yunani
Euro menguat terhadap Dollar AS pada hari Senin, pulih dari penurunan pada awal sesi menyusul aksi short-covering para pedagang memberikan sedikit ruang bagi Euro. Namun perseteruan di antara para pembuat kebijakan masih membatasi gain euro. Para petinggi di Eropa nampaknya masih belum mencapai kesepakatan mengenai rencana keterlibatan investor swasta dalam restrukturisasi hutang Yunani, yang terus diserukan oleh Jerman, meskipun ECB telah memperingatkan akan potensi gejolak pasar. Sementara investor mulai memangkas peluang kenaikan kembali suku bunga dalam beberapa bulan ke depan, bahkan setelah presiden ECB Jean-Claude Trichet sensinyalkan kemungkinan adanya kenaikan suku bunga pada bulan Juli, mengingat ECB masih mempertahankan proyeksi inflasi 2012 tidak berubah. Teppei Ino, analis mata uang pada Bank of Tokyo-Mitsubishi UFJ di Tokyo, memperkirakan Euro dapat terjatuh kembali ke posisi rendah bulan Mei di $1.3968 seiring krisis hutang zona Euro dan berkurangnya prospek kenaikan suku bunga menjadi fokus pasar.
Poundsterling Optimis Jelang CPI Inggris
Sterling menguat terhadap Dollar AS dan menyentuh level tinggi dalam lebih dari sepekan terhadap euro pada hari Senin, dipicu oleh kecemasan hutang zona Eropa dan antisipasi investor terhadap data inflasi hari Selasa yang diperkirakan menunjukkan kenaikan, kendati kecemasan rapuhnya perekonomian Inggris membuat sterling rentan. Analis teknikal mengatakan pergerakan konstan di bawah MA100 pada $1.6246 akan membawa sterling menuju $1.6055 dan
kemudian $1.6000 yang merupakan MA 200.
CPI tahunan diperkirakan tetap pada 4,5% pada bulan Mei. Hasil rilis di atas level tersebut mungkin akan memberikan dorongan bagi Cable, meskipun menurut analis tidak akan bertahan lama kecuali para investor yakin jika BoE akan merespon dengan menaikkan suku bunga. “Kenaikan inflasi akan mendorong Sterling naik, tapi mungkin hanya akan berumur pendek,” kata Lee McDarby, kepala dealing pada Investec. “Pasar perlu melihat kemajuan pada data sebelum ada pembicaraan mengenai kenaikan tingkat suku bunga.” Sentimen Sterling juga berpotensi terpukul pekan ini seiring data tenaga kerja hari Rabu dan penjualan ritel di hari Kamis dapat menambah kecemasan goyahnya ekonomi Inggris.
Franc Kian Menarik Sebagai Safe-Haven
Franc Swiss menguat terhadap hampir semua mata uang utama setelah belum adanya kesepakatan mengenai bantuan finansial untuk Yunani memicu investor beralih ke aset paling aman di Eropa, dengan yield obligasi Portugal dan Irlandia yang naik menuju rekor tinggi. Sementara SNB diperkirakan akan memutuskan menahan tingkat suku bunga di 0.25% pada pertemuan tanggal 16 Juni mendatang serta tidak mensinyalkan melakukan intervensi untuk membatasi penguatan franc.
“Investor melirik Franc Swiss lebih karena status safe haven-nya,” kata Elizabeth Gregory, analis pasar pada Swissquote Bank SA di Jenewa. “Ketidakpastian masih terus menyelimuti zona Euro, sementara prospek pertumbuhan Swiss nampak cerah. Maka tren penguatan Franc Swiss akan berlanjut.” Pejabat di Eropa menemui jalan buntu mengenai keterlibatan investor swasta dalam restrukturisasi hutang Yunani.
Euro Recovers Amid Debate Greek Debt
The euro strengthened against the U.S. dollar on Monday, recovering from the decline at the beginning of the session following the action of short-covering by traders give little room for the Euro. But the feud between the policy makers are still limiting the gain euros. European officials has not yet reached agreement on the involvement of private investors plan to restructure debt in Greece, which kept called for by Germany, although the ECB has warned of the potential market turmoil. Meanwhile, investors began to increase in opportunities to cut interest rates again in coming months, even after ECB president Jean-Claude Trichet sensinyalkan possibility of a rate hike in July, given the ECB still retains the 2012 inflation projection unchanged. Teppei Ino, currency analyst at Bank of Tokyo-Mitsubishi UFJ in Tokyo, estimates that Euro could fall back to a lower position in May at $ 1.3968 as the Euro zone and the debt crisis reduced
the prospect of higher interest rates become the focus of the market.
Optimistic About Coming to the UK pound sterling CPI
Sterling strengthened against the U.S. dollar and touched a high level in more than a week against the euro on Monday, sparked by fears the euro zone debt and investors’ anticipation of Tuesday’s inflation data are expected to show an increase, despite concerns the fragility of the British economy making sterling vulnerable. Technical analysts say the movement is constant under MA100 at $ 1.6246 would bring sterling to $ 1.6055 and
then $ 1.6000 which is the MA 200.
The annual CPI is expected to remain at 4.5% in May. Results release above that level would probably give a boost for Cable, although according to analysts will not last long unless the investors believe that if the BoE will respond by raising interest rates. “The increase in inflation would push Sterling rose, but may only be short-lived,” said Lee McDarby, head of dealing at Investec. “The market needs to see progress on the data before there is talk about rising interest rates.” Sterling sentiment also has the potential to hit this week as the employment data on Wednesday and retail sales on Thursday to increase the anxiety fragile UK economy.
Franc increasingly interesting as the Safe-Haven
Swiss franc strengthened against most major currencies after the lack of agreement on financial aid to Greece triggered investors to switch to the safest assets in Europe, with Portugal and Ireland bond yield which rose to a record high. While the SNB is expected to decide to hold interest rates at 0.25% at the next meeting June 16 and not signaling to intervene to limit the strengthening of franc.
“Investors Swiss Franc glanced over because its safe haven status,” says Elizabeth Gregory, analyst market in Swissquote Bank SA in Geneva. “Uncertainty continues surrounding the Euro zone, while Switzerland‘s growth prospects seem bright. And the Swiss franc strengthened the trend will continue. “Officials at the European impasse regarding the involvement of private investors in the debt restructuring Greece.
- Dollar weakens against most major currencies (seattlepi.com)
- Euro Near Record Low Versus Franc on Debt Concerns; Kiwi Rallies (businessweek.com)
- Dollar weakens against most major currencies (seattletimes.nwsource.com)
- Euro Weakens on Speculation Greece’s Debt Crisis Will Worsen (businessweek.com)
- Swiss Franc Hits High Vs. Euro (online.wsj.com)
- Pound Climbs Against Euro for Fourth Day on Debt Crisis Concern (businessweek.com)
- Trichet: ECB has its own collateral framework (forexlive.com)
- ECB and Germany May Be Forced to Compromise (europebiz.wordpress.com)
- Krona Rises on Franc as Traders Seek Germany Without Greece (businessweek.com)
- Limits of Monetary Policy (businessinsider.com)
- Trichet Reiterates ECB Hike In July A Likelihood, Not Certain (forexlive.com)
- Forex: British Pound To Consolidate Ahead Of U.K. CPI, Euro Holds Narrow Range (businessinsider.com)
- Greek rating now worst in the world (cnn.com)
- Euro Reality is worse than Humpty Dumpty’s Medical Prognosis (businessinsider.com)
- Euro crisis: “If fiscal union is not on the cards, the only other option is eurozone breakup” (sluggerotoole.com)
- Repeat:Trichet Reiterates July Hike A Likelihood, Not Certain (forexlive.com)