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Market Review Eropa


Market Review Eropa

Euro, Aussie dollar serta mata uang berisiko anjlok ditengah pengalihan resiko akibat ketidakpastian global dihantui downgrade S&P pada rating kredit AS sehingga memicu arus modal ke mata uang Swiss Franc dan Yen Jepang. Sementara bursa saham Eropa bertahan di teritori negatif, Emas meroket sejalan dengan sentimen negatif para investor dibebani downgrade rating kredit AS meskipun ECB mengaktifkan pembelian obligasi Italia & Spanyol.

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Dollar on Edge with Deficit Deadline, ISM Report Stokes Volatility


Dollar on Edge with Deficit Deadline, ISM Report Stokes Volatility

By John Kicklighter, Currency Strategist

02 August 2011 03:23 GMT
  • 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.

Related:Discuss the Dollar in the DailyFX Forum, John’s Picks: Controlling Risk is Tantamount as Volatility Prevails and Direction Absent

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

ECONOMIC DATA

Next 24 Hours

GMT Currency Release Survey Previous Comments
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

Currency EUR/USD GBP/USD USD/JPY USD/CHF USD/CAD AUD/USD NZD/USD EUR/JPY GBP/JPY
Resist 2 1.5160 1.6600 86.00 0.8900 1.0275 1.1800 0.9020 118.00 146.05
Resist 1 1.5000 1.6475 81.50 0.8550 1.0000 1.1000 0.8750 113.50 140.00
Spot 1.4268 1.6297 77.08 0.7817 0.9561 1.0964 0.8762 109.98 125.62
Support 1 1.4000 1.5935 77.00 0.7800 0.9425 1.0400 0.7745 109.00 125.00
Support 2 1.3700 1.5750 76.25 0.7600 0.9055 1.0200 0.6850 106.00 119.00

CLASSIC SUPPORT AND RESISTANCE –EMERGING MARKETS 18:00 GMTSCANDIES CURRENCIES 18:00 GMT

Currency USD/MXN USD/TRY USD/ZAR USD/HKD USD/SGD Currency USD/SEK USD/DKK USD/NOK
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
Spot 11.7277 1.6911 6.7309 7.7906 1.2018 Spot 6.3245 5.2217 5.3789
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

Currency EUR/USD GBP/USD USD/JPY USD/CHF USD/CAD AUD/USD NZD/USD EUR/JPY GBP/JPY
Resist 2 1.4571 1.6575 78.89 0.8056 0.9667 1.1127 0.8889 113.85 130.45
Resist 1 1.4420 1.6436 77.99 0.7936 0.9614 1.1045 0.8826 111.92 128.03
Pivot 1.4302 1.6337 77.14 0.7834 0.9553 1.0984 0.8779 110.31 126.12
Support 1 1.4151 1.6198 76.24 0.7714 0.9500 1.0902 0.8716 108.38 123.70
Support 2 1.4033 1.6099 75.39 0.7612 0.9439 1.0841 0.8669 106.77 121.79

INTRA-DAY PROBABILITY BANDS 18:00 GMT

\Currency EUR/USD GBP/USD USD/JPY USD/CHF USD/CAD AUD/USD NZD/USD EUR/JPY GBP/JPY
Resist. 3 1.4462 1.6454 77.97 0.7926 0.9657 1.1106 0.8882 111.61 127.17
Resist. 2 1.4414 1.6415 77.74 0.7899 0.9633 1.1071 0.8852 111.21 126.79
Resist. 1 1.4365 1.6376 77.52 0.7872 0.9609 1.1035 0.8822 110.80 126.40
Spot 1.4268 1.6297 77.08 0.7817 0.9561 1.0964 0.8762 109.98 125.62
Support 1 1.4171 1.6218 76.64 0.7762 0.9513 1.0893 0.8702 109.16 124.84
Support 2 1.4122 1.6179 76.42 0.7735 0.9489 1.0857 0.8672 108.75 124.45
Support 3 1.4074 1.6140 76.19 0.7708 0.9465 1.0822 0.8642 108.35 124.07

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Written by: John Kicklighter, Senior Currency Strategist for DailyFX.com


US Dollar Looking More Contructive Across the Board into Tuesday


US Dollar Looking More Contructive Across the Board into Tuesday

By Joel Kruger, Technical Strategist

02 August 2011 04:18 GMT
  • US Dollar Index bounces by yearly lows; more upside potential
  • RBA leaves rates on hold as was widely expected at 4.75%
  • Yen and Swissie find offers after trading to record highs
  • US debt ceiling developments still being digested
  • Eurozone structural concerns resurface
  • Aussie and Kiwi finally showing weakness

The US Dollar has been well bid overall in the early week, with the price action resulting in a favorable close off of the yearly lows in the US Dollar Index. The only other currencies that have shown better bid in recent trade have been the other safe haven currencies in the Swiss Franc and Yen, which both trade just off recently established record highs against the Greenback. Still, even the Yen and Swissie showed some relative weakness in the latter portion of Monday trade, and with both of these markets looking extremely stretched, the risks from here seem to favor USD appreciation going forward.

Markets had initially been well bid on Monday on the news of a resolution to the US debt ceiling talks, with risk correlated assets rallying impressively, before finally reversing quite sharply into North American trade. A combination of concern over the type of resolution achieved by the US government, softer US ISM data, and widening Eurozone peripheral bond spreads, all contributed to the risk off trade, with US equities getting hit rather hard. We also started to finally see some relative weakness in the antipodean currencies, with both Aussie and Kiwi rolling over from post-float record high levels and putting in bearish closes against the Greenback.

The RBA has now come out early Tuesday leaving rates on hold at 4.75% as was widely expected, with the accompanying central bank statement maintaining its newly adopted less hawkish outlook. The central bank continues to express concern over broader global macro threats and some worrying deteriorative local fundamentals, and as such, even with the attractive yield differentials, we would continue to look to be fading any strength in the currency as we contend that the best is now behind the currency down under.

On the data front, the key release in Asian trade was a weaker than expected Aussie building approvals print. Looking ahead, economic releases in the European session are few, but at the same time should not go unnoticed with Swiss retails sales, UK construction PMI, and Eurozone producer prices all very capable of moving markets. US equity futures and oil prices are consolidating their latest declines, while gold is once again looking toppish by record highs following Monday’s bearish close.

ECONOMIC CALENDAR

US_Dollar_Looking_More_Contructive_Across_the_Board_into_Tuesday_body_Picture_5.png, US Dollar Looking More Contructive Across the Board into Tuesday

TECHNICAL OUTLOOK

US_Dollar_Looking_More_Contructive_Across_the_Board_into_Tuesday_body_eur.png, US Dollar Looking More Contructive Across the Board into Tuesday

EUR/USD: The market continues to adhere to a bearish sequence of lower tops since May, with a fresh lower top now likely in place by 1.4535 ahead of the next downside extension back towards and eventually below 1.4000. In the interim, look for any intraday rallies to be well capped ahead of 1.4400, with a break and close back below 1.4200 on Tuesday to accelerate declines. Ultimately, only back above 1.4535 would negate outlook and give reason for pause.

US_Dollar_Looking_More_Contructive_Across_the_Board_into_Tuesday_body_jpy2.png, US Dollar Looking More Contructive Across the Board into Tuesday

USD/JPY: Setbacks have stalled out for now just ahead of the 76.25 record lows from March, with the market dropping to 76.30 ahead of the latest minor bounce. However, the bounce is somewhat significant on a short-term basis, with the market putting in a bullish outside day formation on Monday to suggest that the price could once again be very well supported in favor of a major upside reversal over the coming days. Look for a break and close back above 78.05 to confirm bullish reversal prospects and accelerate gains towards 80.00, while back below 86.25 negates and opens the door for fresh record lows.

US_Dollar_Looking_More_Contructive_Across_the_Board_into_Tuesday_body_gbp2.png, US Dollar Looking More Contructive Across the Board into Tuesday

GBP/USD: Despite the latest rally back above 1.6400, the market still remains locked in a broader downtrend off of the April highs, and a fresh lower top is now sought out somewhere ahead of 1.6550 in favor of the next downside extension back towards the recent range lows at 1.5780. Monday’s strong bearish outside formation could very well set up the next lower top by 1.6475, and we look for a break and close back below 1.6200 to confirm and accelerate declines. Ultimately, only a break back above 1.6550 would delay bearish outlook and give reason for pause.

US_Dollar_Looking_More_Contructive_Across_the_Board_into_Tuesday_body_swiss1.png, US Dollar Looking More Contructive Across the Board into Tuesday

USD/CHF: Despite the intense downtrend resulting in recently established fresh record lows below 0.7800, short/medium/longer-term technical studies are looking quite stretched to us, and we continue to like the idea of taking shots at buying in anticipation of a major base. Monday’s fresh record lows by 0.7730 seem to have been very well supported, and we would be on the lookout for a break and close back above 0.7950 on Tuesday to encourage short-term reversal prospects and accelerate gains. Back below 0.7730 negates.

Written by Joel Kruger, Technical Currency Strategist


Japanese Yen Direction Contingent on U.S. Debt Ceiling Talks


By Christopher Vecchio, Junior Currency Analyst

22 July 2011 22:59 GMT
The Japanese Yen¥USD/JPY • NY Spot Close 78.477
Japanese_Yen_Direction_Contingent_on_U.S._Debt_Ceiling_Talks_body_usdjpy_risk.png, Japanese Yen Direction Contingent on U.S. Debt Ceiling TalksJapanese Yen Direction Contingent on U.S. DebtCeiling TalksFundamental Forecast for Japanese Yen: Neutral

The Yen slumped slightly this past week, falling 0.75 percent its American counterpart, while remaining in the middle of the pack against a basket of the other major currencies. While risk-appetite found some footing, with the Australian Dollar and New Zealand Dollar leading the major currencies, the safe haven currencies – the Japanese Yen, the Swiss Franc and the U.S. Dollar – were relatively even across the board. This is a result of remaining uncertainty concerning the state of the two major financial pillars of the global economy, the Euro-zone and the United States. Thus, while there was some resolution in the near-term in regards to the European sovereign debt crisis, there is remaining uncertainty as to what is happening with the United States’ debt ceiling.

With not much significant data released over the past week, the Yen’s place, as has been for the past few weeks, was primarily that of a store of save haven, as, despite the country’s economic woes, the currency remains one of the most liquid assets in the world. There were two notable bright spots that highlighted the week for the Pacific Rim nation that are worth mentioning. First, on Wednesday, the merchandise trade balance figure for June was released, blowing through expectations. While the trade balance was -¥855.8 billion in May, the ¥70.7 billion reading easily beat the -¥149.0 billion estimate, a strong indication that the Japanese economy is starting to get on stronger footing following the earthquake. To this end, the all industry activity index expanded by 2.0 percent in May, after gaining by 1.4 percent in June; this further supports the notion that the Japanese economy is recovering.

Next week will be particularly interesting, considering that among a week fully saturated of significant events out of Japan, it broke late Friday that the debt negotiations broke off between Democrats and Republicans on resolving the debt ceiling issue. In terms of data due, the significant data begins to trickle in starting on Wednesday, with the bulk of the data being released on Thursday.

Retail sales data leads the block of data releases, with trade expected to have gained at a 1.5 percent rate in June, slightly down from the 2.4 percent rate in May. On the contrary, large retailers’ sales are forecasted to have fallen by a slight 0.4 percent over the same period. On Thursday, two more data release could further support the Yen. First, the consumer price index is expected to show a slight uptick to 0.2 percent, marking the third month in which price pressures have increased, a welcomed trend by the Japanese economy. Later, industrial production data is due, which, while forecasted to have decreased on a year-over-year basis, production is expected to have rebounded on a monthly basis, by 4.5 percent in June. it is unlikely that these data will have much of an impact on the Yen, though, as the currency is currently considered a store of safe haven in times of crisis, so amid the debt problems ramping up in the United States, which they now have, the Yen will be bid higher on poor news. -CV


Growth, Inflation Data and a Rate Decision Make for a Volatile Week


By Christopher Vecchio, Junior Currency Analyst

22 July 2011 20:55 GMT

With the last full week of July ahead, there is significantly more event risk on the docket than the third week in July. Now, as the markets have begun to digest the results of the new bailout of Greece, price action will largely be dictated by key events on the docket, including American and British growth figures, Australian and German consumer price indexes, and a rate decision from the most southern antipodean nation. Still, the markets will continue to listen to jabbering between Democrats and Republicans, as the debt ceiling debacle has still yet to find resolution ahead of the ‘hard’ August 2 deadline.

United Kingdom Gross Domestic Product (YoY) (2Q A): July 26 – 08:30 GMT

The British economy has experienced growth of at least 1.5 percentin each of the past four quarters, on a year-over-year basis, going back to the second quarter of 2010. Surveys indicate that the GDP growth figure released on July 26 will come in at 0.8 percent, well below last quarter’s 1.6 percent pace, on a yearly-basis. Growth forecasts have been revised downwards as the economy has failed to pick up momentum in recent weeks and months, as most recently noted by the Bank of England minutes, released this past week.

Contributing to the downturn has been the persistent Euro-zone debt crisis, which has curtailed investment overseas and demand for British goods. Inflation continues to be stubbornly high at 4.5 percent, more than double the inflation target rate as set by the Bank of England. Although a decline in output should deter further inflation, the priority remains to accelerate economic growth, which is why the central bank has held rates at 0.50 percent for twenty-nice consecutive months.

United States Durable Goods Orders (JUN): July 27 – 12:30 GMT

U.S. Durable Goods Orders are expected to have risen only 0.3 percent after increasing a promising 2.1 percent in May, already revised up from the 1.9 percent initial reading. The increase is still welcomed following a 2.7 percent drop in orders in April. The recent upswing in the closely watched economic indicator is rooted mainly in easing disruptions to factory production in the United States, as supply chain disruptions as a result of the aftermath of the Japanese natural disasters and ensuing earthquake weakened demand. In the fragile U.S. economy, manufacturing has been one of the key areas of strength since the recession abated.

A weaker domestic currency has boosted exports and encouraged manufacturers to continue to make long-term investments. The durable goods orders report is a leading indicator of economic health, and will thus be closely watched to gauge manufacturers’ sentiment and investment activity as the debt ceiling debate looms in the U.S.

Reserve Bank of New Zealand Rate Decision (JUL 28): July 27 – 21:00 GMT

At its last meeting on June 8, the Reserve Bank of New Zealand decided to maintain its key benchmark interest rate at 2.50 percent, on the outlook that the economy is steadily improving following the earthquakes over the past few months. The central bank has determined that the most southern antipodean nation is still in need of stimulus to promote further strengthening. It is widely expected that the key rate will be kept at 2.50 percent at the next monetary policy meeting on July 28, with the Credit Suisse Overnight Index Swaps showing a mere 6.0 percent chance of a 25.0-basis point rate hike. Still, despite such weak expectations, the number of basis points priced into the Kiwi over the next 12-months, 94.0, has boosted the New Zealand Dollar since mid-March.

In spite of such a strong domestic currency, recent data releases indicate that the economy is undergoing robust growth and inflation has risen faster than expected. GDP growth figures released on July 13 came in at 1.4 percent, blowing past a forecast of 0.5 percent growth, while recent inflationary data showed inflation increasing to 5.3 percent, topping expectations of 5.1 percent, on a year-over-year basis. These two important economic indicators will play a major role in determining future the central bank’s cash rate decisions. If the recent growth continues, there is a high probability that there will be a rate hike in September to contain inflationary pressures.

German Consumer Price Index (YoY) (JUL P): July 28 – 04:00 GMT

The German consumer price index has remained steady for the last six months and no change is expected in this figure at the next release next Thursday. According to a Bloomberg News survey, the initial forecast calls for a print of 2.3 percent on a year-over-year basis, matching the number of the previous month. This number is slightly higher than the European Central Bank’s target inflation of “below but close to 2 percent,” but the recent rate hikes enacted by the central bank are expected to help suppress further jumps in inflationary pressures: changes in interest rates take anywhere from two- to six-months to be felt by an economy.

Higher energy prices have been the primary driver keeping inflation above the 2.0 percent mark but “lower food and seasonal food prices can be in part held responsible for the benign pan-German reading.” Since Germany is the Euro-zone’s strongest and largest economy, this reading is closely watched by the European Central Bank as a determinant of their monetary policy decisions.

United States Gross Domestic Product (Annualized) (2Q A): July 29 – 12:30 GMT

The U.S. economy is expected to have experienced very slow economic growth in the second quarter of 2011. The GDP data that will be released on July 29 is an indication that output is increasing at a decreasing rate, albeit at a decreasing rate. Forecasts call for a 1.7 percent growth in output versus a 1.9 percent growth experienced in the first quarter, according to a Bloomberg News survey. Two significant factors contributing to the slow recovery include high food and energy prices and supply chain disruptions following the Japan earthquake.

The ongoing debt ceiling debate has reduced consumer confidence as investors concerns grow about the possibility of a U.S. default. The lowered confidence levels have translated into reduced spending impacting the output produced by the world’s largest economy. At the most recent Federal Reserve monetary policy meeting, the FOMC revised GDP and unemployment forecasts downwards from their April projections. The change in growth forecasts for 2011 and 2012 have been revised from 3.3 percent to 2.9 percent and from 4.2 percent to 3.7 percent, respectively.

Written by Christopher Vecchio, Currency Analyst


Fed Chair Significantly Downplays Prospects for Additional Easing


Fed Chair Significantly Downplays Prospects for Additional Easing

Fed Chair Significantly Downplays Prospects for Additional Easing

By Joel Kruger, Technical Strategist

15 July 2011 04:44 GMT
  • Thursday price action fails to inspire any real directional bias
  • USD recovers after Bernanke dismisses possibility for QE3
  • S&P jumps into mix and also warns of potential US ratings downgrade
  • Eurozone trade balance only key release in European session

All things considered, Thursday’s session of trade was relatively uneventful from a price action standpoint, with markets in the end, closing near their daily opening levels. The Greenback had initially been weighed down across the board on concerns over a potential downgrade to US credit ratings, but managed to fight its way back in the latter half of the day, with US economic data coming in as expected and more importantly, Fed Chair Bernanke throwing cold water on any real hopes for further accommodation from the Fed.

When asked if the Fed would consider additional accommodation, the Fed Chair said that the central bank was not considering this as an option at the present time. The US dollar was very well bid as a result with market participants also retracing some of their moves from the previous day’s testimony when it seemed as the door was open for potential QE3 measures. However, ongoing concern over the US debt ceiling also would not completely go away, with S&P joining into the mix and also warning of some form of a downgrade to US ratings over the coming days even in a situation where the ceiling were raised. Specifically, the S&P analyst said that the chances for a sovereign rating downgrade in the next 90 days had risen considerably

Looking ahead, the European economic calendar is extremely quiet, with the only key release coming in the form of the Eurozone trade balance. But as was the case on Thursday, the quiet economic calendar for the session should be a welcome development as broader global macro forces are at play. US equity futures and oil prices consolidate their latest declines, while gold sits on the opposite end of the spectrum and consolidates gains by record highs.

ECONOMIC CALENDAR

Fed_Chair_Significantly_Downplays_Prospects_for_Additional_Easing_body_Picture_5.png, Fed Chair Significantly Downplays Prospects for Additional Easing

TECHNICAL OUTLOOK

Fed_Chair_Significantly_Downplays_Prospects_for_Additional_Easing_body_eur.png, Fed Chair Significantly Downplays Prospects for Additional Easing

EUR/USD: Overall, price action remains quite bearish and we continue to like the idea of selling into rallies in anticipation of a more sizeable pullback below the 200-Day SMA. The longer-term moving average resides by the 1.3900 figure and a clear break below will open the door for a test of next key support in the 1.3750. In the interim, look for the formation of a fresh lower top somewhere ahead of 1.4400. Thursday’s topside failure by a convergence of moving averages just under 1.4300 could very well offer itself as a strong candidate for this next lower top.

Fed_Chair_Significantly_Downplays_Prospects_for_Additional_Easing_body_jpy2.png, Fed Chair Significantly Downplays Prospects for Additional Easing

USD/JPY: The latest daily close below 79.50 certainly compromises our constructive outlook with the market breaking down below some solid multi-day range support in the 80.00 area and dropping into the 78.00’s thus far. This now puts the pressure back on the downside and opens the door for a retest and potential break below the record lows from March by 76.30. At this point, a daily close back above 80.00 would be required at minimum to relieve downside pressures.

Fed_Chair_Significantly_Downplays_Prospects_for_Additional_Easing_body_gbp2.png, Fed Chair Significantly Downplays Prospects for Additional Easing

GBP/USD: We classify the latest price action as some consolidation ahead of the next major downside extension with the market now looking to establish back below the 200-Day SMA and extend declines through next key support at 1.5750 further down. In the interim, look for any rallies to be well capped ahead below 1.6250 on a daily close basis. Back under 1.6000 helps to confirm and should accelerate.

Fed_Chair_Significantly_Downplays_Prospects_for_Additional_Easing_body_swiss1.png, Fed Chair Significantly Downplays Prospects for Additional Easing

USD/CHF: Despite the intense downtrend resulting in recently established fresh record lows below 0.8100, short/medium/longer-term technical studies are looking quite stretched to us, and we continue to like the idea of taking shots at buying in anticipation of a major base. Aggressive bulls may want to look to establish fresh long positions ahead of 0.8000, while conservative counter-trenders will want to wait for a daily close back above 0.8200 at a minimum.

Written by Joel Kruger, Technical Currency Strategist


Gold and Currencies Correlations at Record on US Dollar Risk


Gold and Currencies Correlations at Record on US Dollar Risk

By David Liu, 15 July 2011 02:36 GMT

The following table includes the correlation between gold and the most popular currency pairs over various timeframes. A value close to +1 indicates a strong positive relationship between gold and the pair, while a value close to -1 indicates a strong negative relationship. Colored values indicate week-to-week changes of over 30%.

———————————————————————————————————————————

Gold USD/CAD AUD/USD NZD/USD EUR/USD GBP/USD USD/JPY USD/CHF
3 Day 15 Min -0.94 0.91 0.90 0.91 0.94 -0.85 -0.91
1 Week 60 Min -0.46 0.18 0.44 -0.07 0.62 -0.92 -0.94
2 Week 60 Min -0.36 0.12 0.24 0.05 -0.24 -0.41 0.44
1 Month Daily -0.26 0.18 0.32 -0.66 0.12 0.50 -0.52

Weekly Commentary: Short term correlations with gold and dollar pairs rose to the highest in recent history as Moody’s threatened to downgrade US government treasury pending the ongoing debt scuffle in the House of Representatives. The fear that the safest asset in the world may lose its status hurt the dollar on all sides as investors flocked to both foreign currencies and precious metals.

For more about the debt ceiling and what it means for the dollar, please refer to this analysis.

On a longer term outlook, the Japanese yen and Swiss franc gained in tandem with the yellow metal, showing increased safe haven demand. Fundamental problems this week ranging from a possible contagion of the European debt crisis to Italy to the possible US debt downgrade induced further flights to safety. Despite the record flows, markets are looking forward to second quarter earnings next week and a possible conclusion to the debt fight.

Gold-Forex_Correlations_07152011_body_Picture_1.png, Gold and Currencies Correlations at Record on US Dollar RiskGold-Forex_Correlations_07152011_body_Picture_2.png, Gold and Currencies Correlations at Record on US Dollar RiskPlease note: Chart uses franc rate as CHFUSD to show safety correlation with gold.

Gold-Forex_Correlations_07152011_body_Picture_3.png, Gold and Currencies Correlations at Record on US Dollar RiskGold-Forex_Correlations_07152011_body_Picture_4.png, Gold and Currencies Correlations at Record on US Dollar RiskWritten by David Liu, DailyFX Research


6 Month Euro Forecast: Looking for the EURUSD at 1.25


6 Month Euro Forecast: Looking for the EURUSD at 1.25

By David Rodriguez, Quantitative Strategist

13 July 2011 06:00 GMT

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.


Euro Sovereign Debt Crisis Further Deteriorates, So Why the Bounce?


Euro Sovereign Debt Crisis Further Deteriorates, So Why the Bounce?

By John Kicklighter, Currency Strategist

13 July 2011 04:13 GMT
  • Dollar and Equities Traders Look for Mentions of QE3 from Bernanke
  • Euro Sovereign Debt Crisis Further Deteriorates, So Why the Bounce?
  • British Pound Follows Risk Trends More Closely than Inflation Data
  • Australian Dollar Finds a Temperate Boost from Chinese GDP
  • New Zealand Dollar Gets a Second Attempt at 1Q GDP Figures
  • Japanese Yen Sees Early Session Surge But Strength Quickly Retraced
  • Gold Rally Continues, Record High Close as Financial Stability Questioned

Dollar and Equities Traders Look for Mentions of QE3 from Bernanke

If the dollar (ticker = USDollar) were in charge of its own fortunes, it wouldn’t have suffered the sharp reversal the market impressed through the European and US trading hours Tuesday. The price action through the previous trading day reminds us that the greenback is at the mercy of larger fundamental themes; and the currency will continue to find its bearings through these strong market winds through the foreseeable future. Tracking following the now-familiar correlations, the high level of market volatility made even easier to spot the dollar’s reflection of risk appetite trends. Our favored benchmark for sentiment trends, S&P 500 futures, managed to break the most aggressive decline in over a month with a sharp, bullish recover before New York liquidity came online. The unusually active overnight session lined up perfectly with EURUSD, pulling the currency back up to the important 1.40 figure that signaled progress on the pair’s bearish progress the session before. Now, with the benchmark exchange rate resting once again at this critical figure; the debate over direction and momentum are once again the responsibility of speculators.

From the fundamental side of the equation, market sentiment was guided by the preoccupation with the European sovereign debt situation – hence the intraday reversal. With Ireland finding itself sovereign debt rating lowered to ‘junk’ status (more on that below), the situation has tangibly deteriorated; but the speculative spirit would respond quickly to the quick fix offered in rumors of ECB purchases of EU member bonds. This temporary relief would turn a quick profit taking on risk-aversion position; and lead market participants to wait for the next catalyst for direction. For scheduled event risk, data did little to encourage risk trends or the US recovery. The May trade deficit swelled much more than expected to a $50.2 billion shortfall while the NFIB reported an unexpected slip in small business confidence (the group responsible for the greatest segment of employment in the country). Most notable, though, was the minutes from the FOMC decision. This looked like a write-off event after Chairman Bernanke’s press conference following the decision; but the notes proved noteworthy. On one hand, a few members spoke to the need for further stimulus should growth not curb unemployment; but there was also a consensus on the “steps” for stimulus withdrawal.

Perhaps this mixed view will come up in Bernanke’s testimony in the upcoming New York session. The central banker is scheduled to deliver his semi-annual policy report to Congress; and politicians have better access to grill than the regular market participant. Given the discussions circulating in headlines and amongst trading forums, there is considerable speculation of a QE3 announcement. That is unlikely given the steady progress of policy to this point and the trouble with eventually drawing down a larger safety net. Then again, anything is possible nowadays.

Euro Sovereign Debt Crisis Further Deteriorates, So Why the Bounce?

Having plunged in the previous two active trading sessions (and fallen over 500 points in the span of 5 days against the greenback), the euro was due for a correction. The initial tumble Tuesday morning was largely influenced by prevailing market concerns; but some credit should be given to comments offered by new IMF head Lagarde. The real buying momentum for the day, however, falls to rumors that the ECB purchased Italian and Spanish sovereign bonds after their dramatic selloff the previous day. A bid from the policy officials is a well-known temporary fix; but the hold over form this effort is certainly in question after Moody’s downgraded Ireland’s credit rating to ‘Junk’ and pegged it with a negative outlook. The immediate impact was muted; but this was the same general reaction to the Portugal incident the previous week. We now have two countries whose debt will have to be purged by high quality portfolios and a crisis spreading to the EU core. Temporary fixes won’t cut it.

British Pound Follows Risk Trends More Closely than Inflation Data

Between bullish and bearish scenarios for the UK CPI data; the latter had the greater potential for impact. That said, a notable slip from the headline reading to 4.2 percent clip wouldn’t rouse much of a reaction from the sterling. This reflects a complete lack of interest in rate speculation. Alternatively, the jobs figures could tap into concerns over the impact of austerity efforts on growth and perk up volatility.

Australian Dollar Finds a Temperate Boost from Chinese GDP

Business and consumer confidence data populated the Australian docket Tuesday and Wednesday respectively; but its influence over the market was notable anemic. Those trading the high-yield currency are more concerned with larger risk trends and longer-term economic trends. That said, a 2Q GDP reading from China (the slowest since 3Q 2009 but still 9.5 percent) didn’t seem to alter carry interests much.

New Zealand Dollar Gets a Second Attempt at 1Q GDP Figures

Last week, the market was preparing for the release of 1Q GDP figures from New Zealand; but the statistics group decided to push the data’s release back. Now, we are once again in the countdown to the release and expectations of a 0.3 percent increase in growth reflect a decent performance for the country. Yet, for a currency that has rallied on flimsy fundamentals; a disappointment can push the tipping point.

Japanese Yen Sees Early Session Surge But Strength Quickly Retraced

The Bank of Japan boosted its outlook for the economy for the second month with the commentary from its policy decision; but the downgrade to year-end 2012 GDP forecasts hung heavy. Yet, yen traders know that generated little interest for the currency. Wednesday morning, a big flush after the session rollover would expose low liquidity and spark a sharp rally. But without carry unwinding to back it up, it was quickly retraced.

Gold Rally Continues, Record High Close as Financial Stability Questioned

With Bernanke on tap tomorrow, the US 2Q earnings season starting soon, the budget ceiling countdown running, Ireland downgraded to ‘junk’ status, and the Portuguese central bank downgrading growth forecasts; there is plenty of reason to avoid exposure to the largest economies and their troubled markets. What are the viable alternatives to something as familiar and liquid as currencies: gold is at the top of the short list.

ECONOMIC DATA

Next 24 Hours

GMT Currency Release Survey Previous Comments
0:30 AUD Westpac Consumer Confidence (JUL) -2.6% May indicate rate of consumer consumption going into Fall months
0:30 AUD Westpac Consumer Confidence Index (JUL) 101.2
2:00 CNY Industrial Production YTD (YoY) (JUN) 13.9% 14.0% Slower production could mean PBoC tightening working
2:00 CNY Industrial Production (YoY) (JUN) 13.1% 13.3%
2:00 CNY Fixed Assets Inv Excl. Rural YTD (YoY) (JUN) 25.7% 25.8%
2:00 CNY Real GDP YTD (QoQ) (2Q) 2.1% If the GDP slows, it may indicate spending will decrease. However if GDP continues to grow, may lead to continued tightening
2:00 CNY Real GDP YTD (YoY) (2Q) 9.5% 9.7%
2:00 CNY Real GDP (QoQ)(2Q) 2.1%
2:00 CNY Real GDP (YoY) (2Q) 9.0% 9.7%
2:00 CNY Retail Sales YTD YoY (JUN) 16.7% 16.6% Retail sales is usually correlated with inflation, may suggest PBoC plans
2:00 CNY Retail Sales (YoY) (JUN) 17.0% 16.9%
4:30 JPY Industrial Production (MoM) (MAY F) 5.7% Japanese industrial data could suggest demand for raw materials
4:30 JPY Industrial Production (YoY) (MAY F) -5.9%
4:30 JPY Capacity Utilization (MoM) (MAY) -1.1%
6:00 EUR German Wholesale Price Index (MoM) (JUN) -0.2% 0.0% Wholesale prices expected to fall slightly, reduction may pass onto CPI
6:00 EUR German Wholesale Price Index (YoY) (JUN) 8.8% 8.9%
7:15 CHF Producer & Import Prices (MoM) (JUN) -0.3% -0.2% Production import prices may have little bearing on future SNB decisions
7:15 CHF Producer & Import Prices (YoY) (JUN) -0.3% -0.4%
8:30 GBP Claimant Count Rate (JUN) 4.7% 4.6% Newest British employment data could show weakness in labor market, possibly pointing to a slowdown in the overall economy
8:30 GBP Jobless Claims Change (JUN) 15K 19.6K
8:30 GBP Average Weekly Earnings 3M/YoY (MAY) 2.1% 1.8%
8:30 GBP Weekly Earnings exBonus 3M/YoY (MAY) 2.0% 2.0%
8:30 GBP ILO Unemployment Rate (3M) (MAY) 7.7% 7.7%
9:00 EUR Euro-Zone Industrial Production w.d.a. (YoY) (MAY) 4.8% 5.3% Year over year industrial production expected to slow as world economy weaker
9:00 EUR Euro-Zone Industrial Production s.a. (MoM) (MAY) 0.4% 0.2%
11:00 USD MBA Mortgage Applications (JUL 8) -5.2% Data may point to real estate health
12:30 USD Import Price Index (MoM) (JUN) -0.6% 0.2% Year-over-year import prices expected to be driven upwards by raw materials costs
12:30 USD Import Price Index (YoY) (JUN) 13.2% 12.5%
14:30 USD DOE U.S. Crude Oil Inventories (JUL 8) -889K Energy levels expected to drop as demand keeps falling due to slower domestic economy
14:30 USD DOE U.S. Gasoline Inventories (JUL 8) -634K
14:30 USD DOE U.S. Refinery Utilization (JUL 8) 0.3%
14:30 USD DOE Cushing OK Crude Inventory (JUL 8) -460K
14:30 USD DOE U.S. Distillate Inventory (JUL 8) -191K
18:00 USD Monthly Budget Statement (JUN) -$65.5B -$57.6B Budget deficit expected to widen to Aug 2
22:30 NZD Business NZ PMI (JUN) 54.7 Business survey has trended up
22:45 NZD GDP Q1 (YoY) 0.5% 0.8% First quarter output expected to be lower, largely due to Christchurch earthquake
22:45 NZD GDP Q1 (QoQ) 0.3% 0.2%
GMT Currency Upcoming Events & Speeches
5:00 JPY Bank of Japan Monthly Economic Report
14:00 USD Bernanke Delivers Semi-Annual Monetary Policy Report to House

SUPPORT AND RESISTANCE LEVELS

CLASSIC SUPPORT AND RESISTANCE – 18:00 GMT

Currency EUR/USD GBP/USD USD/JPY USD/CHF USD/CAD AUD/USD NZD/USD EUR/JPY GBP/JPY
Resist 2 1.5160 1.6600 89.00 0.9345 1.0275 1.1800 0.8400 118.00 146.05
Resist 1 1.5000 1.6300 86.00 0.8900 1.0000 1.1000 0.8300 113.50 140.00
Spot 1.3976 1.5913 79.24 0.8306 0.9666 1.0598 0.8181 110.74 126.10
Support 1 1.4000 1.5935 79.00 0.8300 0.9500 1.0400 0.7745 109.00 125.00
Support 2 1.3700 1.5750 75.00 0.8250 0.9055 1.0200 0.6850 106.00 119.00

CLASSIC SUPPORT AND RESISTANCE –EMERGING MARKETS 18:00 GMTSCANDIES CURRENCIES 18:00 GMT

Currency USD/MXN USD/TRY USD/ZAR USD/HKD USD/SGD Currency USD/SEK USD/DKK USD/NOK
Resist 2 13.8500 1.7425 7.4025 7.8165 1.3650 Resist 2 7.5800 5.6625 6.1150
Resist 1 12.5000 1.6730 7.3500 7.8075 1.3250 Resist 1 6.5175 5.3100 5.7075
Spot 11.7927 1.6465 6.8786 7.7948 1.2252 Spot 6.5865 5.3360 5.5990
Support 1 11.5200 1.5725 6.5575 7.7490 1.2145 Support 1 6.0800 5.1050 5.3040
Support 2 11.4400 1.5040 6.4295 7.7450 1.2000 Support 2 5.8085 4.9115 4.9410

INTRA-DAY PIVOT POINTS 18:00 GMT

Currency EUR/USD GBP/USD USD/JPY USD/CHF USD/CAD AUD/USD NZD/USD EUR/JPY GBP/JPY
Resist 2 1.4183 1.6049 80.81 0.8444 0.9843 1.0735 0.8390 114.46 129.09
Resist 1 1.4080 1.5981 80.02 0.8375 0.9755 1.0667 0.8286 112.60 127.59
Pivot 1.3958 1.5881 79.60 0.8329 0.9690 1.0596 0.8198 111.09 126.36
Support 1 1.3855 1.5813 78.81 0.8260 0.9602 1.0528 0.8094 109.23 124.86
Support 2 1.3733 1.5713 78.39 0.8214 0.9537 1.0457 0.8006 107.72 123.63

INTRA-DAY PROBABILITY BANDS 18:00 GMT

\Currency EUR/USD GBP/USD USD/JPY USD/CHF USD/CAD AUD/USD NZD/USD EUR/JPY GBP/JPY
Resist. 3 1.4172 1.6068 80.01 0.8411 0.9760 1.0736 0.8290 112.28 127.68
Resist. 2 1.4123 1.6029 79.82 0.8385 0.9736 1.0701 0.8263 111.90 127.29
Resist. 1 1.4074 1.5991 79.62 0.8359 0.9713 1.0667 0.8236 111.51 126.89
Spot 1.3976 1.5913 79.24 0.8306 0.9666 1.0598 0.8181 110.74 126.10
Support 1 1.3878 1.5835 78.86 0.8253 0.9619 1.0529 0.8126 109.97 125.31
Support 2 1.3829 1.5797 78.66 0.8227 0.9596 1.0495 0.8099 109.58 124.91
Support 3 1.3780 1.5758 78.47 0.8201 0.9572 1.0460 0.8072 109.20 124.51

v

Written by: John Kicklighter, Senior Currency Strategist for DailyFX.com


FOREX: US Dollar to Rise if Bernanke Testimony Sinks QE3 Hopes


FOREX: US Dollar to Rise if Bernanke Testimony Sinks QE3 Hopes

By Ilya Spivak, Currency Strategist

13 July 2011 06:48 GMT

Talking Points

  • NZ Dollar Leads Risk-Linked Currencies Higher as Stocks Rise
  • Chinese GDP Data Cools Rate Hike Fears, But Not for Long
  • Traders Turn Spotlight on Bernanke’s Testimony on QE Hopes
  • UK Jobless Claims to Cement Dovish Bank of England Outlook

The New Zealand Dollar outperformed in overnight trade as Asian stock exchanges rebounded after yesterday’s selloff, boosting sentiment-linked currencies. The Australian and Canadian Dollars likewise yielded considerable gains. Needless to say, safe-haven currencies came under pressure, with the Japanese Yen suffering outsized losses while the Swiss Franc and US Dollar also suffered, though the greenback held up best among the three.

The MSCI Asia Pacific regional equity index rose 0.6 percent after minutes from June’s Federal Reserve policy meeting revealed policymakers were divided about additional stimulus to bolster growth if economic recovery remains anemic, offering a sliver of hope for those worried about looming global slowdown in that a third round of quantitative easing (known as “QE3”) has not been ruled out outright. China’s Gross Domestic Product reading offered additional support, showing output grew at an annual pace of 9.5 percent in the second quarter, slowing from 9.7 percent in the three months through March. The outcome stoked speculation that slowing growth will delay further interest rate hikes.

However, the figures’ supportive powers seem decidedly limited. Indeed, the timelier Retail Sales and Industrial Production readings came in dramatically above economists’ forecasts, the former yielding the strongest increase since January while the latter returned the highest print in 13 months. Taken against a backdrop of soaring inflation as well as buoyant money supply and loan growth, the case for further tightening is remains a very compelling one, with fears of

Looking ahead, the spotlight turns on the Federal Reserve Chairman Ben Bernanke as he delivers his semi-annual testimony on monetary policy to the US House of Representatives. While the central bank chief’s prepared remarks are likely to toe a familiar line, traders will pay close attention to clues about the likelihood of further stimulus in his response to lawmakers’ questions. A strong statement squashing budding hopes for QE3 (at least for now) would stoke worries of broad-based slowdown in the second half of the year, weighing on risk appetite and spurring demand for safe-haven currencies anew.

On the data front, UK Jobless Claims figures headline the docket, with consensus forecasts calling for a fourth consecutive monthly increase to put overall applications for unemployment benefits at the highest level since April 2010. The result promises to cement expectations that the Bank of England will hold off from interest rate hikes in the near term, keeping a firm lid on the British Pound.

Asia Session: What Happened

GMT CCY EVENT ACT EXP PREV
0:30 AUD Westpac Consumer Confidence (JUL) -8.3% -2.6%
0:30 AUD Westpac Consumer Confidence Index (JUL) 92.8 101.2
2:00 CNY Industrial Production YTD (YoY) (JUN) 14.3% 13.9% 14.0%
2:00 CNY Industrial Production (YoY) (JUN) 15.1% 13.1% 13.3%
2:00 CNY Fixed Assets Inv Excl. Rural YTD (YoY) (JUN) 25.6% 25.7% 25.8%
2:00 CNY Real GDP YTD (YoY) (2Q) 9.6% 9.5% 9.7%
2:00 CNY Real GDP (QoQ) (2Q) 2.2% 2.1%
2:00 CNY Real GDP (YoY) (2Q) 9.5% 9.3% 9.7%
2:00 CNY Retail Sales YTD (YoY) (JUN) 16.8% 16.7% 16.6%
2:00 CNY Retail Sales (YoY) (JUN) 17.7% 17.0% 16.9%
4:30 JPY Industrial Production (MoM) (MAY F) 6.2% 5.7%
4:30 JPY Industrial Production (YoY) (MAY F) -5.5% -5.9%
4:30 JPY Capacity Utilization (MoM) (MAY) 12.8% -1.1%
5:00 JPY Bank of Japan Monthly Economic Report (MAY)

Euro Session: What to Expect

GMT CCY EVENT EXP PREV IMPACT
6:00 EUR German Wholesale Price Index (MoM) (JUN) -0.2% 0.0% Low
6:00 EUR German Wholesale Price Index (YoY) (JUN) 8.8% 8.9% Low
7:15 CHF Producer & Import Prices (MoM) (JUN) -0.3% -0.2% Low
7:15 CHF Producer & Import Prices (YoY) (JUN) -0.3% -0.4% Low
8:30 GBP Jobless Claims Change (JUN) 15.0K 19.6K High
8:30 GBP ILO Unemployment Rate (3M) (MAY) 7.7% 7.7% High
8:30 GBP Claimant Count Rate (JUN) 4.7% 4.6% Medium
8:30 GBP Average Weekly Earnings 3M/YoY (MAY) 2.1% 1.8% Medium
8:30 GBP Weekly Earnings ex Bonus 3M/YoY (MAY) 2.0% 2.0% Low
9:00 EUR Euro-Zone Indus Production w.d.a. (YoY) (MAY) 4.8% 5.3% Medium
9:00 EUR Euro-Zone Indus Production s.a. (MoM) (MAY) 0.4% 0.2% Low

Critical Levels

CCY SUPPORT RESISTANCE
EURUSD 1.3855 1.4080
GBPUSD 1.5813 1.6049