Risky assets were able to find a base due to some encouraging words out of China . However, market sentiment remains fragile and could tip either way at any time. Summer markets at their finest. Japan�s Industrial production came basically inline at 2.4%m/m, while in Australia building approvals were better than expected at 9.3% on the month better than the expected 8.0%. The big movement in FX was the NZD due to the RBNZ, which kept rates at 2.50% as was widely expected but the accompanying statement surprisingly had a dovish tone (which highlights the concern central banks have over signalling the start of the economic recovery). China 's PBOC vice governor stated that � China will unswervingly stick to appropriately loose monetary policy�, reversing the rapidly deteriorating market sentiment.
[B]News and Events:[/B]
Risky assets were able to find a base due to some encouraging words out of China . However, market sentiment remains fragile and could tip either way at any time. Summer markets at their finest. The theme of a rise and fall in risk appetite was consistent with our view of tentative sentiment in the market, where any change in recovery expectation would prompt traders to turn to the dollar in the face of negative development. Yesterday�s light economic calendar painted a gloomy picture with German CPI sliding to -0.1% and US durable goods orders falling to -2.5% vs -0.6% exp. Risk correlated trades fell sharply, with oil prices slipping $3 to $63bbl on the back of unexpected supply gain. Yet, there were good news before in early Asia. Japan�s Industrial production came basically inline at 2.4%m/m, while in Australia building approvals were better than expected at 9.3% on the month better than the expected 8.0%. The big movement in FX was the NZD due to the RBNZ, which kept rates at 2.50% as was widely expected but the accompanying statement surprisingly had a dovish tone (which highlights the concern central banks have over signalling the start of the economic recovery). In addition, the RBNZ up its rhetoric around the NZD stating "The level of the dollar in particular, is not helping the sustainability of future growth, and brings with it additional economic risks�. The NZDUSD fell sharply on the statement from 0.6580 to 0.6480. But since then has rallied, as markets continue to favour the commodity bloc to the chagrin of the RBNZ. Once again, it was the words from China, which saved the day for the market bulls. Once again, words for China helped bolster risk appetite. China 's PBOC vice governor stated that � China will unswervingly stick to appropriately loose monetary policy�, reversing the rapidly deteriorating market sentiment (regional Asian equity markets rallied on the statement). Clearly, global markets are expecting China to lead the growth and asset appreciation charge. In Europe today, confidence indexes are due for the Euro zone and traders are expecting consumer and economic confidence to register record gains in July. And for FX traders, the key to direction will be defined by the movements of the equity markets.
[B]Today’s Key Issues (time in GMT):[/B]
07:55 EUR Germany: Unemployment change, 000s (sa) Jul 50
07:55 EUR Germany: Unemployment rate, % (sa) Jul 8.4
07:55 EUR Germany: Unemployment level, mn (nsa) Jul 3.410 (-48k) exp
08:00 EUR Germany: Retail PMI, index Jul 46.0 exp
08:00 EUR Retail PMI, index Jul 47.5 exp
08:00 NOK Unemployment rate, % Jul 3.0 exp, 2.7 prior
09:00 EUR Consumer confidence, index Jul -24 exp, -25 prior
09:00 EUR Industrial confidence, index Jul -30 exp, -32 prior
12:30 USD Initial jobless claims, thous (4wk mvg avg) 25-Jul 585 (558) exp, 627 (617)
12:30 CAD Industrial Production 0.1% exp, -1.1% prior
12:30 CAD Raw Materials Price Index 3.0% exp, 2.2% prior
23:01 GBP GfK consumer confidence survey, balance Jul -27 -27 -25 -22 -23
23:30 JPY Job applicant ratio (x) Jun 0.43 exp
23:30 JPY Unemployment rate % Jun 5.3 exp, 5.2 prior
23:30 JPY household real consumption, % y/y Jun 0.1 exp
23:30 JPY Tokyo CPI % y/y Jul -1.7 exp
23:30 JPY Tokyo CPI ex. perishables % y/y Jul -1.7 exp
23:30 JPY Nationwide CPI % y/y Jun -1.8 exp
23:30 JPY Nationwide CPI ex. perishables % y/y Jun -1.7 exp
[B]The Risk Today: [/B]
[B]EurUsd:[/B] Major long entry at 1.4051 was followed by some seriously large stops getting touched all the way down to 1.4010/29 and has left those stopped out chasing the price higher this morning as the rush to get repositioned. 1.3997 is now the key level for support and above 1.4118 should see the intraday and short term players lightening up with a swift 50 - 80 pips in their pocket. Clearance of 1.4161 is required to resume the long term uptrend while short term the trend is obviously still bearish.
[B]GbpUsd:[/B] Medium term uptrend held steady (just about) at 1.6355 / 81 and the pair has performed in typical fashion of late by trading back up towards the resistance at 1.6546 /55. Intraday on the 60 minute chart we are looking at two shooting stars (topping candles) back to back coupled with stochastic turning bearish so expect a pullback and rangebound behavior is back on.
[B]UsdJpy:[/B] The straight line move off the 3 week uptrend was met by the same resistance that sent it there in the first place at 95.29. Two attacks on that level over yesterday afternoon and two failures but good consolidation around the 95.00 mark signals that another press on 95.29 may well be successful in breaking out. Good support at 94.78 and 94.45 provides a very attractive entry point for longs. 95.29 is the key level to trade around.
[B]UsdChf:[/B] The SNB’s Jordan hit the tape yesterday afternoon expressing a willingness to intervene in CHF strength again should they see the need and in turn the pair busted straight through the noise between 1.0817 and 1.0891 breaking out of the short term uptrend in the process. This morning has seen a retest of that break out and further attacks on 1.0891. If the level is cleared then look for 1.0927 and 1.0953 thereafter but be aware of the bearish stochastics on the 4 hour chart and RSI divergence developing on the same time frame.
[B]Resistance and Support:[/B]
By[B] Peter Rosenstreich [/B]- ACM Advanced Currency Markets, Geneva, Switzerland