Daily Market Outlook by Kate Curtis from Trader's Way

Commercial Content Analysts
102

USD

A fresh wave of risk appetite hit the markets and the U.S. dollar in yesterday’s trading. This caused a selloff for the safe-haven currency, as Obama announced that the U.S. Congress has postponed its vote on the military attack in Syria. Apparently, world leaders are pursuing a more diplomatic solution, as Russia’s Putin is asking Syria to hand over its chemical weapons. With no major reports due from the US today, all eyes and ears will be on the developments in this situation in Syria as these could impact risk sentiment and dollar movement.

EUR

Although the euro lost ground to the dollar in the Asian and London sessions, EUR/USD was able to recover later on when risk appetite surged. French data came in weaker than expected and today’s set of medium-tier reports from the euro zone could also disappoint. However, should risk appetite stay up, the euro might be shielded from more losses.

GBP

The pound edged higher against the yen and the dollar yesterday, boosted by a run of risk appetite. The UK RICS house price index also provided support for the pound as it printed a 40% increase. For today, the UK claimant count change will take the spotlight in terms of UK data. After falling by nearly 30K in July, joblessness could decline by 20K in August. A larger decline in claimants could provide another boost for the pound while a weak reading might force it to retreat.

CHF

The franc was no match to dollar and euro strength, as the Swiss currency was weighed down by the run in risk-taking. There were no major reports released from Switzerland yesterday and there are none due today.

JPY

USD/JPY made another attempt to break past the 100.00 level yesterday and, thanks to the run in risk appetite, the pair was successful. At the same time, the BOJ minutes which called on more reforms for the government also resulted to a Nikkei rally and a corresponding yen selloff. No major reports due from Japan today so yen pairs could stay sensitive to risk sentiment.

Commodity Currencies (AUD, CAD, NZD)

The comdoll gang was among the currencies that were able to benefit the most from the run in risk-taking. AUD/USD sealed its break above the 93.00 level while NZD/USD held steady above the .8000 handle. Data from Australia has been relatively upbeat, with the Westpac consumer sentiment report posting another improvement. The RBNZ is set to make its interest rate decision in the upcoming Asian session and traders could start pricing in expectations of an upbeat statement as early as today.

By Kate Curtis fromTrader’s Way

103

USD

The US Dollar extended its losing streak yesterday, as there were no reports for the currency to draw support from. At the same time, the risk rallies aren’t doing so good for the safe-haven dollar. Only the initial jobless claims release is on the U.S. schedule today and a slightly higher number of claimants is expected, from 323K the other week to 332K last week. Also keep tabs on Dudley’s speech at 2:00 pm GMT as he could discuss more details on the upcoming Septaper.

EUR

The euro continued to rally against the dollar but lost ground to the Japanese yen yesterday. Risk flows benefitted the euro, but it appears that the improvements in Japan’s business index outweighed euro strength. For today, Draghi is set to give a speech sometime in the London session and possibly give more details as to why the central bankers discussed lowering interest rates in their latest meeting.

GBP

The pound traded above the 1.5800 mark against the U.S. Dollar but retreated to the Japanese yen. The UK claimant count change report printed better than expected results, showing a 32.6K drop in joblessness and bringing the unemployment rate from 7.8% to 7.7%. BOE inflation report hearings are scheduled today and this should shed more light on whether Carney will alter his stance on not hiking rates for the next two years. UK 10-year bond auction is also scheduled today.

CHF

USD/CHF sank to the .9300 level in yesterday’s trading as dollar weakness persisted. The pair is consolidating around this area though, as it coincides with last week’s lows. There are no major reports released from Switzerland yesterday and today so the behavior of USD/CHF could depend on US data and risk sentiment.

JPY

The yen rebounded strongly yesterday on the heels of better than expected business indicators. The BSI manufacturing index improved from 5.0 to 15.2, reflecting stronger optimism among manufacturers and hinting at better business prospects in the coming months. Core machinery orders, however, came in weaker than expected as it showed a flat reading and hints at lower production in the coming months.

Commodity Currencies (AUD, NZD, CAD)

The RBNZ expressed its intention to hike interest rates starting next year, allowing NZD/USD to trade above the .8100 major psychological level. The Australian jobs release, on the other hand, turned out to be a huge disappointment as the economy reportedly shed 10.8K jobs in August and had a downward revision to the July figure. As for the Loonie, only the national house price index is set for release in today’s NY session.

By Kate Curtis from Trader’s Way

104

Hi, thanks for the analysis. JPY breaks down a daily triangle, I believe that it will go more down.

105

USD

With the US retail sales report coming up, the US dollar was stuck mostly in consolidation against its counterparts. EUR/USD held on to the 1.3300 handle while GBP/USD fought to stay above 1.5800. Slightly weaker spending is expected for the month of August, as the headline figure could increase by 0.5% while the core figure could show a 0.2% uptick. Stronger than expected readings would confirm the Septaper, which would be dollar-positive, while weaker than expected figures could trigger a selloff.

EUR

The euro struggled to hold on to the 1.3300 mark against the dollar but it was no match to yen strength yesterday. Draghi’s speech was dovish as expected since he pointed out that the recovery in the euro zone is still week but mentioned that the euro is a stable currency. He reiterated the ECB’s plans to keep rates unchanged at their low levels for an extended period but the euro barely reacted to this, as it wasn’t really a surprise. Euro zone industrial production data also turned out to be disappointing.

GBP

The pound was able to hold on to some of its recent gains to the dollar but it caved to yen rallies. There were no major reports released from the UK yesterday, as Carney’s speech led to a bit of pound selling. According to the central bank head, the improvements in hiring are just one part of the equation since the BOE is also watching the high inflation in the nation. No reports are due from the UK today as GPB/USD could rely on the US retail sales release for direction.

CHF

The franc lost ground to the dollar but gained against the euro yesterday, as there were no reports released from Switzerland. There are no reports due from Switzerland again today so USD/CHF and EUR/CHF could simply depend on US and euro zone data or market sentiment.

JPY

The yen was a big gainer yesterday, as sentiment for the Japanese economy improved. Although there were no major releases, the clarification by some Japanese officials that the BOJ isn’t easing simply to bring down the value of the yen was reassuring. No reports due from Japan means that yen trading could depend on risk sentiment.

Commodity Currencies (AUD, NZD, CAD)

The Kiwi continued its rallying ways throughout the day, spurred by upbeat remarks from RBNZ officials. As for the Aussie, weak jobs data triggered a sharp selloff from the .9300 handle against the dollar to the .9250 levels. No reports from the comdoll economies are due today so the behavior could be driven by US data and market sentiment.

By Kate Curtis from Trader’s Way

106

USD

The US dollar lost ground to most of its major counterparts on Friday’s New York session, as the retail sales report printed weaker than expected results. The headline figure showed a mere 0.2% uptick instead of the estimated 0.5% increase while the core version of the report showed a 0.1% rise. Headline PPI was better than expected at 0.3% while the core PPI printed a flat reading. Meanwhile, the consumer sentiment report also turned out to be a disappointment as confidence fell from 82.1 to 76.8. For today, US capacity utilization and industrial production data are due, along with the release of the Empire State manufacturing index.

EUR

The euro was unable to stay afloat on Friday as downbeat remarks from Draghi weighed on the shared currency. However, EUR/USD opened higher for this week as doubts on the Septaper triggered dollar weakness. Another speech by Draghi is scheduled for today but this might not have such a huge impact on the euro anymore. Italian trade balance and euro zone CPI are up for release and inflation is expected to be at 1.3% for the headline figure and 1.1% for the core figure.

GBP

The pound struggled to hold on to its recent gains against the dollar and yen last Friday, as there were no new reports from the UK to lift it higher. There are no reports from the UK today as well so pound trading could be range-bound. Take note though that the US is set to print a few medium-tier reports and disappointing results might push GBP/USD higher.

CHF

The franc packed in more gains against the dollar on Friday, as it took advantage of the weaker than expected US retail sales data. There have been no reports from Switzerland then and none are due today, which means that USD/CHF could continue to depend on US figures.

JPY

The yen was able to rebound strongly on Friday as the Japanese Cabinet upgraded its growth forecasts for the economy, citing that Japan’s recovery is already picking up. Although they mentioned that there are still several weak areas, additional stimulus from the BOJ could be enough to keep the economy afloat. Japanese banks are on holiday today, which paves the way for volatile movement among yen pairs.

Commodity Currencies (AUD, NZD, CAD)

Commodity currencies took advantage of dollar weakness on Friday and today, after the US economy showed weak consumer spending data. New Zealand recently reported a bounce in house prices but a weaker Westpac consumer sentiment figure. No reports are due from Australia and New Zealand for the rest of the day while Canada has its foreign securities purchases data up for release in the US session.

By Kate Curtis from Trader’s Way

107

USD

The Greenback still gave up some ground to the major currencies during yesterday’s trading, as news of Summers’ withdrawal from the Fed head race led to more dollar-selling. This is because Yellen is seen as a dove and is likely to keep the stimulus programs in place for the foreseeable future. As for economic data, both reports from the US came in weaker than expected yesterday. The Empire State manufacturing index fell from 8.2 to 6.3 instead of improving to 9.2 while industrial production was lower than expected at 0.4%. For today, there are no major releases from the US as traders might start pricing in expectations for the FOMC statement or start unwinding their dollar positions early.

EUR

The euro rallied yesterday but stopped a few pips shy of the 1.3400 handle against the dollar. Data from the euro zone was weaker than expected but Draghi’s speech contained no surprises, as he already said most of his forward guidance and monetary policy remarks during the ECB statement recently. For today, trade balance and current account balance are due from the euro zone but these aren’t likely to cause huge waves among euro pairs. The German ZEW sentiment figure is likely to have a bigger impact and a small improvement is expected.

GBP

The pound extended its gains to the dollar but was unable to reach the 1.6000 major psychological level despite yesterday’s rallies. There were no reports released from the UK yesterday, as traders are just gearing up for today’s CPI reports. Weaker headline inflation is eyed at 2.7% versus the previous 2.8%, but a higher than expected reading might prompt calls for monetary policy tightening and should be positive for the pound.

CHF

There were no reports released from Switzerland yesterday and none are due today. This means that franc trading could depend mostly on US and euro zone data, as USD/CHF and EUR/CHF have been moving back and forth lately.

JPY

Japanese traders were on holiday yesterday, which is why most yen pairs were simply stuck in their ranges. For today, Japanese traders will return and possibly result to more moves among yen pairs for the rest of the Asian session. There are no news releases from Japan though, as yen pairs could also be sensitive to market sentiment.

Commodity Currencies (AUD, NZD, CAD)

The comdolls were able to edge a little higher against the dollar yesterday but it seems the rallies were short-lived. This was probably because most traders already started unwinding their dollar shorts ahead of tomorrow’s FOMC event. Canadian foreign securities purchases came out better than expected and today’s manufacturing sales release is also expected to print good results. There are no major reports due from Australia and New Zealand today.

By Kate Curtis from Trader’s Way

108

USD

The US dollar edged lower against its counterparts but seems to be consolidating for today’s Asian session, as traders are awaiting the FOMC statement. The Fed is expected to taper bond purchases by $10 billion, possibly as a combination of a reduction in Treasury purchases and in mortgage-backed securities. In addition, market watchers will keep close tabs on the accompanying statement by Bernanke as he is expected to adopt forward guidance and provide clues on future monetary policy moves. Fed estimates on growth and inflation are also set for release along with the rate statement.

EUR

The euro struggled to rebound against the dollar in yesterday’s trading but EUR/USD’s movement is slated to stay muted today. German ZEW came in stronger than expected, allowing the region’s ZEW figure to land above the 50.0 mark. There are no reports due from the euro zone, as EUR/USD traders will probably position themselves ahead of the FOMC statement.

GBP

The pound sold off slightly yesterday, as inflation reports simply came in line with consensus. Annual CPI is at 2.7%, down from the previous 2.8%, and closer to the BOE’s 2% inflation target. Core inflation showed a more subdued figure while producer price inflation hinted at lower price pressures in the future. BOE meeting minutes are up for release today and it will be interesting to see if policymakers pushed for an earlier end to easing or not.

CHF

The franc was vulnerable to dollar and euro behavior yesterday as there were no releases from Switzerland. The schedule is still empty again for today, which means that the franc could be sensitive to market sentiment. In particular, watch out for the FOMC statement if you’re trading USD/CHF.

JPY

The yen edged lower against its counterparts as risk appetite improved and there were no reports released from Japan. US TIC long-term purchases data showed that Japanese investors bought a lot of US bonds in the previous month, which reflected strong demand for the dollar and weak demand for the yen. The schedule is empty for today, which suggests that USD/JPY could be driven by the FOMC decision.

Commodity Currencies (AUD, NZD, CAD)

The comdolls tried their best to bounce back against the dollar yesterday, pushing AUD/USD back above .9300 and NZD/USD way past .8200. USD/CAD held steady above the 1.0300 major psychological support. New Zealand is set to print its GDP after the FOMC statement and possibly show weaker growth of 0.2% compared to the previous quarter’s 0.3%. BOC Governor Poloz is set to give a testimony today and possibly spur volatility for USD/CAD ahead of the FOMC.

By Kate Curtis from Trader’s Way

109

USD

The dollar suffered heavy selling in yesterday’s NY session, as the Fed decided against tapering asset purchases this month. The policymakers agreed that the recovery isn’t stable yet and that the growth outlook has weakened. Bernanke didn’t provide clear clues on when they plan to taper but market participants are starting to price in the possibility that it won’t happen this year. Housing data from the US was also worse than expected yesterday. For today, initial jobless claims, Philly Fed index, and existing home sales are up for release.

EUR

The euro traded up to the 1.3500 handle against the dollar, thanks to the FOMC statement. There were no major reports released from the euro zone yesterday, as most of EUR/USD’s movement was simply a result of dollar weakness. For today, euro zone’s schedule is free from any economic data, which suggests that the euro could continue to take advantage of dollar weakness.

GBP

The pound surged past the 1.6000 handle and 1.6100 mark against the dollar yesterday, as the FOMC’s decision against the Septaper contributed to sharp dollar declines. In addition, the upbeat BOE meeting minutes also provided support for the pound. Members voted unanimously to keep interest rates and bond purchases unchanged, and there was no dissent when it comes to stimulus measures. For today, UK retail sales and CBI orders expectations are up for release and strong figures might boost GBP/USD further.

CHF

The Swiss franc was able to draw strength from an improved ZEW economic expectations reading, which climbed from 7.2 to 16.3. USD/CHF was able to break below the key .9200 psychological support and might be in for more losses, depending on how today’s SNB rate statement turns out. Upbeat remarks from SNB head Thomas Jordan could keep the franc rallying while downbeat comments could force it to retreat.

JPY

The yen packed gains against the dollar but lost ground to its other counterparts in yesterday’s trading. There were no major reports released from Japan, as the yen continues to trade on market sentiment and currency specific data. There are no reports due from Japan again today, which suggests that previous price behavior could carry on.

Commodity Currencies (AUD, CAD, NZD)

The comdolls were able to benefit from dollar weakness yesterday, as AUD/USD traded up to the .9500 handle while USD/CAD broke below the 1.0300 mark. NZD/USD was also boosted by the New Zealand GDP reading, which came in line with consensus for the second quarter and showed an upward revision for the first quarter. Canadian wholesale sales are up for release today.

By Kate Curtis from Trader’s Way

110

USD

The dollar was sold off sharply after the FOMC statement but it was quick to recover some of its recent losses while holding steady against other major counterparts. Economic data from the US was better than expected, with both Philly Fed index and existing home sales printing higher than expected gains. For today, there are no economic releases lined up but three FOMC officials (George, Tarullo, and Bullard) are set to give testimonies.

EUR

The euro was able to extend its rally against the yen but struggled to stay strong against the U.S. dollar. There were no reports released from the euro zone yesterday but the upcoming German elections is starting to weigh on the shared currency. There are no reports due from the euro zone again today as traders could start pricing in expectations for the German elections or unwind some of their euro trades ahead of the event risk.

GBP

The pound returned some of its recent gains to the dollar when the UK retail sales showed disappointing results. Consumer spending fell by 0.9% in August instead of rising by the estimated 0.4%. However, GBP/USD managed to hold on to the 1.6100 area and appears ready for a rebound. Public sector net borrowing data is due today and an improvement might be enough to lift the pound.

CHF

The franc was able to hold on to its recent levels against the U.S. dollar, as the SNB upgraded its growth forecasts for the Swiss economy. There were no actual monetary policy changes made though. There are no reports due from Switzerland today, as the franc could continue to draw support from the hawkish SNB statement.

JPY

The yen was sold off sharply towards the end of the Asian session, as a BOJ official was quoted saying that the central bank is worried about external risks to growth and the possible negative impact of Abe’s sales tax increase. In addition, BOJ Governor Kuroda spoke of the good effects of the recent easing program and emphasized that they could expand it if necessary.

Commodity Currencies (AUD, NZD, CAD)

The comdolls struggled to hold on to their recent gains, as all showed retracements to the dollar yesterday. There were no major reports released from the comdoll economies, but Canada’s medium-tier wholesale sales report printed strong results. For today, Canadian CPI figures are up for release and possibly allow USD/CAD to resume its drop if they come in strong.

By Kate Curtis from Trader’s Way

111

USD

Just when it seemed the US dollar was in for another round of losses, FOMC member Bullard gave a testimony and started talking about the possibility of tapering in October. This was enough to get dollar bulls riled up in anticipation of an Octaper event, which would push interest rates and the dollar higher. For today, there are no major reports due from the US. Only a speech by FOMC member Dudley, which might also spark volatility for dollar pairs, and the manufacturing PMI are up for release.

EUR

The euro gapped up against the dollar over the weekend on the wake of successful German elections. German Chancellor Angela Merkel held on to her position for the third term, although her Christian Democrats party was unable to secure a majority. This paves the way for a grand coalition to be formed and, if there are several challenges along the way, this might force the euro to return its recent gains. French and German PMIs are up for release today and another set of improvements could help the euro extend its gains.

GBP

The pound lost a bit of ground on Friday, as negative sentiment from Thursday’s retail sales release continued to drag the British currency down. Public sector net borrowing was lower than expected for the month but it was much higher than the previous month’s reading, as it showed that the government chalked up another deficit by spending more than what they earned. There are no major reports due from the UK today.

CHF

The Swiss franc was one of the major currencies that was able to hold steady against the Greenback’s rallies on Friday, as USD/CHF held on to the .9150 minor psychological support. Upbeat remarks from the SNB the previous day were enough to keep the currency supported until the end of the week. There are no reports lined up from Switzerland today so USD/CHF and EUR/CHF might be sensitive to U.S. and euro zone data.

JPY

The yen was able to hold on to its recent gains, as news updates revealed that Abe was looking at other alternatives to offset the sales tax increase. The prospect of additional stimulus from the BOJ could lead to more yen selling though so watch out for any updates on this issue. As for economic data, none are due from Japan today.

Commodity Currencies (AUD, NZD, CAD)

The comdolls gave up some of their recent wins to the dollar, as USD/CAD retreated to the 1.0300 handle on mixed inflation reports while NZD/USD pulled back below the .8400 mark. Chinese final manufacturing PMI came in stronger than expected this morning, adding to support for the Australian dollar and to speculations that China is starting to recover. No reports are due from the comdoll economies for the rest of the day.

By Kate Curtis from Trader’s Way

112

USD

The US dollar had a mixed performance yesterday as traders are trying to reestablish their biases on the US economy. On the one hand, the Fed has refrained from tapering while some FOMC officials like Dudley reiterated that the economy is too weak to warrant a reduction of bond purchases. On the other hand, FOMC policymaker Bullard has mentioned that the possibility of tapering in October is still high. For today, US CB consumer confidence data is up for release and a small decline is expected. FOMC member George is also set to give a speech in today’s US session.

EUR

The euro was once again weighed down by remarks from ECB head Draghi, as he spoke of the possibility of another round of long-term refinancing operations. Apparently, the drop in excess liquidity and the rise in money market rates is leading ECB officials to worry about a credit crunch and possible risks to recovery. Euro zone PMIs have come in mixed though, with the manufacturing figures in both France and Germany coming in below consensus and the services readings coming in strong. German Ifo business climate data is up for release today and an improvement from 107.5 to 108.4 is expected.

GBP

The pound was able to hold on to its recent levels yesterday, despite the lack of data from the UK. BBA mortgage approvals data and a few speeches by BOE policymakers are lined up for today, adding to potential volatility for pound pairs. MPC members Miles, Tucker, and Bean are set to take the stage today and possibly highlight the recent improvements in the UK economy and the reduced need for stimulus, which might help support the pound against its counterparts.

CHF

There were no major releases from Switzerland yesterday, which explains why it simply stayed in consolidation against the US dollar. There are still no reports due from Switzerland today so USD/CHF might keep moving sideways or be sensitive to US data.

JPY

The yen flexed its muscles yesterday, thanks to speculations that the government has its own stimulus package to offset the projected impact of the sales tax. Word on the street is that a cut in corporate tax might be implemented, much to the joy of business owners. This led to a rally in the yen, as traders thought that the BOJ will not need to dole out additional stimulus.

Commodity Currencies (AUD, NZD, CAD)

The comdolls were unable to make much headway in yesterday’s trading, as traders were uneasy about shorting the dollar again. Data from China was better than expected, as the HSBC manufacturing PMI for September rose from 50.1 to 51.2, reflecting stronger export prospects for Australia. No reports are due from New Zealand, as Canada will take the spotlight with its retail sales release. A rebound in spending is eyed, mostly because of the recent improvement in hiring.

By Kate Curtis from Trader’s Way

113

USD

The US dollar’s rally gained traction yesterday, even though there weren’t exactly a lot of major reports on tap. In fact, US reports actually came in below consensus yesterday, as the Richmond manufacturing index slipped from 14 to 0 instead of improving to 17. The CB consumer confidence figure also came in slightly weaker than expected at 79.7 instead of the estimated 79.9 reading, reflecting lower confidence for the month. Durable goods orders data are up for release today and improvements are expected, which might allow the dollar to keep up its rallies.

EUR

The euro lost ground to most of its major counterparts in yesterday’s trading, as Germany’s Ifo business climate report fell short of expectations. The actual reading climbed from 107.6 to 107.7, lower than the estimate at 108.4. German GfK consumer climate data is up for release today and another disappointment might be in the cards, although the reading is slated to rise from 6.9 to 7.1.

GBP

The pound was weaker against most of its major rivals, except for the euro. BBA mortgage approvals showed an improvement and reached its highest level since December 2009 at 38.2K. This reflects a healthy level of loan demand, which is good for the housing sector and construction industry. BOE officials expressed their contentment with the current level of stimulus while some mentioned that tightening could take place if significant improvements are seen. UK CBI realized sales are up for release today and a dip from 27 to 24 is expected.

CHF

The franc was stuck in consolidation against the US dollar, as USD/CHF was having trouble breaking below the .9100 major psychological support. There were no major reports released from Switzerland then but today’s UBS consumption indicator might be a catalyst for a breakout. The July figure came in at 1.41 and a higher reading might push USD/CHF lower.

JPY

The yen continued to rally against the other major currencies yesterday, as USD/JPY was able to stay safely below the 99.00 handle. There were no reports released from Japan as risk was off in the markets. There are no reports due from Japan today as we could see yen pairs continue to react to risk sentiment.

Commodity Currencies (AUD, NZD, CAD)

The Aussie and Kiwi were the weakest performers in yesterday’s trading, as both higher-yielding currencies were hit by risk aversion. USD/CAD managed to hold on to the 1.0300 handle, even though Canadian core retail sales came in strong at 1.0%. For today, there are no major reports due from any of these comdoll economies so these pairs might be sensitive to risk flows.

By Kate Curtis from Trader’s Way

114

USD

The US dollar let go of its recent gains to the dollar, yen, and euro as data from the US economy wasn’t as strong as expected. Core durable goods orders turned out to be a disappointment with a 0.1% decline for August while the headline figure was only slightly better than expected at its 0.1% uptick. New home sales were slightly below expectations at 421K versus the consensus at 422K. For today, initial jobless claims are up for release along with pending home sales, which could see a 0.9% decline. More weak figures could reinforce the dollar selloff.

EUR

The euro recovered against the Greenback but continued to lose to the yen. Risk aversion was still in play yesterday, although traders showed preference for the lower-yielding yen instead of the dollar, which is plagued by debt ceiling concerns. Germany’s GfK consumer climate report came in line with expectations and showed a 7.1 reading, up from the previous 7.0 figure. For today, M3 money supply and Italian retail sales are up for release and not expected to have a huge impact on euro price action.

GBP

The pound was able to bounce back after hitting the 1.6000 area against the Greenback. The CBI realized sales figure came in much better than expected at 34 versus the estimate of an increase from 24 to 27. UK revised GDP figures are up for release today but no changes are expected. A stronger than expected reading might allow the pound to sustain its rallies though.

CHF

The franc finally made some headway against the U.S. dollar as USD/CHF dipped below the .9100 major psychological level. However, data from Switzerland showed a bit of weakness as the UBS consumption indicator dipped from 1.41 to 1.34. The SNB quarterly bulletin is up for release today and it should shed light on why the central bank upgraded its growth forecasts recently.

JPY

The yen continued to soar against its major counterparts, as improving medium-tier economic data from Japan lifted the currency. Risk aversion also helped fuel the yen’s rallies, as traders preferred the Japanese currency over the U.S. dollar. There are no reports due from Japan today but watch out for updates on the government’s plans to offset the impact of the increased sales tax.

Commodity Currencies (AUD, NZD, CAD)

The comdolls were unable to join the anti-dollar rallies yesterday, as AUD/USD and NZD/USD sank lower while USD/CAD stayed stuck in consolidation around 1.0300. The lack of major data from these economies was probably one of the main reasons why the Aussie, Kiwi, and Loonie failed to rally. For today, their economic schedule is empty once again so these currencies might simply be driven by risk flows again.

By Kate Curtis from Trader’s Way

115

USD

The US dollar lost some ground to most of its major counterparts yesterday, as bleak economic data convinced traders that a taper is not likely for this year. The US GDP reading was held steady at 2.5% for the second quarter instead of being upgraded to the estimated 2.7% reading. Pending home sales fell short of expectations as it printed a 1.6% decline instead of the estimated 0.9% downtick. For today, consumer data such as the core PCE price index, personal spending and income, and preliminary UoM consumer sentiment data are up for release. Weak reports could reinforce the dollar selloff while strong data could provide support for the currency. Take note that some Fed officials are set to give speeches today and their remarks could be taken as clues on the Fed’s monetary policy plans.

EUR

The euro was unable to hold on to its recent gains when medium-tier data from the euro zone printed weak results. Italian retail sales dropped by 0.3% instead of rising by 0.3% while private loans in the region fell by 2.0%. Medium-tier reports from Germany and France are lined up for today, and another set of weak figures could push the euro lower. German CPI is slated to print a flat reading while French consumer spending could show a 0.1% uptick. ECB head Draghi has a speech scheduled today and he could spark additional volatility for euro pairs.

GBP

The pound was one of the weaker currencies in yesterday’s trading, thanks to downbeat data from the UK. The GDP reading held steady at 0.7% for the second quarter while the first quarter report suffered a small downward revision. The current account balance missed expectations and printed a larger than expected deficit. UK Nationwide HPI is up for release today and a 0.5% uptick in house prices is projected.

CHF

The franc stayed in consolidation against the dollar at the .9100 major psychological level yesterday. The lack of data from Switzerland kept the pair in a sideways path but today’s KOF economic barometer release could spark a breakout. The figure is expected to rise from 1.36 to 1.46 in the current month, possibly allowing USD/CHF to tread lower.

JPY

The yen sold off against most of its counterparts, as Japan’s inflation reports came in mixed. National core CPI is up by 0.8%, higher than the estimated 0.7% reading, while the Tokyo core CPI fell short of the projected 0.3% figure and showed a mere 0.2% uptick. No other reports are due from Japan today so stay tuned for updates on the government’s plants to offset the sales tax increase to figure out where yen pairs could trade.

Commodity Currencies (AUD, NZD, CAD)

The comdolls were unable to keep climbing yesterday, as weak US data weighed on overall risk sentiment. There were no major releases from Australia, Canada, or New Zealand recently, leaving the comdoll pairs at the mercy of sentiment. For today, their economic schedules are empty once again so AUD/USD, USD/CAD, and NZD/USD might take their cues from U.S. data.

By Kate Curtis from Trader’s Way

116

USD

The US dollar lost ground on Friday, mostly because of the weak economic data and the prospect of a government shutdown. Lawmakers only have a few hours left to come up with a plan to avoid default, and it appears that Republicans and Democrats still can’t see eye to eye. However, as we have seen in the past, they do tend to come up with something on the very last minute. If that’ll be the case again, we might see a relief rally from the dollar. US Chicago PMI is up for release today and an improvement from 53.0 to 54.5 is expected.

EUR

The euro staged a decent run against the dollar on Friday, but the 1.3550 level held as resistance then the pair gapped lower over the weekend. Data from the euro zone was mostly weaker than expected, with Germany printing a flat CPI reading and France showing a 0.4% decline in consumer spending. German retail sales data is up for release today and a 0.9% rebound is eyed.

GBP

The pound made a test of its recent highs against the dollar and its rally doesn’t seem to be showing any signs of stopping anytime soon. Even though UK’s index of services fell short of expectations, the positive outlook for the British economy was enough to support the pound. Data on net lending to individuals and mortgage approvals are up for release today, so signs of improvement could help GBP/USD extend its gains past 1.6200.

JPY

The yen was a big winner last Friday, as improved inflation data and risk aversion both lifted the Japanese currency. Japan’s economic data came in mostly in line with consensus earlier today, with the retail sales figure posting a 1.1% increase and manufacturing PMI climbing from 52.5 to 52.2. Housing starts, however, fell short of expectations and posted an 8.8% increase instead of the estimated 12.9% jump. No other reports are due from Japan today.

CHF

The Swiss franc was able to rally against the dollar again, pushing USD/CHF below the .9100 support level. Switzerland’s KOF economic barometer was stronger than expected at 1.53 versus the 1.46 estimate. There are no reports up for release from Switzerland today so it could be all about risk sentiment.

Commodity Currencies (AUD, NZD, CAD)

The comdolls were unable to benefit from the dollar selloff that occurred last Friday, as risk aversion took the best of them. AUD/USD slid to the .9300 handle while NZD/USD moved further below .8300 and USD/CAD held on to the 1.0300 handle. Over the weekend, New Zealand printed a 1.4% rebound in housing starts but the previous figure was revised down to -3.4%. Earlier today, China’s official manufacturing PMI came in above 50 but lower than the estimate. Canadian monthly GDP and medium-tier inflation data are due today.

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117

USD

The U.S. dollar experienced heavy selling pressure in yesterday’s trading, as the U.S. economy is currently facing a possible government shutdown. For now, lawmakers still haven’t come up with an agreement on how to implement spending cuts and avoid reaching the debt ceiling, which might then force the U.S. to default on its debts. Data from the U.S. barely had any impact on dollar price action yesterday but today’s ISM manufacturing PMI could push dollar pairs around. A small dip is expected for August, which might reinforce the dollar selloff.

EUR

The euro was stuck in consolidation against the dollar but it managed to score some gains against the Japanese yen. EUR/USD was unable to break past the 1.3550 minor psychological resistance yesterday, as political tensions in Italy continued to threaten the euro zone’s stability. Data from euro zone was mostly weaker than expected, as German retail sales fell short of consensus. For today, Italian and Spanish PMIs are up for release along with the German unemployment change report.

GBP

The pound was one of the major currencies that surged to new highs against the dollar yesterday, as GBP/USD climbed past the 1.6200 major psychological resistance. Data from the UK was actually in line with expectations only but the positive outlook for the British economy was more than enough to keep the pound afloat. For today, the manufacturing PMI is up for release and another improvement is eyed. After all, the UK has been consistently printing better than expected manufacturing PMI for the past five months.

CHF

The franc struggled to hold on to its recent gains, as EUR/CHF moved closer to the 1.2200 handle while USD/CHF paced below the .9100 mark. There were no releases from Switzerland yesterday as traders await the release of the SVME PMI today. A slight improvement is expected and this might be enough to let the franc resume its rallies.

JPY

The yen is also under heavy selling pressure recently, as traders await Abe’s announcement on the sales tax increase. Word on the street is that a hike from 5% to 8% is likely but market watchers are still waiting for the release of the Tankan index to figure out if the economy could withstand a tax hike. Also likely to be announced today is a potential corporate tax cut from the government which could offset the impact of the sales tax.

Commodity Currencies (AUD, NZD, CAD)

The comdolls were in for quiet trading yesterday, as they barely took advantage of dollar weakness. Data from China has been weak, as both HSBC and government manufacturing PMIs fell short of expectations. Canada’s monthly GDP came in line with consensus at 0.6% while New Zealand didn’t release any economic data. The RBA statement is scheduled today and this might have a huge impact on the Aussie if the central bank makes changes.

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118

USD

The U.S. dollar underwent a sharp selloff yesterday on the announcement of an official government shutdown. However, the currency soon recouped its losses when the ISM manufacturing PMI came in better than expected. The reading climbed from 55.7 to 56.2 instead of dropping to 55.3. For today, the ADP non-farm employment change reading is up for release and it is expected to show a 177K increase, higher than the previous 176K reading. A better than expected figure could provide strong support for the U.S. dollar as there might be no NFP release because of the government shutdown.

EUR

The euro is still on its short-term uptrend, but the pair fell back below the 1.3550 resistance after spiking to new highs. The US government shutdown triggered a sharp dollar selloff but the ongoing political trouble in Italy weighed again on the shared currency. For today, the Spanish unemployment change report is up for release but the bigger event is the ECB rate decision. Recall that Draghi mentioned that policymakers considered cutting interest rates in their previous rate decision and that they are also looking to implement more LTRO.

GBP

The pound struggled to hold on to its recent gains to the dollar but it gave up ground to the Japanese yen. UK manufacturing PMI came in weaker than expected at 56.7, down from 57.1, putting an end to its 5-month streak of improvements. For today, the construction PMI is up for release and a climb is expected. Given the weak results of the manufacturing PMI though, we could be in for a downside surprise that might weigh on the pound.

CHF

Switzerland didn’t release any economic reports yesterday, as the franc simply took advantage of dollar and euro weaknesses. USD/CHF breached the .9100 mark and traded close to .9000 but it pulled right back up during the US session, as the ISM manufacturing PMI printed strong results. There are no reports due from Switzerland again today so EUR/CHF and USD/CHF could continue to react to country-specific events, such as the ADP release and the ECB rate decision.

JPY

The yen was able to gain against most of its rivals, except for the Australian dollar. Data from Japan was mixed, as household spending and hiring fell short of consensus but the Tankan manufacturing index printed a rise from 7 to 12. This was enough to ensure that Abe will push through with the sales tax increase from 5% to 8% in April next year but he will be looking to implement reforms to counteract this.

Commodity Currencies (AUD, NZD, CAD)

The Australian dollar was the best performer in yesterday’s trading, as AUD/USD traded above the .9400 handle on the heels of a US government shutdown and an upbeat RBA statement. The Australian central bank kept rates on hold at 2.50% and said that the recent rate cut is just starting to make an impact. Meanwhile, there were no major reports from Canada and New Zealand. Earlier today, Australia reported a drop in building approvals and a weaker than expected trade balance. There are no more reports due from the comdoll economies for the rest of the day.

By Kate Curtis from Trader’s Way

119

USD

The US dollar gave up its gains to its major counterparts, as the US government shutdown extended for another day. It didn’t help that US data was weaker than expected, with the ADP private payrolls figure showing a 166K increase instead of the estimated 177K rise. The previous month’s figure was revised down from 176K to 159K, reflecting a larger downturn in hiring for the past few months. For today, the initial jobless claims and ISM non-manufacturing PMI are up for release. Another round of weak data and a third day of the government shutdown could keep weighing on the Greenback.

EUR

The euro was able to recover in yesterday’s trading as Italian Prime Minister Letta announced victory. He was able to secure enough votes to keep the coalition government in place and prevent a loss of confidence in his leadership. Data from the euro zone was actually weak, with the Spanish unemployment change printing twice as much as the estimated 12K rise in joblessness. The ECB kept interest rates unchanged at 0.50% but Draghi reminded market watchers that further weakness could be in the cards. Spanish and Italian services PMI are up for release today, along with the region’s retail sales figure.

GBP

The pound was able to bounce back to action in yesterday’s trading, thanks to overall dollar weakness. Data from the UK, however, was a disappointment, as the construction PMI didn’t meet the consensus. The figure fell from 59.1 to 58.9, lower than the estimate at 60.1. For today, the services PMI is up for release and we might be in for another weak figreu.

CHF

The franc rebounded against the dollar yesterday but weakened against the euro. USD/CHF fell back below the .9000 handle briefly while EUR/CHF held on to 1.2250. There were no reports released from Switzerland yesterday and none are due today, which suggests that franc pairs could be sensitive to US and euro zone reports.

JPY

The yen staged a strong rally against its major counterparts, pushing USD/JPY to its one-month low. The yen rallied on the heels of the Nikkei selloff. There were no reports released from Japan yesterday and there are no reports due today, which suggests that yen pairs could continue to react to the Japanese stock indices.

Commodity Currencies (AUD, CAD, NZD)

The Australian dollar and the New Zealand dollar were able to get back on their feet yesterday, as both took advantage of the dollar selloff. The Canadian dollar’s gains were limited, as the Canadian economy also stands to suffer if the U.S. economy shows further weakness. Data from Australia was weaker than expected while New Zealand didn’t release any economic reports recently. There are no reports due from Canada, Australia, and New Zealand today.

By Kate Curtis from Trader’s Way

120

USD

The US dollar had a mixed day as it lost to the euro, franc, and yen but caught some gains against the Aussie, Kiwi, and pound. Data form the US was also mixed, as the initial jobless claims printed a better than expected result but the ISM non-manufacturing PMI came in below consensus. Initial jobless claims were at 308K versus the estimate at 315K while the non-manufacturing PMI fell from 58.6 to 54.4, lower than the consensus at 57.2. For today, there are no reports due from the US as the government shutdown means that the NFP will not be published.

EUR

The euro was able to score good wins against its major counterparts in yesterday’s trading, as the victory of Prime Minister Letta still kept the shared currency afloat. During the ECB conference, Governor Draghi was his usual dovish self. However, the euro still seemed to be more affected by the resolution of the political trouble in Italy. For today, only the German PPI is up for release.

GBP

The pound lost ground to most of its counterparts in yesterday’s trading, as GBP/USD formed a double top and hinted of a possible selloff. Data came in line with expectations as the services PMI dipped from 60.5 to 60.3, hinting of a slight slowdown in the industry expansion. For today, there are no reports due from the UK.

JPY

The yen was able to end higher against most of its currency rivals, except for the euro. There were no major reports released from Japan yesterday as the move was probably a result of profit-taking ahead of today’s BOJ rate statement. No easing measures are expected but the yen might give back its gains when the central bank gives concrete plans on how to keep the economy afloat while the sales tax hike gets implemented.

CHF

The franc bounced back against the dollar but chalked up losses to the euro yesterday. There were no reports released from Switzerland, as the franc simply reacted to country-specific data. There are still no reports due from Switzerland today.

Commodity Currencies (AUD, NZD, CAD)

The comdolls weakened slightly against the U.S. dollar, as traders probably booked some of their profits as risk appetite waned. The AIG services index in Australia climbed to its six-month high while China’s services sector posted an expansionary figure. There have been no releases from New Zealand and Canada recently, although RBNZ head Graeme Wheeler gave a speech that was a bit more hawkish than expected.

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Forex Major Currencies Outlook (October 7, 2013)

USD

The US dollar recovered some of its recent losses for the previous week on Friday, as risk aversion popped its head in the markets. It also helped that a lot of traders booked profits at the end of the week. EUR/USD pulled back to the 1.3600 support area while GBP/USD retreated to 1.6050. There were no reports released from the US then, as the US government shutdown meant that the NFP was not printed. For today, the US is set to print its consumer credit report and possibly show an increase.

EUR

The euro gave up some of its recent profits to the dollar and the yen on Friday, yet it seems that EUR/USD and EUR/JPY are off to a good start this week. Data from the euro zone was weak last Friday, as Germany and euro zone printed weaker than expected PPI readings. For today, euro zone Sentix investor confidence and final GDP reading are up for release. No revisions are projected for the GDP report while the Sentix figure could see an increase from 6.5 to 10.9.

GBP

The pound suffered a heavy selloff on Friday, as traders realized that the recent boom in the U.K. might not be sustained. The weak PMI readings from the manufacturing, construction, and services sector earlier in the week led traders to unwind most of their long pound positions. For today, there are no reports from the U.K.

CHF

The franc lost some ground to the dollar on Friday but some suspect that this might just be a retracement. There were no reports released from Switzerland then and today has the foreign currency reserves report on tap. This report has been showing declines in the past months, which means that the SNB has been having an easier time keeping its franc peg.

JPY

The yen continued its rallying ways on Friday, as the Japanese currency continued to benefit from risk aversion and positive sentiment for the Japanese economy. So far, no additional stimulus measures have been announced by either the government or the BOJ. The BOJ monthly report and leading indicators are up for release today and more positive figures could keep the yen afloat.

Commodity Currencies (AUD, NZD, CAD)

The comdolls were shielded from the selloff last Friday, as the strength of the Australian, New Zealand, and Canadian economies helped keep their currencies afloat. Canada’s Ivey PMI came in below consensus but still printed an improvement from 51.0 to 51.9, reflecting stronger growth in the manufacturing industry. Canadian building permits and New Zealand NZIER business confidence data are up for release in the US session.

By Kate Curtis from Trader’s Way