Chief Market Analyst James Hughes looks at the economic data which has impacted markets so far today and looks ahead to more figures which will have an impact later in the week.
Forex research: Global markets daily
[B]Investor sentiment further hit by Chinese credit crunch fears[/B]
Today’s UK opening call provides an update on:
• Asian stocks fall as fears of credit crunch in China rise;
• Fed officials attempt to ease concerns over tapering;
• Focus on US data on Tuesday.
Stock markets in Asia are falling heavily again over night, as concerns of a credit crunch in China continue to hit the share price of small and medium sized businesses.
The apparent reluctance of the People’s Bank of China to step in and ease credit conditions in China is the most concerning thing here. In fact, the PBOC seems intent on tightening credit availability and bringing an end to the cheap money that we’ve seen in China in recent years. There’s a real concern that this could have a real impact on Chinese growth this year, leading to further downward revisions.
The prospect of lower growth in China is doing little to boost sentiment in the markets, at a time when investors are facing up to life without QE3. That said, Minneapolis Fed President Narayana Kocherlakota yesterday claimed that the Fed press conference last week was not as hawkish as is being portrayed in the markets and called for asset purchases to continue as long as the unemployment rate remains about 7%. The comments, along with comments from other members, helped stock markets in the US pare some of yesterday’s losses, although they didn’t completely ease concerns about tapering given that many of the comments came from non-voting members.
Looking ahead to today and the focus in going to remain on the US, with a few key pieces of economic data being released this afternoon. It’s going to be interesting to see how investors react to the data now that any improvement will increase the chances of Fed tapering in September, although I still think it will be December at the earliest.
US durable goods orders are expected to jump by 1.8% in May, down from 3.3% in April. This data is extremely volatile and regularly bounces between positive and negative territory. On top of that, it is clearly extremely difficult to predict and figures rarely come in close to expectations. Unless we see a sharp increase or decrease here, the reaction in the markets should be minor.
Housing data in the US has been a real strong point this year, and that doesn’t look like changing, with new home sales expected to rise to 460,000 in May.
Finally, there’s a lot of focus of consumers this week, starting today with the release of the CB consumer confidence figure. This is probably going to have the biggest impact of all today, given the importance of consumer spending to the US economy. A small rise to 76.6 is expected here, up from 76.2 last month.
Ahead of the open we expect to see the FTSE down 9 points, the CAC up 2 points and the DAX down 2 points.
[B]EURUSD[/B]
The euro has started the week well, after finding support from a combination of the 50 and 200-day SMAs and the middle bollinger band on the weekly chart. The 50 fib level, from 4 April lows to last weeks’ highs is also providing support around this level, so it’s going to take a big push to break below here. This morning it is trading slightly lower, however I expect to see it push higher over the next day or so towards 1.32, where it should find resistance from the middle bollinger band on the daily chart. The middle bollinger band on the daily chart has been a key level of support and resistance, throughout this year especially, and given that we had a break below here on Friday, I expect it to provide significant resistance once again. This level, 1.32, has also previously been a key level of support and resistance for the pair. If we do see a break above here, it should prompt a move towards 1.34. If it holds, then 1.3080 will once again be key, with a break below here being a very bearish signal.
[B]GBPUSD[/B]
Sterling is trading higher against the dollar for a second day, having found support yesterday around the 50-day SMA. Given the major sell-off in the pound last week, it’s not surprising that we’re seeing some kind of correction to start the week off. At this stage, there’s little reason to assume this is anything more than a brief correction, with the middle bollinger band on the daily chart acting as resistance yesterday and probably again today. If the pair does rebound off this level, it should find support around 1.5380, followed by 1.5350 and 1.5320. A break above here on the other hand should see the pair find further resistance around 1.55, 1.5520 and 1.5564.
[B]USDJPY[/B]
The rebound seen in this pair over the last couple of weeks may well be short lived. The pair yesterday found strong resistance around the 50 fib level, of the move from 22 May highs to 13 June lows. The aggressive bounce seen at the 50 fib level suggests there’s still plenty of sellers in the market trying to push the price lower. The pair is also finding resistance around the middle bollinger band on the daily chart, which has previously been a key level of support and resistance. This is another bearish signal for the pair. If we do now see the pair move lower, it should find support around 97, 96.70 and 95.75. If the pair continues to push higher, it should find resistance around 98.75 again, followed by 99 and 99.50.
Chief Market Analyst James Hughes looks at the major stories including a rebounding of stock indices after yesterdays falls and looks ahead to tomorrows GDP’s readings as well as this afternoons US data.
Forex research: Global markets daily
[B]US data eyed as Fed officials try to ease taper concerns[/B]
Today’s US opening call provides an update on:
[ul]
[li]Hawkish comments from Fed officials boost financial markets;
[/li][li]China’s Shanghai Composite stages a massive recovery to end the session down only 0.18%;
[/li][li]US economic data in focus on Tuesday.
[/li][/ul]
European indices are trading more than 1% higher on Tuesday, paring some of Monday’s heavy losses after certain members of the Fed suggested that the markets have overreacted to Ben Bernanke’s comments last week.
A number of Fed officials have now attempted to ease concerns in the markets, although many of them are non-voting members. Minneapolis Fed President Narayana Kocherlakota yesterday claimed that Bernanke’s comments were not as hawkish as is being portrayed in the markets, while others attempted to reassure the markets that the Fed will remain very accommodative.
On top of that, stock markets in Asia made strong recovery late in the session, with China’s Shanghai Composite ending the session only 0.18% lower after trading down almost 6% earlier in the day. Asian stocks have been under a lot of pressure in recent weeks due to concerns over the rising interbank rates which threatens to hit growth in the world’s second largest economy. China’s Shanghai Composite is down around 16% since 29 May.
US futures are pointing to a higher open on Tuesday, following on from the positive start in Europe and encouraging end to the Asian session. The US is going to be very much in focus on Tuesday, with a few pieces of key economic data due to be released.
Durable goods orders are always a good indicator of how the economy is performing, although the figures do tend to be very volatile and rarely come out in line with expectations. New home sales are expected to rise for a fourth consecutive month, to 426,000, as recovery in the housing market shows no signs of slowing.
The CB consumer confidence figure though is the one that’s likely to attract the most interest, given how important consumer spending is for the US economy. This is the first of three pieces of consumer data being released this week and is expected to fall slightly to 75.4, from 76.2 a month ago.
The interesting thing today, and for the rest of the week, is going to be how investors react to the US economic data, now that Fed tapering could be just around the corner. We could now see a case where investors celebrate poor data and react badly to positive figures due to the impact they’ll have on asset purchases.
Ahead of the open we expect to see the S&P up 9 points, the NASDAQ up 19 points and the Dow up 77 points.
guys plz is there any forum here where I can upload my indicator ? I want sound alert to be added to it whenever a new signal is generated…thankss
[B]Europe to open higher as investors boosted by strong data[/B]
Today’s UK opening call provides an update on:
• US stocks rally on strong economic data;
• Chinese stocks fall again as interbank rates remain high;
• US final first quarter GDP revision expected to be unchanged at 2.4%;
• BoE Governor King due to hold press conference on financial stability.
European indices are expected to open slightly higher on Wednesday, after investor sentiment was given a boost by some strong figures out of the US.
Even more encouraging was the reaction in the markets to the data. Given that the Fed has laid out its plans to begin tapering later this year if the economy performs in line with projections, it would not have been surprising to see strong prompt further selling in the equity markets. Instead, the release of some strong consumer, housing and durable goods orders data prompted further buying which could mean that the markets are beginning to function normally again.
If that’s the case, then it would suggest that we’ve now seen the bulk of the correction in the markets that has been talked about so much in recent months. That said, given the Fed’s focus on the labour market, and to a certain extent growth, we may still see an unusual reaction to the GDP data today and the jobs report next week. Even so, yesterday’s reaction was encouraging, not just for the US economy, but the normal functioning of the markets as well.
Overnight in Asia, markets were mostly in the green, as investors became encouraged by both the US data and the reaction to it in the markets. Chinese stocks were still under pressure, although the interbank rates did fall marginally after a People’s Bank of China official claimed that the central bank will guide rates to a reasonable range. This suggests the PBOC are willing to leave the rates at more elevated levels than what they were earlier this year, but will step in to avoid a credit crunch in the country.
Looking ahead to today and the focus is likely to remain on the US, although there’s far less data out than we had yesterday, or will have tomorrow. The release of the final first quarter GDP revision will be watched closely for any signs that the economy is performing better than expected. However, the figure is expected to remain at 2.4%, which is unlikely to prompt a reaction in the markets.
Also of note this morning is Sir Mervyn Kings press conference, in which he’ll discuss the financial stability report. This event usually attracts a lot of attention, especially over the last few years since central banks became such key players in the markets. However, with Mark Carney due to take over from King at the start of next week, traders may keep an eye on it, however it’s likely to have very little impact on the markets.
Ahead of the open we expect to see the FTSE up 18 points, the CAC up 14 points and the DAX up 11 points.
Hi seyola9,
The [I][B]Alert ()[/B][/I] function may help.
Further details are available on the Sound Alerts in Indicators thread in the MQL4 community.
If you have any other questions, feel free to join us on our thread in the Broker Aid Station of Babypips.
Alex
Alexander Chadwick
Alpari (UK) Representative
[B]Investor sentiment on the rise ahead of US GDP[/B]
Today’s US opening call provides an update on:
[ul]
[li]Sentiment continues to improve on Wednesday;
[/li][li]Markets may have priced in Fed tapering;
[/li][li]US Q1 GDP (annualised) expected to remain at 2.4%;
[/li][/ul]
Investor sentiment has received a big boost from the strong figures out of the US yesterday. European indices are trading more than 1% higher this morning and US futures are pointing to a slightly higher open as well, adding to yesterday’s impressive gains.
There was a concern yesterday that if the data came out above expectations, or significantly above as it did, that it would push equities back into the red as investors continue to worry about Fed tapering later this year. Instead, equities held on to gains which was very encouraging and suggests that markets have priced in the tapering, if not overreacted to Ben Bernanke’s comments.
It looks, at the moment, that the 5-10% correction that many people have been calling for this year has now played out. Based on yesterday’s reaction, a recovery in the US could help the rally now push on, although not necessarily at such an aggressive pace. Although, confirmation of whether this is the case should come when the jobs data is released next week, given that Fed policy appears to be focused around employment.
So far in Europe this morning, there has been very little out in terms of economic data. France was confirmed as in recession with the final revision of its first quarter GDP figure, however this was unchanged and therefore prompted no response in the markets.
We’ll probably have a similar response later in the US, when it releases the final revision of its first quarter GDP. Expectations are for it to remain unchanged at 2.4%, which will have very little, if any, impact on the markets.
Ahead of the open we expect to see the S&P up 7 points, the Dow up 61 points and the NASDAQ up 16 points.
0:09 Markets trading higher off back of strong US data
2:14 Chinese markets more fragile after interbank lending rate rise
3:33 Australian PM replaced unexpectedly
4:57 US GDP figure due out later today
Forex research: Global markets daily
Hi Alpari UK, thanks for the reply…I have visited that mql site before but I don’t understand any of the info…All I need is someone to do it for me…thanks
[B]UK GDP and German unemployment in focus this morning[/B]
Today’s UK opening call provides an update on:
• Global equity markets boosted by revised US GDP figure;
• Chinese shares spend a rare session in the green as money market rates ease slightly;
• Focus on the Fed on Thursday, as we hear from voting members Powell and Dudley;
• US weekly jobless claims, UK GDP and German unemployment all in focus today.
Equity markets globally received a major boost on Wednesday, following the release of the revised first quarter GDP figure from the US, and futures suggest we’re going to see more of the same again today.
The idea that the markets are returning to normality following the reaction to the consumer, housing and durable goods data on Wednesday has gone completely out of the window now. Clearly when it comes to growth figures, and probably employment data which we’ll find out next week, the markets are going to favour whatever translates to more stimulus and head for the exits when it increase the possibility of tapering in September.
Even Asian indices are trading in the green across the board, with Chinese stocks also being boosted by another slight easing in money market rates. Australian shares were also given a boost over night by the news that former Prime Minister Kevin Rudd will take over as Labour party leader from Julia Gillard with immediate effect, after she agreed to step aside if she lost a leadership vote. Rudd won the vote by 57 to 45, which means he will be the person who will try to rescue Labours election campaign, three months before Australians head to the polls, a move that appears to have received the approval of the markets.
With global stock markets receiving a boost from the GDP data yesterday, a lot of the attention on Thursday will be back on the Federal Reserve to see how they view the data and what it means for the asset purchases, which Bernanke last week hinted could be tapered later this year. Two voting members of the FOMC, Jerome Powell and William Dudley, are due to speak later on this afternoon, with investors paying close attention to these comments for hints about when we can expect the tapering to begin, with most currently expecting it to be either September, or more likely, December.
There’s plenty of economic data out on Thursday, in both Europe and the US. The US data is likely to attract the most attention, given the impact that the Fed is having on global markets at the moment. In particular, the weekly jobless claims, which spiked last week to 354,000, will be watched closely for signs that businesses are beginning to lay off more people as we head into the summer months. Another figure above 350,000 here may be seen as a sign of weakness here and will therefore be positive for the markets, although it would have to be significantly above this level to have any major impact given that it’s been consistently below 350,000 for so long now.
There’s also plenty of data out of Europe this morning, including the final revision to the UK first quarter GDP figure, which is expected to remain at 0.3%. Any revision here would probably come to the downside, although I don’t think it will be big enough to send it into negative territory and leave the UK in triple dip recession, which would be another major blow to Chancellor George Osborne’s credibility.
In the eurozone, the focus will firstly be on German unemployment data which is expected to show a small increase of 8,000 in the number of unemployed, with the rate remaining extremely low compared to its neighbours, at 6.9%. Shortly after this, we have a number of business and consumer confidence figures for the eurozone, all of which are expected to show a slight improvement in June, benefitting from a lack of attention and bad news in the eurozone recently.
Ahead of the open we expect to see the FTSE up 22 points, the CAC up 9 points and the DAX up 31 points.
0:09 Mixed data out of Europe this morning
1:49 Investors focused on speeches from two Fed policy makers
3:04 Weekly jobless claims in focus this afternoon
Forex research: Global markets daily
[B]Europe flat ahead of speeches from FOMC members[/B]
Today’s US opening call provides an update on:
[ul]
[li]European markets flat ahead of speeches from two voting Fed members;
[/li][li]German unemployment falls to 6.8%;
[/li][li]Revisions show UK narrowly avoided double dip recession in 2012;
[/li][li]Weekly jobless claims, personal consumption and home sales data in focus.
[/li][/ul]
European indices are lacking any real direction early in the session on Thursday, while their US counterparts are expected to open marginally higher.
A lot of the movement in the financial markets recently has been driven by the comments from Ben Bernanke in relation to the Fed’s asset purchase program. With two Fed policy makers, Jerome Powell and William Dudley, due to speak early in the US session, a lot of the attention today is going to be on these comments and in particular, what impact the revision to first quarter GDP has on the Fed’s policy.
So far this morning in Europe, the economic data has been mixed, which is contributed to the current flat equity markets. On the positive side, German unemployment fell by 12,000 in June, while the unemployment rate was revised back down to 6.8%.
However the consumer and business confidence figures were pretty mixed, while Irish first quarter GDP was well below expectations, showing a contraction of 0.9%, while the previous quarter’s growth was revised lower.
There was also some good and bad news for the UK, although the bad far outweighs the good. On the upside, a revision to the GDP figure for the first quarter of 2012 means that the economy was flat at 0% and was therefore never in a double dip recession. That said, this is merely a technicality and revisions have also shown that since 2008, growth has been significantly worse than previously thought which is a much more concerning statistic.
Looking ahead to the US this afternoon and aside from hearing from the two members of the Federal Reserve, there’s also a number of economic releases which could have an impact on the markets. Of particular note is the weekly jobless claims, given the Fed’s focus on the labour market.
Ahead of the open we expect to see the S&P up 1 point, the Dow up 16 points and the NASDAQ up 2 points.
[B]German retail sales and inflation data in focus this morning[/B]
Today’s UK opening call provides an update on:
• Fed members struggle to ease concerns over tapering;
• US and Japanese data helps push stocks higher over night;
• German retail sales and inflation in focus this morning.
European equity indices are expected to open relatively flat on Friday, despite stocks in the US and Asia both rising over night off the back of some rather dovish comments from a few Fed members and strong economic data.
I think the opinion among most, if not all, Fed members is that the markets have somewhat overreacted to Ben Bernanke’s comments last week. The decision to taper later this year is not set in stone. The Fed will only begin tapering if the economic data falls in line with the Fed projections for growth and employment. If not then tapering will be delayed. This does not appear to have been acknowledge in the markets. As many members have suggested, the decision is not based on the calendar, but the economic data.
The data out of the US on Thursday was quite positive on the whole. Weekly jobless claims were roughly in line with expectations, while personal income rose more than expected and pending home sales increasing at a much faster rate of 6.7%, compared with forecasts of 1%. All in all, this points to an economy that is continuing to improve in the second quarter and is showing no signs of slowing as we head into the third.
The data out of Japan over night was also quite encouraging as industrial production improved at a much faster pace than expected in May, while the national CPI figure was higher than expected, at -0.3%, up from -0.7%. The core CPI figure, which doesn’t include volatile food prices, was also a strong point, as it remained in inflationary territory at 0.2%. This suggests that while it may have brought large amounts of volatility to the markets, “Abenomics” may in fact be working and the 2% inflation target in two years may not be an unachievable target after all. The only real downside in the data came from the unemployment rate, which remained at 4.1%, despite expectations of a drop to 4% in May.
While the focus is likely to remain on the US again today, with another Fed member, Jeremy Stein, due to speak and the Chicago PMI and UoM consumer sentiment figures due out, there’s also a couple of key pieces of data out of Europe first this morning. German retail sales are expected to have risen in May, with an improvement of 0.2% expected, while inflation is expected to have risen to 1.7% this month, compared to a year earlier, which won’t help the chances of another rate cut when the ECB meets next month.
Ahead of the open we expect to see the FTSE down 4 points, the CAC down 2 points and the DAX up 5 points.
[B]EURUSD[/B]
This pair is beginning to look quite bullish again, in the medium term, having found support earlier in the week, from the 50-week SMA. The recovery in the pair since hitting these lows means the pair now looks on course to close back above the middle bollinger band on the weekly chart, which could also be seen as a bullish signal. It also found support from the 61.8 fib level, of the move from 4 April lows to 18 June highs which looks a little bullish. That said, for this bullish outlook to be confirmed, I will need to see a daily close above where both the 50 and 200-day SMAs intersect the 50 fib level. The pair only broke below here this week so this will either confirm the break, or whether it was a false breakout. If it finds resistance here, as it has this morning, it would be quite bearish for the pair, with the next support level once again being the 61.8 fib level around 1.30, followed by 1.2950. With the 4-hour chart looking bullish, having broken above a descending channel and through the middle bollinger band, a break above the 50 fib can’t be ruled out, and would prompt a move towards 1.3150 and 1.3175. As it stands, it simply looks a question of which fib will break first.
[B]GBPUSD[/B]
While sterling is continuing to look weak on both the monthly and weekly charts, the pair has been heavily sold over the last couple of weeks, so may be due some kind of correction. The daily chart supports this more bullish outlook in the short to medium term, with the pair having found support between the 50 and 61.8 fib levels, around 1.5250, from the descending trend line, dating back to the start of the year. The pair broke above here earlier this month, before finding resistance around 1.5750, so this has naturally become a new area of support. If the trend line continues to hold, we could see the pair push higher over the next week or so, with the next level of resistance coming around 1.53, followed by 1.5335, where the descending trend line intersects the 50 fib level on the 4-hour chart. If the trend line of the daily chart is broken, the pair should find support around 1.52, followed by 1.5182, from the 61.8 fib level, and 1.5150.
[B]USDJPY[/B]
This pair is looking quite bullish again, having recovered well from the heavy losses it sustained earlier this month. The fact that it broke immediately back above, and found support from, the 100-week SMA goes some way to confirming this. It’s also looking a little bullish on the daily chart, having broken above the 50 fib level this morning after finding strong resistance here earlier this week. It is now finding resistance around 99, a previous level of resistance. A break above here would maintain this bullish short term outlook, with the next target being 100, which was previously a major level of resistance and now lies close to the 61.8 fib level. It is worth noting though that the pair has become a little overbought recently and may therefore be due some kind of retracement. If we do see a pull back now, the pair should find support around 98.50 and 98.11, where the ascending trend line intersects the 50 fib level. This is also a previous level of resistance.
[B]Mixed markets bringing a close to a strong week for bulls[/B]
Today’s US opening call provides an update on:
[ul]
[li]Indices mixed with FTSE heading towards first weekly rise since mid-May
[/li][li]ECB disputes German claims that QE is being considered
[/li][li]German retail sales provide mixed messages
[/li][li]Looking ahead to US consumer sentiment and Canadian GDP data
[/li][li]FOMC member Stein due to talk, bringing potential volatility
[/li][/ul]
Global indices are expected to provide an mixed end to the week, as the UK FTSE100 heads towards the first weekly rise in over a month. The failure of markets to fall on Tuesday following strong consumer confidence and home sales data provided some indication of where the markets looked set to move, with global markets paring some of the previous week’s losses. The linkages between strong data and early tapering would ordinarily provide a sell-off in the markets, yet the subsequent rise led to an increased awareness of correction owing to potentially oversold markets. US markets also shared the same fate, posting a strong rise in the S&P500 every day this week, reacting to both positive and negative events with a more bullish tone despite recent weaknesses innate in the markets.
The ECB have moved to deny recent reports from German newspaper Sueddeutsche Zeitung that the central bank were considering a US style QE programme in the near future. Speculation has been rife over recent months of a potential asset purchase plan owing to the much publicised shift away from austerity and towards growth within the single currency. However, a spokesperson of the ECB has moved to dispute such claims, announcing that the reference to a ‘360-degree perspective’ by Mario Draghi was not in relation to any quantitative easing measures.
German retail sales figures provided mixed messages earlier this morning, with the annualised figure falling from 2.7% to 0.4%, falling short of expectations that we would see a reduction of around 0.6%. However, some respite was found in the monthly number, providing a clear improvement of 0.8% from -0.1% the month before. German consumer activity has been in focus this week, with the GFK consumer confidence survey providing a welcome rise, from 6.5 to 6.8. The importance of retail sales figures is often underestimated, yet this provides both a factual level of consumer activity, along with an increased perception of confidence within the economic environment.
Looking ahead, the Canadian monthly GDP figure is due for April. Market expectation is of a reduced figure of 0.1% from a 0.2% rise in March. There is likely to be strong reactions within the market should this figure come in above or below expectations, however, given this is a monthly rather than quarterly figure, it carries less weight than usual GDP figures. Also, the UoM consumer sentiment index is due out later for the US economy. Should we see a fall in line with expectations or below, it could bring about an uptick in indices given the linkages between poor data and delayed QE tapering.
Lastly, the FOMC member Stein is due to speak later today, which could bring further volatility to the markets. Jeremy Stein is a voting member of the board, thus bringing added credence to his opinion, and thus we are looking for any comments as to whether he expects tapering to occur sooner or later. This follows Fed member Dudley’s comments yesterday which spiked markets owing to his view that tapering within 2013 is certainly not a foregone conclusion.
US markets are expected to open higher, with the S&P500 +3 points and DJIA +14.5.
0:20 US markets boosted by Fed comments
1:14 Asian markets end higher as PBOC eases credit concerns
2:20 EU agrees seven year budget
4:32 Fed comments and US data followed closely later
Forex research: Global markets daily
[B]Manic start to the week ahead of payrolls on Friday[/B]
Today’s UK opening call provides an update on:
[ul]
[li]Chinese manufacturing data points to further slowdown in June;
[/li][li]Japanese manufacturing data improves more than expected;
[/li][li]European manufacturing PMIs in focus this morning;
[/li][li]Mark Carney takes over as BoE governor ahead of meeting on Thursday.
[/li][/ul]
European equity markets are expected to open mostly lower on Monday, after two manufacturing PMIs in China pointed to another slow down in growth in June.
Once again though, both pieces of data, the official release which is approved by the government and the HSBC figure, told very different stories. Both shows the figure coming down compared to last month, which is a concern, however the official figure remained in growth territory while the HSBC figure was well into contraction territory. Given the skepticism surrounding any data from the Chinese government and the ongoing cash crunch, traders are going to be more inclined to view the HSBC figure as a more accurate reflection of conditions in China’s manufacturing.
Things were more encouraging in Japan, where the Tankan manufacturing data came in much improved from the first quarter, while most releases were even ahead of expectations. There’s no doubt that manufacturers are largely benefiting from the weaker yen so far this year, and the releases prompting further weakening here with the dollar hitting highs of 99.53 during the session.
With it being the first week of the month, there’s a long list of economic data due to be released, including the daddy of them all, the non-farm payrolls, on Friday. Given the sensitivity in the markets to anything related to the Fed’s asset purchases at the moment, there’s likely to be a lot of caution in the lead up to this figure, quickly followed by large amounts of volatility.
This morning though, it’s going to be all about the eurozone and the UK, with manufacturing PMIs due to be released, followed by inflation and unemployment data for the eurozone.
We’re expecting a bit of a mixed bag from the eurozone PMIs, with improvement expected in the French, Italian and eurozone figures, and a decline expected in Spain and Germany. If anything, this should be seen as a positive thing, if they come in in line with expectations, given just how poor the French, Spanish and Italian figures were only a few months ago.
It also highlights the fact that the other countries are falling more in line with the eurozone’s powerhouse, Germany. With industries in all now contracting at a similar rate, they may be able to come up with a solution that’s mutually beneficial.
Following this we have the release of the CPI figure and the unemployment rate. Both of these are going to be extremely important when it comes to the ECBs rate decision on Thursday. Despite the fact that unemployment is already at all time highs for the eurozone, and expected to rise again to 12.3%, I expect the ECB will leave policy unchanged on Thursday, especially if inflation rises for a second month to 1.5%.
The ECB is not going to want to rush into a decision like this, especially with inflation on the rise. When rates were last cut, inflation was falling rapidly and there was a lot of hints from policy makers and politicians in the week or so before the announcement, and we have not seen that yet.
In the UK, the manufacturing PMI is expected to remain in growth territory for a second month, at 51.3. This is a very positive sign for the UK, given the amount of time it’s spent in contraction territory over the past couple of years. In fact, we haven’t seen two or more consecutive months of growth here since this time last year, and that was the only time in the last two years that we’ve had that.
Staying with the UK, today is Mark Carney’s first day as Governor of the Bank of England. The new Governor doesn’t have long to settle into his new role though, with the next meeting of the MPC taking place this Thursday. No change in rates or asset purchases is expected at this meeting, however we can’t count out some kind of forward guidance in relation to interest rates, especially given that Carney has favoured this policy in the past. Now it’s just a case of whether he can sell it to the other policy makers.
Finally today, it’s over to the US for the release of the official manufacturing PMI and the the ISM manufacturing PMI. Both are expected to be in growth territory at 52.4 and 50.1 respectively.
Ahead of the open we expect to see the FTSE up 5 points, the CAC down 9 points and the DAX down 37 points.
[B]EURUSD[/B]
The euro is continuing to find solid support around the key 1.30 level this morning, having already found support here for the last three days. This can be taken one of two ways. Firstly, there’s clearly a lot of buyers at this level, given the inability of the market bears to force a close below here, which may suggest the pair looks bullish. On the other hand, the pressure on this level has been continuous, which suggests there’s still plenty of traders that are looking to break this level and force a significant move lower. The fact that this is also the 61.8 fib level adds more significance to a break of this level as it would suggests that the recent downtrend is in fact a reversal of the uptrend which began at the start of April, rather than a retracement. With the pair also finding strong resistance to the upside, around 1.3075, from the 50 and 200-day SMAs, as well as the 50 fib level, the direction of the pair in the medium term will probably be decided by which level breaks first.
[B]GBPUSD[/B]
Sterling is trading higher against the dollar this morning, after finding support at the end of last week from the descending trend line that it broke above on 5 June. The pair is also finding support here from the 61.8 fib level. A break below here would be quite a bearish signal, while a failure to break this level would suggest there’s a bullish bias in the markets. The pair is currently oversold on the daily chart, which would support a push higher, at least in the short term.If we do see a move higher, the pair should find resistance around 1.5221 and 1.5234, from the 50 and 61.8 fib levels on the 4-hour chart. Above here it should find further resistance around 1.5270, where the descending trend line, dating back to 19 June intersects a previous level of support and resistance. If we see a move lower, the pair should find support around 1.52, followed by 1.516 and 1.5135.
[B]USDJPY[/B]
The dollar is pushing higher against the yen again this morning, as the pair closes in on 100 for the first time since breaking back below here at the start of last month. It opened above the 50-day SMA this morning, after finding strong resistance here last week. The next level of resistance will come around 100 from the 61.8 fib level. This was also previously a major level of resistance. If we do see a break above here, it would be very bullish for the pair, with the next level of resistance coming around 100.70. Alternatively, given how strong the rally has been recently, and the fact that the stochastic on the daily chart is showing as overbought, we could see it pull back from here. If we do, it should find support around 99.50, followed by 99.25 and 98.75…