Post #FOMC digest -
Initial Impact on NFP on $USD is negative with $EURUSD testing 1.1440, however, we dont see a break past recent USD lows as the jobs data dont answer the obvious questions facing investors and focus is still on CPI. Also, the US 10-year yield is on the rise now testing yesterdays high 2.39%. The US Non-farm Payrolls at 222K above 178K expected, unemployment rate up to 4.4% from 4.3%. However, average earnings remain unchanged at 0.2% while a jump to 0.3% was expected.
EUR/NOK is showing intial signs of forming a top with MACD diverging and an inclining wedge pattern forming. This raises risk of a move towards 9.3216 possibly 9.2465… Above 9.6425 to open 9.7445.
Market Macro Wrap 07 Jul 2017
USD has ended the week on a positive note after a very strong NFP print, however, weak earnings data suggest that we are not going anywhere in a hurry. Next week the focus will turn to the US CPI and Fed Chair Yellen testimony and until then USD may remain range bound.
This week marks also marks a significant change in outlook for bonds with the German (0.57%) and U.S. (2.4%) 10-year yields rising sharply both up approximately 20bp. The ECB minutes on Thursday were slightly hawkish and the Euro-area data on Friday has also added to the positive Euro tone. Hence, unless we see some weakening in Euro data next week a further upside is very likely.
JPY is still at the bottom of the pile, down 0.79% versus USD, as losses have accelerated this week. A major reason for JPY weakness is widening rate differential; German and US yields have rallied while JGB bonds remain largely unaffected.
GBP slipped on poor industrial production (-0.1% actual vs 0.4% expected), worse than expected Manufacturing production and widening trade balance; we expect GBP to lose further ground.
CAD continued to be strong (number one currency this week) helped by a very strong jobs report. The market is now pricing in a full 25bp rate hike at the BoC policy meeting next week and hence, it is difficult to see how CAD can extend its gains further. In our view, we will need to see a dramatic change in BoC view on the current stimulus to push below the 1.2824 area on USDCAD.
Trending Economic 10/07
Overnight, the BoJ Governor Kuroda reiterated a similar message that we are used to. He said that the BoJ will keep the QQE with yield curve control as long as required. We don’t see much change in JPY outlook with the yield differential with EU and US likely to widen further.
USD has ended last week on a positive note after a very strong NFP print, however, weak earnings data suggested that we are not going anywhere in a hurry. This week focus will turn to the US CPI and Fed Chair Yellen testimony and until then USD may remain range bound. For the Euro-area the calendar will be relatively quiet with EUR outlook relatively positive.
GBP slipped on poor industrial production last week; we expect GBP to lose further ground. in terms of data, the key focus will remain on the UK employment statistics. We think the average earnings are more important than the unemployment rate with GBP vulnerable to weak earnings.
CAD continued to be strong (number one currency this week) helped by a very strong jobs report. The market is now pricing in a full 25bp rate hike at the BoC policy meeting on Wednesday and hence, it is difficult to see how CAD can extend its gains further. In our view, we will need to see a dramatic change in BoC view on the current stimulus to push below the 1.2824 area on USDCAD.
EUR/USD is still above the 1.1375 uptrend hence we expect a bounce back up to 1.1426-1.1457 area. Below 1.1375 (support line) to open 1.1324 (support line joining 28 June/05 Jul lows)
Trending Economic 11/07
In the G10 currencies, AUD (+0.16%) is number one following improved NAB business confidence with NZD (-0.50%) number ten. JPY weakness continues (second weakest G10 currency) not surprisingly though as the BoJ Governor Kuroda reiterated a dovish message yesterday that reaffirmed markets that BoJ is really far from adjusting the QQE with Yield Curve control. In the equities space, the Nikkei has closed up 0.57% at 20195 but the European equities have so far been mixed with FTSE -0.5%, DAX -+0.14% and CAC 40 -0.1%. In the rates market, the US and German bonds are consolidating after last week’s sell-off with the US and German 10 year yield trading at 0.56% and 2.39%, respectively. In the energy space, WTI front month has fallen slightly after testing the $45 mark, now trading at $44.35.
In terms of data, the economic calendar will be relatively thin with no tier one release. However, we will hear from BoE’s Haldane and Broadbent at 1000 and 1100 GMT, respectively, Broadbent will carry more interest as his vote is neutral. ECB Coeure will also speak at 1200 GMT but the focus will remain on Fed Brainard at 1630 GMT with her view on the balance sheet of key interest.
Weekly FX Technical Analysis round-up – Tuesday 11th July 2017
SUMMARY OF KEY FX RATES
Trade ideas
NZDUSD Daily Chart (3-years)
NZD/USD MACD is now crossing down from the overbought area and a rising Wedge formation is also completed. Hence, we see a dip to .7136-.7187, possibly .7052-.7089 area. Above .7345 is needed to avert downside.
AUDNZD Daily Chart (6-month)
AUDNZD completing a head and shoulders base with neckline around 1.0550 with a break likely to trigger 1.0695, possibly 1.0748. MACD is also entering in to the positive territory from the oversold levels which add to the bullish view. Below 1.0418 is needed to change outlook.
AUDCHF Daily Chart (6-month)
AUDCHF is forming a base with strong support at .7271 the MACD is also looking constructive for a further upside to .7480-.7575 area. Below .7271 is needed to avert.
EURNOK Daily Chart (6 month)
EURNOK is showing initial signs of forming a top with MACD diverging and an inclining wedge pattern forming. This raises risk of a move towards 9.3216 possibly 9.2465. Above 9.6425 to open 9.7445
GBPNOK Daily Chart (6 month)
GBPNOK is moving in a downtrend with decent resistance at 10.882. MACD is also flattening just below the zero line. Hence, we see a further downside to 10.554-10.664 area. Above 10.882 to change outlook
Major Currency Pairs
EURUSD Daily Chart (6-month)
EUR/USD as now found support above 1.1294 and the MACD has also moved up from near the zero line. Hence, we are still bullish with a view to restest 1.1457 downtrend with a break likely to open towards 1.1530-1.1611 (2015/2016 highs), possibly 1.1701 (August 2017 high). Below 1.1294, however, will question a further upside with likelihood of a correction to 1.1110-1.1200
GBPUSD Daily Chart (6-month)
GBP/USD MACD is moving up into the positive territory but key resistance exist at 1.3047. Hence chances are for a dip to 1.2773-1.2815 area where a break will open 1.2591-1.2641 test. Above 1.3047 to open 1.3119-1.3276 area
USDJPY Daily Chart (6-month)
USDJPY broke a key level at 113.35 (triangle top) and the next set of resistance comes in at 115.60. The MACD is still strong and we look for a further upside to 115.60, possibly 116.11, the multi-year downtrend. Below 112.78 needed to avert upside.
AUDUSD Daily Chart (6-month)
AUD/USD still looks constructive and there is plenty of support around the .7517-20. Hence we expect dips to be short lived with .7714 likely to be tested over the coming days above there next target area is .7749-.7831 (2017 / 2016 highs). Below .7517 averts.
EURGBP Daily Chart (6-month)
EURGBP MACD has started to flatten in the positive territory with chances of a move higher. Hence, we expect resumption of an upside to .8880 initially, .9025-.9066 (Nov and Oct 2016 highs) over the coming days. Below .8757 to delay upside
USDCAD Daily chart (6-month)
USD/CAD 1.2765-1.2824 is the next key support area to watch with a bounce not ruled out given that MACD seems overextended in the oversold area. We expect 1.3168-1.3224 area to come under test but while below there chances are for a deeper dip to 1.2597-1.2657 area
Trending Economic 11/07
In the G10 currencies EUR (+0.16%) is number one following AUD at number two with NZD (-0.84%) still number ten. JPY weakness continues and GBP has also started to weaken, now the second weakest G10 currency after NZD (-0.37% versus USD). GBP weakness can be attributed to BoEs Broadbent disappointing markets after failing to provide any details on the Monetary Policy. The markets were wary of a hawkish message. The UK employment statistics on Wednesday now remains the key with the need for above-expected numbers to keep GBP from falling sharply. Elsewhere, ECB Coeure said that currency depreciation is a side effect of the policy, not the aim.
In the equities space, nothing much changed since morning with the European equities still mixed with FTSE -0.4%, DAX +0.25% and CAC 40 -0.19%. In the rates market, the US and German bonds are still consolidating after last week’s sell-off with the US and German 10 year yield trading at 0.56% and 2.39%, respectively. In the energy space, WTI front month has recovered from morning lows now looking to test the $45 mark, trading at $44.78.
The market will focus on Yellen’s testimony on Wednesday with the BoC rates decision coinciding with the Fed Chair schedule at 1400GMT The market is now pricing in a full 25bp rate hike at the BoC policy meeting and hence, it is difficult to see how CAD can extend its gains further. In our view, we will need to see a dramatic change in BoC view on the current stimulus to push below the 1.2824 area on USDCAD.
Trending Economic 12th July
In the G10 currencies, JPY (+0.48%) is number one followed AUD (0.18%) at number two with GBP (-0.23%) number ten. GBP has weakened following BoE’s Broadbent comments this morning to the Scottish press where he said that he is “not ready” to raise rates. The UK employment statistics later today at 0830 GMT is now in focus with the need for above-expected numbers to keep GBP from falling further. Elsewhere, we will focus on the Euro-area industrial production at 0900 GMT for clues on the Euro-area economy.
In the equities space, the Nikkei has closed down 0.48% at 20,098 but the European equities have opened firm with FTSE +0.33%, DAX +0.4% and CAC 40 +0.5% so far. In the rates market, the US 10 year bonds have firmed up slightly with the yield falling 5bp since yesterday’s highs to 2.35% while the German 10-year Bunds continues to be offered with yield trading at 0.61% up 7bp today. In the energy space, WTI front month is consolidating below the $46.0 mark at $45.88 following yesterday’s recovery.
Today, the market will focus on Yellen’s testimony on Wednesday with the BoC rates decision coinciding with the Fed Chair schedule at 1400GMT The market is now pricing in a full 25bp rate hike at the BoC policy meeting and hence, it is difficult to see how CAD can extend its gains further. In our view, we will need to see a dramatic change in BoC view on the current stimulus to push below the 1.2824 area on USDCAD.
Trending Economic Update 12/07
The BoC raised interest rate by 25bp to 0.75% as expected, we have seen some strength in CAD with USDCAD falling to 1.2820 area; we are looking at 1.2750-1.2824 as the first key support area on USDCAD where bids may come in. That said the current recovery in oil and weak US outlook do pose further downside risk to USDCAD. Also, the rates statement didn’t make it obvious whether whether this is removal of accommodation or not, hence, BoC Poloz press conference at 15:15 GMT is now the key focus.
Fed Chair Yellen testimony is seen as neutral and there is no change to the view that balance sheet reduction will begin in September and next US rate hike will happen in December. USD-Index is likely to remain in recent ranges ahead of the US CPI. That said, the US and German bonds have firmed up with US (2.31%) and German (0.51%) 10-year yields both down 4bp approximately. In the G10 currencies CAD (+0.74%) is number one as a result of the BoC decision to hike rates (as expected) and JPY (+0.54%) is number two rising due to narrowing interest rate differentials. AUD (0.33%) and NZD (0.30%) are number three and four with GBP at number five after recovering from morning lows following better than expected UK employment statistics. EUR has now slipped to number ten as EU 10-year yields correct.
Trending Economic 13th July G10 Currencies
In the G10 currencies SEK (+0.76%) is number one after a strong Swedish CPI (1.9% actual vs. 1.7%); as we have said before we are bullish SEK because in our view Riksbank will adjust its policy stance to hawkish compelled by strong domestic data. NZD (0.55%) & AUD (0.55%) are both number two buoyed by strong Chinese trade data. USD is now number ten after Fed Chair Yellen reiterated a similar message to the one that investors are used to. In the rates market, the US 10-year treasuries are consolidating after a move higher following Yellen’s testimony, with the yield at 2.315%. The German 10-year bunds are slightly down with yield at 0.58%. In the energy space, the WTI front month has come off its yesterday’s highs ($46.65) to trade around $45.29 ahead of the EIA crude inventory data later today.
The US CPI and retail sales will now be the main focus on Friday with USD vulnerable to a data miss. Even a small inflation miss is likely to cause a USD adjustment to the downside as this development will nullify Fed Chair Yellen comments yesterday that fall in inflation is transitory. We will need 0.1% and 0.2% headline and core inflation (as expected), respectively to keep USD from falling sharply. US PPI later today will also be keenly watched.
Trending Economic
JPY and CHF are now the weakest G10 currencies as 10-year yields have recovered both in Germany (0.60%) and US (2.35%). The risk-on currencies have also rallied helped by better than expected Chinese trade numbers and recovery in Oil prices. The WTI front month has now moved above $46.0 mark after testing $45.0 earlier in the day. The US equities have also added to its gains with S&P 500 +.14%, Dow Jones +0.06% and Nasdaq +0.23%.
Fed Chair Yellen added little, in her testimony at the Capitol Hill that should alter our short-term view on USD She said that she sees “risk of inflation being two-sided”.
Hence, the US CPI becomes the main focal point (on Friday) with USD vulnerable to a data miss. Even a small inflation miss is likely to cause a USD adjustment to the downside as this development will nullify Fed Chair Yellen earlier comments that fall in inflation is transitory. We will need 0.1% and 0.2% headline and core inflation (as expected), respectively to keep USD from falling sharply. For more information visit https://fxnavigator.tradermade.com
Trending Economic 14th July
In the currencies market, AUD (0.29%) is still number one with JPY and CHF still at the bottom of the pile. EUR (0.20$) has had a bit of a reversal but USD is now the weakest G10 currency. In terms of the weekly standings, commodity currencies reign supreme with AUD, CAD and NOK top three. In the equities market, Nikkei 225 has closed +0.95% for the week and even though European equities have opened mixed today, we have seen decent gains since the start of the week; FTSE +0.61%, DAX +2.04% and CAC40 +1.91%. In the rates market, US and EU 10-year yields are both down 2bp each at 0.57% and 2.34%, respectively. In the energy space, WTI front month is consolidating below the $46.0 mark at $45.90 following yesterday’s rise.
Fed Chair Yellen added little, in her testimony on Capitol Hill that should alter our short-term view on USD She said that she sees “risk of inflation being two-sided”.
Hence, the US CPI becomes the main focus today with USD vulnerable to a data miss. Even a small inflation miss is likely to cause a USD adjustment to the downside as this development will nullify Fed Chair Yellen earlier comments that fall in inflation is transitory. We will need 0.1% and 0.2% headline and core inflation (as expected), respectively to keep USD from falling sharply.
For USDJPY the trend is up and with BoJ policy accommodative it is likely that ECB and US will feel more confident that there will be no sharp global bonds sell-off while gradually raising rates. The reaffirmation of the policy stance by keeping the JGB near target yields has ensured that JPY is still a sell. That said, any sharp correction in US 10-year yield (from CPI miss) can lead to some short-term USDJPY weakness.
For more information visit https://fxnavigator.tradermade.com
Trending Economic 17th July
We don’t see much change in the USD bearish outlook as only second tier US data is due this week. The investors are likely to focus on the BoJ and the ECB meetings on Thursday; the BoJ is likely to keep policy rate and the 10 year JGB yield target unchanged. The annual pace of JGB purchases will also be kept unchanged (JPY 80 trillion) in the policy statement. The ECB policy meeting is likely to be more interesting but we with no change expected on policy focus will be on language around QE. The ECB is likely to keep its hawkish rhetoric on the economy with a caveat that the monetary policy need to be accommodative. Elsewhere, the UK CPI and retail sales will dictate GBP direction with above expected numbers likely to push up the probability of a November rate hike.
There will also be key releases from Canada, Australia and New Zealand. New Zealand will be in focus first with Q2 CPI release later today at 2245 GMT; any data miss is likely to push NZD lower as already a weak print is expected. Australia unemployment rate and Canada CPI on Thursday and Friday will also get a lot of attention
