JPY weakens further, then snaps back a bit. USDCAD survives another test of parity. Quiet calendar today once again. USD defensive with EURUSD now around $1.5870. Break of 1.5895 needed for the upside to re-open…
Overnight News Bullets
§ JN Leading Index, May, out at 92.9% vs 92.6% prior.
§ JN Coincident Index CI, May, out at 103.3% vs 103.0% prior.
§ SZ ZEW Survey (expectations), Jul, out at -76.9 vs -67.0 exp. Prior -63.8
§ EC Construction Output MoM/YoY, May, out at 0.2%/-1.1% vs -0.6%/-1.7% prior.
§ CA Int’l Securities Transactions, May, out at C$10.717 vs C$3.500 exp. Prior C$9.835
§ US Housing Starts, Jun, out at 1066K vs 960K exp. Prior 977K
§ US Building Permits, Jun, out at 1091K vs 965K exp. Prior 978K
§ US Initial Jobless Claims, Jul 12, out at 366K vs 380K exp. Prior 348K
§ US Continuing Claims, Jul 12, out at 3122K vs 3180K exp. Prior 3203K
§ US Philadelphia Fed., Jul, out at -16.3 vs -15.0 exp. Prior -17.1
§ Turkish Central Bank hikes rates 50bp to 16.75%
§ AU Import Price Index, QoQ, 2Q out at 1.4% vs 2.2% exp. Prior 2.7%
§ AU Export Price Index, QoQ, 2Q out at 13.5% vs 10.0% exp. Prior 3.5%
§ JN Tokyo Dept. Store Sales YoY, Jun, out at -7.4% vs -2.3% prior.
§ JN Nationwide Dept. Sales YoY, Jun, out at -7.6% vs -2.7% prior. O/N Data Heat map
EU | US | JP | UK | SZ | AU | CA | NZ | NO | SE | FR |
+ | - | 0 | - | (+) | + | 0 | 0 | 0 | 0 |
Calendar
Today's Highlights:
Time (GMT) | Region | Release | Consensus |
08:00 | NO | Existing Homes QoQ (2Q) | |
08:30 | UK | Public Finances (Jun) | 12.6B |
08:30 | UK | Public Sector Net Borrowing (Jun) | 7.4B |
08:30 | UK | M4 Money Supply MoM/YoY (Jun P) | 0.4%/9.7% |
08:30 | UK | M4 Sterling Lending (Jun P) | 10.0B |
09:00 | E-Z | Trade Balance NSA/SA (May) | -1.0B/0.8B |
12:30 | CA | Leading Indicators (Jun) | 0.1% |
12:30 | CA | Wholesale Sales (May) | 0.5% |
17:00 | US | Baker Hughes U.S. Rig Count |
This and Next Week’s Highlights:
Date | Region | Release |
Jul 21 | AU | Producer Price Index, New Motor Vehicle Sales |
Jul 21 | SZ | Producer & Import Prices |
Jul 21 | US | Leading Indicators |
Jul 22 | SZ | Trade Balance |
Jul 22 | CA | Retail Sales |
Jul 22 | US | Richmond Fed, House Price Index, ABC Consumer Confidence |
What's going on?
§ In what well signifies the sentiment swings in the current equity markets, Asian stocks have registered moderate losses despite the American indexes closing Thursday’s trading over 1% higher. Falling energy and resources prices were seen to hurt the energy company and resource producers.
§ The USD is headed for a weekly gain against the euro, as hawkish comments from the Fed Chairman and the speculation of U.S. investment banks having taken account of credit losses is giving a boost for dollar.
§ Crude oil has taken a key support level around $130, touching the $129 mark in yesterday’s trading, lowest level in a month as slowing demand has halted the bullish price trend. Next key support level for oil is now around $123
FX
EUR | USD | JPY | GBP | CHF | AUD | CAD | NZD | NOK | SEK | PLN |
+ | 0 | - | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
FX Trading Strategies
Pair | Supp. | Resis. | Comments |
EURUSD | 1.5780 | 1.5950 | EURUSD showed fake breakout potential yesterday when spot |
MAJOR HEADLINES – PREVIOUS SESSION
§ US Jul. Philadelphia Fed out at -16.3 vs. -15.0 expected and -17.1 in Jun.
§ Australia Q2 Import Price Index out at 1.4% vs. 2.2% expected
§ Japan Jun. Nationwide Department Store Sales out at -7.6% vs. -2.7% in May
§ Germany Jun. Producer Prices out at 0.9% vs. 0.7% expected
THEMES TO WATCH – UPCOMING SESSION
Key Risk Events (All times in GMT)
§ Norway Q2 Existing Homes Sales (0800)
§ Bank of England's Gieve to Speak (0805)
§ EuroZone May Trade Balance (0900)
§ Canada Jun. Leading Indicators (1230)
Market Comments
US financial stocks continued to squeeze higher yesterday and the JPY crosses followed suit, but then a further enormous writedown from Merrill Lynch and bad news from major tech bellwethers pushed the sentiment back down and USDJPY corrected 100 pips from its blow-off rally late yesterday. This was clearly a short squeeze - but how long it will last is the key question for the moment. Let's see if the 200-day moving average in USDJPY continues to survive, it has been the key resistance area since the pair topped out a month ago and now comes in around 107.20.
A story emerged late last night in the FT about Gordon Brown and the UK Treasury seeking to change/eliminate rules that prevent the UK Treasury from borrowing more than 40% of GDP, but sources within the Treasury are apparently denying that this is the case this morning. This was the likely cause of the dip in GBP late yesterday. On a long-term basis, this is a sensitive area for the pound as the powers that be did little or nothing to rectify excessive budget deficits even when the times were good in recent years in the UK, so the pound will likely be vulnerable on this issue going forward when tax revenues are falling in a weaker economy while stimulus spending is likely to increase. The 1.9950 area gave way briefly overnight in GBPUSD on the story, and this is a key support area as it is also
near the 200-day moving average (Update: this level was taken out as we were writing, so it now serves as resistance zone...)
The US housing starts/building permits numbers yesterday looked impressive on the face of things, but this development was apparently due to some new building code regulations in the NYC area that provoked a one-off boost for July. The worst ever NAHB survey (probably the most forward looking new housing indicator in the US) from the previous day should remind us that not all is well in the US housing market, nor will it be for some time to come. The only hope at this point is a deceleration in the rate at which it is deteriorating.
We have a virtually empty calendar again today, with the Citigroup earnings probably one of the key events considering all of the recent noise about US banks. Also, the equity market in general may be a key driver of moves in FX with the disappointing tech earnings bellwethers. It is a bit surprising that the equity market hasn't seen even more strength considering the enormous drop in oil prices this week.
Technical Impressions
EURUSD continues its rangebound ways. After a brief drop to a new low, likely on the oil price drop, the pair rebounded back into the key 1.5820 (10-day EMA) to 1.5892 (yesterday's highs) zone. These may be the range markers/break points of the day. In USDJPY, the 0.382 of yesterday's frantic rally comes in at 105.83 and the downside reversal level is all the way down at 105.00. Again, the key upside resistance level comes in at 107.20, the 200-day moving average. USDCAD saw a reversal yesterday after another try through parity that failed to hold, but found resistance right at the 10-day EMA (around 1.0082 at present) which has been serving as resistance for over a week now.
Chart: USDCAD
USDCAD is perking up and has twice avoided a dip through parity (and the 200-day moving average just below) in recent days. Yesterday the pair snapped higher on the oil drop and a BoC report that showed Carney and company reasonably optimistic that inflation will ease (though they were also a bit bullish on growth we must add in contrast to Bernanke's recent and rather dour countenance). the 10-day EMA looks like a key threshold if the pair wants to have a try higher.
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