- Dollar Edges Higher as the Collective Fed Talk Takes a Modest but Tangible Hawkish Shift
- British Pound Confronted by a Wave of Event Risk and the Possibility of a Renewed Stimulus Discussion
- Euro: Are Traders Growing More Skeptical of Europe’s Financial and Economic Recovery?
- Japanese Yen Stalls after the G20 Gathering Avoids Implicating the BoJ for Intervention
- Australian Dollar will Show its Sensitive to Rate Speculation with a Business Confidence Report
- Canadian Dollar: Would a Balanced Budget Bolster the Loonie’s Appeal in a Stimulus World?
Dollar Edges Higher as the Collective Fed Talk Takes a Modest but Tangible Hawkish Shift
On an exceptionally light trading day, the US dollar would recover a little lost ground. Skeptical speculators could easily attribute this to a natural correction during a trading lull. However, there was a modest fundamental drum beat to entice a more meaningful and perhaps lasting reversal given the right support going forward. For performance, the trade-weighted dollar index marked its biggest daily advance in a week after recovering from a close call dip to retest Thursday’s nine-month low. Across the majors, this would lead to some interesting developments. Most notably, EURUSD threatened a tentative bearish break of its consistent four-week, aggressive rising trend channel. If this turn gains a foothold after stalling below 1.40, it will go a long way towards encouraging a wholesale dollar bid. Amongst other majors, GBPUSD would close in on the lower boundaries of its rising trend channel, USDJPY tagged a fresh 15-year low before quickly retracing and made another failed attempt at overtaking 0.99. Dollar bears are still testing the boundaries; but they are lacking conviction.
Looking for the fundamental current behind the dollar today; we should first start with the general quality of speculative interest. While risk appetite trends have more or less been replaced by Fed stimulus speculation in recent weeks; the general appeal of risky assets, and the trading activity that accompanies that appeal, still have a prominent influence over the greenback. Monday, the taste for risk or need to unwind it was light. In fact, looking at the benchmark S&P 500, we see that the index was virtually unchanged and carved out one of the smallest daily ranges seen in recent weeks. Far more interesting is the level of activity behind the capital markets. Looking at volume on the same stock index, the 644.8 shares traded was the fewest since the holiday liquidity drain at the end of December. This curbed activity level can be attributed to the lack of scheduled event risk; but that hasn’t necessarily stopped the market before. Instead, this hesitancy is more likely a response to the lack of developments today on the most important fundamental fronts and the threat of upcoming event risk. Today, there were two important themes that could have encouraged a trend from the greenback. The first news item of import was the commentary coming from the IMF and World Bank meetings over the weekend. Policy officials reportedly spoke specifically about the building ‘currency war’ in these meetings; and there was some level of speculation that they could come address some of the issues (like the yuan’s near-fixed exchange rate, the US’s extraordinarily loose monetary policy or Japan’s intervention efforts). Yet, considering these policy decisions are deeply rooted in an economic and fiscal approach, the likelihood of such an outcome was exceptionally low. Therefore, it wasn’t a surprise when nothing would come of this discussion.
Holding far greater potential in its nuance was the round of Fed commentary scheduled for the day. On opposite sides of the policy scale, New York Fed President maintained his dovish and expansionary policy stance while Kansas City Fed President Hoenig kept up the call for rate hikes and a curb on stimulus. The real wild card though was newly elected Vice Chairwoman Yellen who is considering amongst the most dovish of board members who voiced concern about the long-term effects of holding rates exceptionally low for an extended period. Tomorrow’s FOMC minutes will maintain interest in the Fed’s positioning; but we should also keep an eye on the risk response to the 3Q earnings season opener.
Related: Discuss the Dollar in the DailyFX Forum, John’s Analyst Picks: EURGBP and AUDCHF on the Books but EURUSD the Main Focus
British Pound Confronted by a Wave of Event Risk and the Possibility of a Renewed Stimulus Discussion
Given the pound’s stalled progress against the dollar just below 1.60 and its recovered footing against the dollar at 0.88, it is clear that the currency is primed for a fundamental catalyst to draw out a larger trend. In fact, the sterling is perhaps the most fundamentally leveraged currency over the next 48 hours. Already this evening we have seen the release of the RICS house price balance and BRC retail sales monitor for September. The housing figure fell to a 16-month low while the spending report posted a weak 0.5 percent increase (the fifth month of poor sales according to the surveyors). Going forward, trade figures and another housing report is secondary to the interest rate implications of the CPI data. This reading could renew the monetary policy debate; but it is important to remember that they haven’t shut the door on stimulus.
Euro: Are Traders Growing More Skeptical of Europe’s Financial and Economic Recovery?
There was relatively little for euro traders to work with on the docket. The only data on board was French and Italian with little market impact. For commentary ECB President Trichet maintained his view on policy and growth, while board member Quaden said there was “no reason” for a policy change. And, it was worth noting that the euro was little encouraged by Ireland Finance Ministers’ reassurances and a drop in ECB loans.
Japanese Yen Stalls after the G20 Gathering Avoids Implicating the BoJ for Intervention
For many fundamental traders that want volatility, the commentary to come out of the IMF conversation about currency manipulation as a means for economic competition was a disappointment for its lack of strong words. However, for Japan, an absence of notable reprimand is actually significantly. This suggests an implicit acceptance of the country’s intervention efforts. That being said, intervention won’t be any more effective.
Australian Dollar will Show its Sensitive to Rate Speculation with a Business Confidence Report
After the tempered but hawkish policy approach the RBA took last week and the impact of retail sales data last week, the Aussie dollar is highly susceptible to interest rate speculation through economic event risk. Coming out early in Tuesday’s session, the business confidence figure for September unexpectedly slipped with a notable drop in employment and export sales. Is this enough to lower hawkish rate forecasts? Not really.
Canadian Dollar: Would a Balanced Budget Bolster the Loonie’s Appeal in a Stimulus World?
Interest rate forecasts have dropped off recently as the BoC has eases rhetoric. However, in the absence of high rates or the promise of a rapid advance in yields; there is still a fundamental appeal to the loonie when we consider its relative fiscal health. Where the US is looking at expanding stimulus, Canadian Finance Minister Flaherty is expected to deliver a budget update that projects a near-term balancing tomorrow.
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**For a full list of upcoming event risk and past releases, go to www.dailyfx.com/calendar
ECONOMIC DATA
Next 24 Hours
|
Currency |
GMT |
Release |
Survey |
Previous |
Comments |
|
AUD |
0:30 |
NAB Business Confidence (SEP) |
11 |
Australian business confidence rose in August to a four-month high. |
|
|
AUD |
0:30 |
NAB Business Conditions (SEP) |
5 |
||
|
JPY |
5:00 |
Consumer Confidence (SEP) |
42.5 |
Confidence fell to a four-month low in August. |
|
|
JPY |
5:00 |
Consumer Confidence Households (SEP) |
42.4 |
||
|
EUR |
6:00 |
German Consumer Price Index (MoM) (SEP F) |
-0.1% |
-0.1% |
Germany’s annual inflation rate accelerated in September as prices for heating oil and food rose. Prices fell 0.2%, however, on a month-to-month basis. |
|
EUR |
6:00 |
German Consumer Price Index (YoY) (SEP F) |
1.3% |
1.3% |
|
|
EUR |
6:00 |
German CPI – EU Harmonised (MoM) (SEP F) |
-0.2% |
-0.2% |
|
|
EUR |
6:00 |
German CPI – EU Harmonised (YoY) (SEP F) |
1.3% |
1.3% |
|
|
EUR |
6:00 |
German Wholesale Price Index (MoM) (SEP) |
0.4% |
1.6% |
|
|
EUR |
6:00 |
German Wholesale Price Index (YoY) (SEP) |
6.3% |
6.4% |
|
|
EUR |
6:45 |
French Current Account (euros) (AUG) |
-2.2B |
Exports were 34.1B euros in Aug. |
|
|
GBP |
8:30 |
DCLG UK House Prices (YoY) (AUG) |
8.1% |
8.4% |
Increased annually in last 9 months. |
|
GBP |
8:30 |
Consumer Price Index (MoM) (SEP) |
0.0% |
0.5% |
U.K. consumer prices increased in August following a 0.1% decline in the month prior. |
|
GBP |
8:30 |
Consumer Price Index (YoY) (SEP) |
3.1% |
3.1% |
|
|
GBP |
8:30 |
Core Consumer Price Index (YoY) (SEP) |
2.6% |
2.8% |
|
|
GBP |
8:30 |
Retail Price Index (SEP) |
224.8 |
224.5 |
Retail price inflation, a measure of living costs used in wage negotiations, exceeded estimates in August. |
|
GBP |
8:30 |
Retail Price Index (MoM) (SEP) |
0.1% |
0.4% |
|
|
GBP |
8:30 |
Retail Price Index (YoY) (SEP) |
4.4% |
4.7% |
|
|
GBP |
8:30 |
RPI Ex Mort Int.Payments (YoY) (SEP) |
4.4% |
4.7% |
|
|
GBP |
8:30 |
Visible Trade Balance (Pounds) (AUG) |
-8.050B |
-8.667B |
U.K. trade deficit widened to a record in July as imports surged. |
|
GBP |
8:30 |
Trade Balance Non EU (Pounds) (AUG) |
-4.400B |
-4.800B |
|
|
GBP |
8:30 |
Total Trade Balance (Pounds) (AUG) |
-4.475B |
-4.916B |
|
|
USD |
11:30 |
NFIB Small Business Optimism (SEP) |
89.6 |
88.8 |
Index likely rose for second month. |
|
USD |
14:00 |
IBD/TIPP Economic Optimism (OCT) |
44.5 |
45.3 |
Sits 1.5 pts below its 12-month avg. |
|
USD |
21:00 |
ABC Consumer Confidence (OCT 10) |
-47 |
At lowest reading since August 9. |
|
Currency |
GMT |
Upcoming Events & Speeches |
|
GBP |
8:30 |
BoE’s David Miles Speaks on Economy |
|
USD |
15:45 |
Fed’s Thomas Hoenig Speaks on Economy |
|
EUR |
16:20 |
ECB President Jean-Claude Trichet Speaks on Economic Outlook |
|
USD |
18:00 |
Federal Open Market Committee Meeting Minutes |
SUPPORT AND RESISTANCE LEVELS
CLASSIC SUPPORT AND RESISTANCE – 18:00 GMT
|
Currency |
EUR/USD |
GBP/USD |
USD/JPY |
USD/CHF |
USD/CAD |
AUD/USD |
NZD/USD |
EUR/JPY |
GBP/JPY |
|
Resist 2 |
1.4200 |
1.6375 |
89.00 |
1.0460 |
1.0922 |
1.0000 |
0.8230 |
127.60 |
146.05 |
|
Resist 1 |
1.4000 |
1.5965 |
86.00 |
0.9950 |
1.0750 |
0.9850 |
0.7650 |
120.00 |
140.00 |
|
Spot |
1.3876 |
1.5882 |
82.07 |
0.9648 |
1.0139 |
0.9838 |
0.7518 |
113.89 |
130.35 |
|
Support 1 |
1.3500 |
1.5500 |
80.00 |
0.9600 |
0.9950 |
0.9100 |
0.6850 |
103.80 |
125.00 |
|
Support 2 |
1.3335 |
1.5300 |
75.00 |
0.9500 |
0.9700 |
0.8100 |
0.6585 |
100.00 |
119.00 |
CLASSIC SUPPORT AND RESISTANCE –EMERGING MARKETS 18:00 GMTSCANDIES CURRENCIES 18:00 GMT
|
Currency |
USD/MXN |
USD/TRY |
USD/ZAR |
USD/HKD |
USD/SGD |
Currency |
USD/SEK |
USD/DKK |
USD/NOK |
|
Resist 2 |
14.4500 |
1.6755 |
8.7915 |
7.8165 |
1.4945 |
Resist 2 |
7.7500 |
5.7800 |
6.2750 |
|
Resist 1 |
13.8500 |
1.4865 |
8.3675 |
7.8075 |
1.4655 |
Resist 1 |
7.5800 |
5.5400 |
6.1150 |
|
Spot |
12.4516 |
1.4156 |
6.8690 |
7.7583 |
1.3072 |
Spot |
6.6714 |
5.3741 |
5.8445 |
|
Support 1 |
12.0500 |
1.4070 |
6.6950 |
7.7490 |
1.3000 |
Support 1 |
6.6150 |
5.3000 |
5.7030 |
|
Support 2 |
11.7200 |
1.3665 |
6.4300 |
7.7450 |
1.2500 |
Support 2 |
6.4440 |
5.1000 |
5.5200 |
INTRA-DAY PIVOT POINTS 18:00 GMT
|
Currency |
EUR/USD |
GBP/USD |
USD/JPY |
USD/CHF |
USD/CAD |
AUD/USD |
NZD/USD |
EUR/JPY |
GBP/JPY |
|
Resist 2 |
1.4063 |
1.5999 |
82.92 |
0.9711 |
1.0185 |
0.9941 |
0.7600 |
115.78 |
131.97 |
|
Resist 1 |
1.3970 |
1.5940 |
82.50 |
0.9679 |
1.0162 |
0.9889 |
0.7559 |
114.83 |
131.16 |
|
Pivot |
1.3918 |
1.5905 |
81.94 |
0.9633 |
1.0127 |
0.9856 |
0.7533 |
114.34 |
130.52 |
|
Support 1 |
1.3825 |
1.5846 |
81.52 |
0.9601 |
1.0104 |
0.9804 |
0.7492 |
113.39 |
129.71 |
|
Support 2 |
1.3773 |
1.5811 |
80.96 |
0.9555 |
1.0069 |
0.9771 |
0.7466 |
112.90 |
129.07 |
INTRA-DAY PROBABILITY BANDS 18:00 GMT
|
Currency |
EUR/USD |
GBP/USD |
USD/JPY |
USD/CHF |
USD/CAD |
AUD/USD |
NZD/USD |
EUR/JPY |
GBP/JPY |
|
Resist. 3 |
1.4072 |
1.6069 |
83.14 |
0.9778 |
1.0271 |
0.9995 |
0.7640 |
115.64 |
132.38 |
|
Resist. 2 |
1.4023 |
1.6022 |
82.87 |
0.9746 |
1.0238 |
0.9955 |
0.7610 |
115.21 |
131.87 |
|
Resist. 1 |
1.3974 |
1.5975 |
82.61 |
0.9713 |
1.0205 |
0.9916 |
0.7579 |
114.77 |
131.36 |
|
Spot |
1.3876 |
1.5882 |
82.07 |
0.9648 |
1.0139 |
0.9838 |
0.7518 |
113.89 |
130.35 |
|
Support 1 |
1.3778 |
1.5789 |
81.53 |
0.9583 |
1.0073 |
0.9760 |
0.7457 |
113.01 |
129.34 |
|
Support 2 |
1.3729 |
1.5742 |
81.27 |
0.9550 |
1.0040 |
0.9721 |
0.7426 |
112.57 |
128.83 |
|
Support 3 |
1.3680 |
1.5695 |
81.00 |
0.9518 |
1.0007 |
0.9681 |
0.7396 |
112.14 |
128.32 |
v
Written by: John Kicklighter, Currency Strategist for DailyFX.com
To receive John’s reports via email or to submit Questions or Comments about an article; email jkicklighter@dailyfx.com
http://www.dailyfx.com/real_time_news/
