- Dollar Puts In Another Volatile Run to Nowhere
- Euro Flounders after Germany Approves EFSF Expansion, Mixed Data
- New Zealand Downgrades Will Reverberate for Some Time
- British Pound Follows Euro Lines Rather than Data Improvement
- Canadian Dollar Looks to July GDP Data Will Refine US Connection
- Swiss Franc Talked Down by SNB’s Hildebrand, FX Market Brushes It Off
- Gold Range at Pre-Tumble Low, Volume Lightest in Two-Week
Dollar Puts In Another Volatile Run to Nowhere
Intraday volatility is still quite high even though the absence of a clear and consistent direction has become painfully obvious to market participants. This excessive energy speaks to how sensitive speculative markets are to developments in the financial foundations of the capital markets. All that is absent now is a meaningful development that either undermines or fortifies stability. For the dollar, the burden for bullish momentum is still the highest amongst its counterparts. Far behind the yield and growth curves; the greenback has to play to its liquidity status to gain traction. Demand for market depth deteriorates each day the market’s move sideways and volatility eases. Looking to the benchmarks for risk, we see the S&P 500 worked its way deeper into its 1,225 / 1,115 range as the masses await larger catalysts to descend upon the market.
Despite the lack of fuel to feed trends and moment, we still see the influence of a heavy bearish lean behind risk trends which is a sign that fundamentals are ready to drive the dollar higher with a meaningful catalyst. Good, objective gauges for the marke’s fear are the various volatility indexes. The equities-based VIX is tracing out a range that looks very similar to the S&P 500 index it is based on; yet this congestion is set near its highest levels since the second quarter of 2010. More specific to FX markets, we note that the currency volatility index (CVIX) has pulled back this week from a 16-month peak; but it is still trending higher and at 14.8 percent is still well above the 11.2 percent monthly average measured at the end of July.
Looking for catalysts into the final 24 hours of this trading week, we are met with low potential drivers. That said, the presence of heavy-hitting global indicators the following week will keep traders on their toes, expecting a return to breakouts and trends next week. In the meantime, we took note of the commentary from policy officials this past session. Atlanta Fed President Lockhart reflected on the labor trouble facing the US, suggesting that monetary policy not be able to significantly improve employment. Far more opinionated was Philadelphia Fed President Plosser who opined that the latest move from the central bank could undermine its creditability and that there would be little significant positive impact from Operation Twist on growth. Given the position the Fed finds itself in, we would normally ignore it; but the prominence of a dissenting vote suggests there is a possibility of a quick reversal or a more creative approach in the foreseeable future. In the upcoming New York session, the top event risk are personal spending and income figures along with St. Louis Fed President Bullard’s reflections on the US economy.
Related: Discuss the Dollar in the DailyFX Forum, John’s Video: Lack of Conviction Better for USDJPY Scalp than EURUSD Trends
Euro Flounders after Germany Approves EFSF Expansion, Mixed Data
After Finland passed the EFSF expansion proposal (in concept, numbers are still open to debate); the German Lower House decided to follow suit. There are still a number of votes to go (the Upper House in Germany voting tomorrow, other EU members); but headwinds seem limited. With the potential to expand the fund to buy bonds on the secondary market, open credit lines and recapitalize banks; there is enough here to take immediate pressure off the European crisis. Yet, this is still a consideration for the future. In the meantime, the read on the economic health of the region was mixed with a two-year low in consumer confidence and Reunification low in German unemployment.
New Zealand Downgrades Will Reverberate for Some Time
It was sentiment versus cold hard fact for the New Zealand dollar this morning. With risk trends anchored, the high-yielding currency was dealing with a natural dampener. However, there were clear fundamental shocks to this peace when rating agency Fitch announced it had downgraded the country’s rating to AA; and Standard & Poor’s followed a few hours later with its own downgrade to a similar AA level. Pairs that were highly risk sensitive (NZDUSD and NZDJPY) absorbed the impact; but AUDNZD charged ahead. This development does not have a one-off effect. Expect these downgrades to come back again as sentiment starts to tip in one direction – especially if it is a bearish lean.
British Pound Follows Euro Lines Rather than Data Improvement
Though there were a few notable fundamental highlights from the sterling’s arena, it wouldn’t be enough to deviate the currency from the EU crisis / risk trends line. That said, it is worth noting the SNB’s suggestion that they may add pounds to their reserves going forward and news that consumer confidence had bounced up from two-year lows.
Canadian Dollar Looks to July GDP Data Will Refine US Connection
Policy officials in Canada have been vocal this past week; but they have had almost no influence on the loonie. Perhaps the upcoming July GDP reading will have better luck. For the Canadian currency, the economic connection to the US and investment aspect similar to Australian and New Zealand offer a confused look. This data is an opportunity for the currency to run off its own fundamentals.
Swiss Franc Talked Down by SNB’s Hildebrand, FX Market Brushes It Off
Policy officials have tried hard over the past few days to talk the Swiss franc down. Following up on his colleague’s (Thomas Jordan) remarks, SNB President Hildebrand echoed the vow to protect the EURCHF floor. He may have sabotaged his own efforts however in noting the ‘dangerous’ economic forecast given his currency’s safe haven status. Perhaps the future sterling purchases could spread the Swiss short move.
Gold Range at Pre-Tumble Low, Volume Lightest in Two-Week
Not only is gold lower on the week; but it is holding those lows. With the previous, sharp correction back in August; the metal put in for a quick reversal to recover lost ground. Yet, with this past session’s close, we have seen the smallest range since just before the collapse a week ago and the weakest volume figures for the futures market in two weeks. It is difficult to feed a trend or reverse it under these conditions.
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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
|
GMT |
Currency |
Release |
Survey |
Previous |
Comments |
|
0:30 |
AUD |
RPData-Rismark House Px Raw (AUG) |
-0.9% |
Continued declines in housing prices suggests saturation of market |
|
|
0:30 |
AUD |
RPData-Rismark House Px s.a. (AUG) |
-0.6% |
||
|
1:00 |
NZD |
NBNZ Activity Outlook (SEP) |
43.3 |
Bank’s own outlook index has tracked lower |
|
|
1:00 |
NZD |
NBNZ Business Confidence (SEP) |
34.4 |
||
|
1:30 |
AUD |
Private Sector Credit (MoM) (AUG) |
0.2% |
0.2% |
Australian credit continues to grow despite high interest |
|
1:30 |
AUD |
Private Sector Credit (YoY) (AUG) |
2.8% |
2.7% |
|
|
2:00 |
NZD |
Money Supply M3 (YoY) (AUG) |
6.3% |
Growth may decrease on rate expectations |
|
|
2:30 |
CNY |
HSBC Flash China Manufacturing PMI (SEP) |
49.9 |
Manufacturing seen as shrinking |
|
|
4:00 |
JPY |
Vehicle Production (YoY) (AUG) |
-8.9% |
Japanese heavy industry production data continues to show weakness, may create large problem for new Noda administration |
|
|
5:00 |
JPY |
Construction Orders (YoY) (AUG) |
5.7% |
||
|
5:00 |
JPY |
Annualized Housing Starts (AUG) |
0.860M |
0.955M |
|
|
5:00 |
JPY |
Housing Starts (YoY) (AUG) |
4.5% |
21.2% |
|
|
6:00 |
EUR |
German Retail Sales (MoM) (AUG) |
-0.5% |
0.3% |
Fall in retail sales may delay rate hikes |
|
6:00 |
EUR |
German Retail Sales (YoY) (AUG) |
-1.0% |
-1.6% |
|
|
6:45 |
EUR |
French Producer Prices (MoM) (AUG) |
-0.1% |
Increase in producer prices most likely due to higher raw materials prices |
|
|
6:45 |
EUR |
French Producer Prices (YoY) (AUG) |
6.1% |
||
|
6:45 |
EUR |
French Consumer Spending Manuf. (MoM) (AUG) |
1.1% |
Consumer spending growing at a slower pace, pointing to weaker sentiment |
|
|
6:45 |
EUR |
French Consumer Spending Manuf. (YoY) (AUG) |
2.2% |
||
|
6:45 |
EUR |
French Consumer Spending (MoM) (AUG) |
0.2% |
1.2% |
|
|
6:45 |
EUR |
French Consumer Spending (YoY) (AUG) |
1.3% |
1.8% |
|
|
8:00 |
EUR |
Italian Unemployment Rate s.a. (Q2) |
8.0% |
8.2% |
Italian unemployment stagnant, not expected to move market |
|
8:00 |
EUR |
Italian Unemployment Rate s.a. (AUG P) |
8.0% |
8.0% |
|
|
9:00 |
EUR |
Euro-Zone CPI Estimate (YoY) (SEP) |
2.5% |
2.5% |
Estimate still above ECB target |
|
9:00 |
EUR |
Euro-Zone Unemployment Rate (AUG) |
10.0% |
10.0% |
May increase on Greek cuts |
|
9:00 |
EUR |
Italian CPI (NIC incl. tobacco) (MoM) (SEP P) |
-0.1% |
0.3% |
Italian prices relatively stable, fall may be due to lower consumer spending |
|
9:00 |
EUR |
Italian CPI (NIC incl. tobacco) (YoY) (SEP P) |
2.9% |
2.8% |
|
|
9:00 |
EUR |
Italian CPI – EU Harmonized (MoM) (SEP P) |
1.0% |
0.4% |
|
|
9:00 |
EUR |
Italian CPI – EU Harmonized (YoY) (SEP P) |
2.6% |
2.3% |
|
|
9:30 |
CHF |
KOF Swiss Leading Indicator (SEP) |
1.33 |
1.61 |
Swiss economy still seen as weak |
|
10:00 |
EUR |
Italian Producer Price Index (MoM) (AUG) |
0.1% |
0.3% |
Italian PPI may be weaker as large industries slow buying, expansion |
|
10:00 |
EUR |
Italian Producer Price Index (YoY) (AUG) |
4.5% |
4.9% |
|
|
12:30 |
Gross Domestic Product (MoM) (JUL) |
0.3% |
0.2% |
Major data of the day – YoY data expected to increase for last time before August economic weakness |
|
|
12:30 |
CAD |
Gross Domestic Product (YoY) (JUL) |
2.3% |
2.0% |
|
|
12:30 |
USD |
Personal Income (AUG) |
0.1% |
0.3% |
US consumer spending lower as more consumers hold onto cash in uncertain economy |
|
12:30 |
USD |
Personal Spending (AUG) |
0.2% |
0.8% |
|
|
12:30 |
USD |
PCE Deflator (YoY) (AUG) |
3.0% |
2.8% |
|
|
12:30 |
USD |
PCE Core (MoM) (AUG) |
0.2% |
0.2% |
|
|
12:30 |
USD |
PCE Core (YoY) (AUG) |
1.7% |
1.6% |
|
|
13:45 |
USD |
Chicago Purchasing Manager (SEP) |
56.5 |
56.5 |
Midwestern industries expected stable |
|
13:55 |
USD |
U. of Michigan Confidence (SEP F) |
57.8 |
57.8 |
Final revision not expected to move markets |
|
14:00 |
USD |
NAPM-Milwaukee (SEP) |
58.3 |
Purchasing index has been stable |
|
GMT |
Currency |
Upcoming Events & Speeches |
|
1:35 |
CNY |
MNI September Business Condition Survey |
|
15:00 |
USD |
Fed’s Bullard to Speak in San Diego |
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 |
1.5160 |
1.6745 |
86.00 |
0.8560 |
1.0275 |
1.0750 |
0.9020 |
118.00 |
146.05 |
|
Resist 1 |
1.5000 |
1.6600 |
81.50 |
0.8275 |
1.0000 |
1.0800 |
0.8750 |
113.50 |
140.00 |
|
Spot |
1.4193 |
1.6215 |
76.78 |
0.7888 |
0.9839 |
1.0650 |
0.8473 |
108.97 |
124.49 |
|
Support 1 |
1.4000 |
1.5935 |
76.35 |
0.7500 |
0.9425 |
1.0350 |
0.7745 |
109.00 |
124.00 |
|
Support 2 |
1.3700 |
1.5750 |
75.50 |
0.7000 |
0.9055 |
0.9925 |
0.6850 |
106.00 |
119.00 |
CLASSIC SUPPORT AND RESISTANCE
EMERGING MARKETS & SCANDIES CURRENCIES 18:00 GMT
|
Currency |
USD/MXN |
USD/TRY |
USD/ZAR |
USD/HKD |
USD/SGD |
Currency |
USD/SEK |
USD/DKK |
USD/NOK |
|
Resist 2 |
13.8500 |
1.8235 |
7.4025 |
7.8165 |
1.3650 |
Resist 2 |
7.5800 |
5.6625 |
6.1150 |
|
Resist 1 |
12.5000 |
1.8000 |
7.3500 |
7.8075 |
1.3250 |
Resist 1 |
6.5175 |
5.3100 |
5.7075 |
|
Spot |
12.4149 |
1.7522 |
7.0738 |
7.7892 |
1.2046 |
Spot |
6.3965 |
5.2483 |
5.4031 |
|
Support 1 |
11.5200 |
1.6500 |
6.5575 |
7.7490 |
1.2000 |
Support 1 |
6.0800 |
5.1050 |
5.3040 |
|
Support 2 |
11.4400 |
1.5725 |
6.4295 |
7.7450 |
1.1800 |
Support 2 |
5.8085 |
4.9115 |
4.9410 |
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 |
1.4326 |
1.6296 |
77.19 |
0.8104 |
0.9906 |
1.0778 |
0.8595 |
110.27 |
125.04 |
|
Resist 1 |
1.4259 |
1.6255 |
76.98 |
0.7996 |
0.9873 |
1.0714 |
0.8534 |
109.62 |
124.77 |
|
Pivot |
1.4222 |
1.6214 |
76.77 |
0.7854 |
0.9813 |
1.0670 |
0.8485 |
109.24 |
124.48 |
|
Support 1 |
1.4155 |
1.6173 |
76.56 |
0.7746 |
0.9780 |
1.0606 |
0.8424 |
108.59 |
124.20 |
|
Support 2 |
1.4118 |
1.6132 |
76.35 |
0.7604 |
0.9720 |
1.0562 |
0.8375 |
108.21 |
123.91 |
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 |
1.4393 |
1.6392 |
77.65 |
0.8030 |
0.9949 |
1.0814 |
0.8613 |
110.70 |
126.19 |
|
Resist. 2 |
1.4343 |
1.6348 |
77.43 |
0.7994 |
0.9922 |
1.0773 |
0.8578 |
110.27 |
125.77 |
|
Resist. 1 |
1.4293 |
1.6304 |
77.22 |
0.7959 |
0.9894 |
1.0732 |
0.8543 |
109.83 |
125.34 |
|
Spot |
1.4193 |
1.6215 |
76.78 |
0.7888 |
0.9839 |
1.0650 |
0.8473 |
108.97 |
124.49 |
|
Support 1 |
1.4093 |
1.6126 |
76.34 |
0.7817 |
0.9784 |
1.0568 |
0.8403 |
108.11 |
123.64 |
|
Support 2 |
1.4043 |
1.6082 |
76.13 |
0.7782 |
0.9756 |
1.0527 |
0.8368 |
107.67 |
123.22 |
|
Support 3 |
1.3993 |
1.6038 |
75.91 |
0.7746 |
0.9729 |
1.0486 |
0.8333 |
107.24 |
122.79 |
Written by: John Kicklighter, Senior Currency Strategist for DailyFX.com
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