- Dollar Little Moved as Traders Ignore Risk, Liquidity and Data
- Euro: Merkel and Sarkozy Meeting Yields Big Talk, Little Action
- Swiss Franc Readies for Government Ruling on Euro Peg
- British Pound Shows Limited Reaction to CPI, Likely Less to Minutes
- Japanese Yen: Could the Japanese Get Ideas from Swiss Threats?
- Australian Dollar Eases Back Alongside Equities, Commodities, Yield Outlook
- Gold: When Everything Else Seems to Dim, The Precious Metal Climbs
Dollar Little Moved as Traders Ignore Risk, Liquidity and Data
Volatility and fundamental conviction continues to deteriorate. Interestingly, the greenback is settling back alongside its more risk-sensitive counterparts. This is actually a positive for the dollar. Under normal circumstances, when all the bombastic headlines surrounding financial panic and imploding risk appetite are clear, the greenback’s natural inclination will be a steady decline. This is due to the gradual but consistent loss of the currency’s safe haven status – an effort that that has been more than a decade in the making and will inevitably accelerate after major themes (like the European sovereign funding crisis) pass as investors circle back to that pivotal downgrade by Standard & Poor’s. Yet, the dollar holds. As does the S&P 500. This odd truce no doubt reflects upon an extremely cautious market. Traders are not ready to build up risky positions so soon after the most pervasive risk aversion move since the 2008 crisis. Then again, neither are they willing to unwind their exposure wholesale if they don’t have to (the feeling of hope that dramatic losses can be recovered is felt by beginner and expert alike).
Looking at the dollar’s performance through Tuesday’s session, the Dow Jones FXCM Dollar Index (ticker = USDollar) managed a sparse 61-point range – the smallest span since July 28th. That seems to fit the equities markets well enough – S&P 500 futures cut a 24-point swing to post the smallest movement from the benchmark since before the August panic set in. Risk appetite trends still offer the greatest volatility potential for the dollar – though we know the greenback generally requires more than just an ordinary slip in optimism to generate send investors back towards something as shaky as Treasuries. Without doubt, the decision by the world’s policy makers to maintain stimulus and to further take up manipulation is certainly giving reason for pause (whether that be a speculator or someone merely looking for safety).
It’s worth mentioning that an indirect contribution to the dollar’s value is the fact that the slide in interest rate expectations for its largest counterparts is countered by the yield for the US which has little room to fall further. Furthermore, we are starting to note a slow rise in short-term market rates (three-month Libor) as the market prices in a modest increase in risk for US assets. But, this is a more long-term theme. In the meantime, scheduled event risk through this past session peaked with the smaller than expected 1.5 percent drop in housing starts and larger 0.9 percent jump in industrial production. Neither of these indicators strikes a nerve for the dollar. The same holds true for the upcoming PPI.
Related:Discuss the Dollar in the DailyFX Forum, John’s Video: How Should We Approach the Possibility of a Swiss Peg
Euro: Merkel and Sarkozy Meeting Yields Big Talk, Little Action
There were a lot of nervous euro traders through this past trading session. Not only were the core GDP figures crossing the wires; but imaginations were running away with what the possibilities for a meeting between German Chancellor Merkel and French President Sarkozy could hold. The 2Q GDP figures for Germany, Spain and the Euro Zone were certainly discouraging. Most concerning was the scant 0.1 percent growth from the region’s largest member through the quarter and a much tempered 2.8 percent pace over the year. This suggests that the EU’s core members are not immune to the global slowdown and regional austerity measures. Holding a greater degree of uncertainty was the Merkel/Sarkozy press conference. They called for the adoption of deficit limits in constitutions, a common corporate tax regime and an ‘economic government’. These proposals will meet substantial resistance. In the meantime, they shot down an increase in the EFSF and Eurobonds.
Swiss Franc Readies for Government Ruling on Euro Peg
Speculation that Swiss authorities will announce a plan to peg the franc to the euro in the upcoming session has been fully leveraged. Outside of a few unconfirmed sources in papers, there is little to substantiate this time line; but the market seems willing to see it as possible given the government is scheduled to hold its regular meeting today. The likelihood that the SNB and government adopt a peg or band is perhaps not as low as many believe as authorities have already shown themselves to be desperate. That said, the real question is whether such a move would be effective. Such a move would certainly dissuade speculation; but a steady FX rate could actually encourage safe haven capital flows…
British Pound Shows Limited Reaction to CPI, Likely Less to Minutes
The pound started to work its way higher after the ONS released its CPI data; however, this data wouldn’t be able to manage a sustained boost for the sterling. With the market pricing in no change to the benchmark rate over 12 months and the BoE leaving the door open for more stimulus, it is clear inflation above the target has little bearing on its risk/reward. The same likely holds for the BoE’s minutes and jobs figures.
Japanese Yen: Could the Japanese Get Ideas from Swiss Threats?
A peg…Is that more effective than one off intervention? What is the downside? These are questions that Japanese officials have no doubt asked themselves; but it is highly unlikely that they will consider this a viable option like their Swiss counterparts. Invention to this degree on one of the world’s most liquid currencies and largest economies would cause massive ripples for trade partners and the likely the entire world.
Australian Dollar Eases Back Alongside Equities, Commodities, Yield Outlook
Interest rate expectations are a solid burden for the Australian dollar. That said, without a meaningful boost in risk appetite, the currency will be left to flounder against its counterparts – even though it still maintains one of the highest rates amongst its peers. With 130 bps of cuts priced in over the 12 months, it will take a healthy run of optimism to shock this currency out of its funk. This is difficult without volume and volatility.
Gold: When Everything Else Seems to Dim, The Precious Metal Climbs
When everything else moving at an unusual pace, gold seems to be doing exactly what it should be – rising. It doesn’t take much of a risk aversion move to boost the commodity. All we really need is the sense of uncertainty and risk that stalled capital markets could turn into tumbling markets given the wrong headlines. It is still well off highs; but all we need is talk of a peg, euro funding trouble or dollar reserve loss.
For Real Time Forex News, visit: http://www.dailyfx.com/real_time_news/
**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 |
Westpac Leading Index (MoM) (JUN) |
-0.1% |
May decline as economy slows |
|
|
1:00 |
AUD |
DEWR Internet Skilled Vacancies (MoM) (JUL) |
0.0% |
High level jobs usually slower than mining |
|
|
1:30 |
AUD |
Wage Cost Index (QoQ) (Q2) |
0.9% |
0.8% |
Higher wage costs may buoy support for increased rates |
|
1:30 |
AUD |
Wage Cost Index (YoY) (Q2) |
4.0% |
3.8% |
|
|
8:00 |
EUR |
Euro-Zone Current Account n.s.a. (euros) (JUN) |
-18.3B |
Current account data unlikely to change future pace of ECB decisions |
|
|
8:00 |
EUR |
Euro-Zone Current Account s.a. (euros) (JUN) |
-5.2B |
||
|
8:30 |
GBP |
Jobless Claims Change (JUL) |
20.0K |
24.5K |
British labor market expected to weaken slightly on continued economic stagnation; may lead to further monetary policy easing |
|
8:30 |
GBP |
Average Weekly Earnings 3M/YoY (JUL) |
2.3% |
2.3% |
|
|
8:30 |
GBP |
Weekly Earnings exBonus 3M/YoY (JUL) |
2.3% |
2.1% |
|
|
8:30 |
GBP |
Claimant Count Rate (JUL) |
4.7% |
4.7% |
|
|
8:30 |
GBP |
ILO Unemployment Rate (3M) (JUL) |
7.7% |
7.7% |
|
|
9:00 |
EUR |
Euro-Zone Consumer Price Index (MoM) (JUL) |
-0.6% |
0.0% |
Short term fall in inflation could point to easier ECB rates into the year |
|
9:00 |
EUR |
Euro-Zone Consumer Price Index (YoY) (JUL) |
2.5% |
2.5% |
|
|
9:00 |
EUR |
Euro-Zone Consumer Price Index – Core (YoY) |
1.6% |
1.6% |
|
|
9:00 |
EUR |
Italian Current Account (euros) (JUN) |
-5094M |
Deficit may widen on new fiscal plans |
|
|
11:00 |
USD |
MBA Mortgage Applications (AUG 12) |
21.7% |
Upswing may be due to lower rates |
|
|
12:30 |
CAD |
International Securities Transactions (CAD) (JUN) |
10.0B |
15.4B |
Lower may be due to slowing recovery |
|
12:30 |
USD |
Producer Price Index (MoM) (JUL) |
0.1% |
-0.4% |
Moderate producer prices indicate that higher costs will probably not be passed onto consumers |
|
12:30 |
USD |
PPI Ex Food & Energy (MoM) (JUL) |
0.2% |
0.3% |
|
|
12:30 |
USD |
Producer Price Index (YoY) (JUL) |
7.0% |
7.0% |
|
|
12:30 |
USD |
PPI Ex Food & Energy (YoY) (JUL) |
2.3% |
2.4% |
|
|
14:30 |
USD |
DOE U.S. Crude Oil Inventories (AUG 12) |
-750K |
-5225K |
An improvement in gasoline, crude oil inventories could point to moderately slowing economy, less demand |
|
14:30 |
USD |
DOE Cushing OK Crude Inventory (AUG 12) |
-1372K |
||
|
14:30 |
USD |
DOE U.S. Distillate Inventory (AUG 12) |
625K |
-737K |
|
|
14:30 |
USD |
DOE U.S. Gasoline Inventories (AUG 12) |
-1050K |
-1588K |
|
|
14:30 |
USD |
DOE U.S. Refinery Utilization (AUG 12) |
-0.3% |
-0.7% |
|
|
23:50 |
JPY |
Merchandise Trade Balance Total (Yen) (JUL) |
69.3B |
68.6B |
July trade expected to improve as Japanese manufacturing sector returns near pre-earthquake capacities |
|
23:50 |
JPY |
Adjusted Merchandise Trade Balance (Yen) (JUL) |
-131.9B |
-191.2B |
|
|
23:50 |
JPY |
Merchandise Trade Exports (YoY) (JUL) |
-2.6 |
-1.6 |
|
|
23:50 |
JPY |
Merchandise Trade Imports (YoY) (JUL) |
11.0% |
9.8% |
|
GMT |
Currency |
Upcoming Events & Speeches |
|
8:30 |
GBP |
Bank of England 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 |
1.5160 |
1.6600 |
86.00 |
0.8550 |
1.0275 |
1.1800 |
0.9020 |
118.00 |
146.05 |
|
Resist 1 |
1.5000 |
1.6475 |
81.50 |
0.8275 |
1.0000 |
1.1000 |
0.8750 |
113.50 |
140.00 |
|
Spot |
1.4211 |
1.6350 |
77.71 |
0.7562 |
0.9895 |
1.0244 |
0.8269 |
110.43 |
127.05 |
|
Support 1 |
1.4000 |
1.5935 |
77.00 |
0.7500 |
0.9425 |
0.9925 |
0.7745 |
109.00 |
125.00 |
|
Support 2 |
1.3700 |
1.5750 |
76.25 |
0.7300 |
0.9055 |
1.0200 |
0.6850 |
106.00 |
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 |
13.8500 |
1.8235 |
7.4025 |
7.8165 |
1.3650 |
Resist 2 |
7.5800 |
5.6625 |
6.1150 |
|
Resist 1 |
12.5000 |
1.7425 |
7.3500 |
7.8075 |
1.3250 |
Resist 1 |
6.5175 |
5.3100 |
5.7075 |
|
Spot |
12.2745 |
1.7765 |
7.1680 |
7.8070 |
1.2204 |
Spot |
6.4750 |
5.2423 |
5.4625 |
|
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 |
1.4558 |
1.6556 |
78.86 |
0.7753 |
1.0016 |
1.0538 |
0.8534 |
113.94 |
129.88 |
|
Resist 1 |
1.4385 |
1.6453 |
78.29 |
0.7658 |
0.9955 |
1.0391 |
0.8401 |
112.19 |
128.47 |
|
Pivot |
1.4257 |
1.6375 |
77.89 |
0.7570 |
0.9869 |
1.0300 |
0.8311 |
110.95 |
127.47 |
|
Support 1 |
1.4084 |
1.6272 |
77.32 |
0.7475 |
0.9808 |
1.0153 |
0.8178 |
109.20 |
126.06 |
|
Support 2 |
1.3956 |
1.6194 |
76.92 |
0.7387 |
0.9722 |
1.0062 |
0.8088 |
107.96 |
125.06 |
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 |
1.4427 |
1.6522 |
78.67 |
0.7697 |
1.0019 |
1.0412 |
0.8411 |
112.31 |
128.88 |
|
Resist. 2 |
1.4373 |
1.6479 |
78.43 |
0.7663 |
0.9988 |
1.0370 |
0.8375 |
111.84 |
128.42 |
|
Resist. 1 |
1.4319 |
1.6436 |
78.19 |
0.7629 |
0.9957 |
1.0328 |
0.8340 |
111.37 |
127.96 |
|
Spot |
1.4211 |
1.6350 |
77.71 |
0.7562 |
0.9895 |
1.0244 |
0.8269 |
110.43 |
127.05 |
|
Support 1 |
1.4103 |
1.6264 |
77.23 |
0.7495 |
0.9833 |
1.0160 |
0.8198 |
109.49 |
126.13 |
|
Support 2 |
1.4049 |
1.6221 |
76.99 |
0.7461 |
0.9802 |
1.0118 |
0.8163 |
109.02 |
125.68 |
|
Support 3 |
1.3995 |
1.6178 |
76.75 |
0.7427 |
0.9771 |
1.0076 |
0.8127 |
108.55 |
125.22 |
v
Written by: John Kicklighter, Senior 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
The information contained herein is derived from sources we believe to be reliable, but of which we have not independently verified. Forex Capital Markets, L.L.C.® assumes no responsibility for errors, inaccuracies or omissions in these materials, nor shall it be liable for damages arising out of any person’s reliance upon this information. Forex Capital Markets, L.L.C.® does not warrant the accuracy or completeness of the information, text, graphics, links or other items contained within these materials. Forex Capital Markets, L.L.C.® shall not be liable for any special, indirect, incidental, or consequential damages, including without limitation losses, lost revenues, or lost profits that may result from these materials. Opinions and estimates constitute our judgment and are subject to change without notice. Past performance is not indicative of future results.
