- Dollar Drifting Ahead of Important Budget Votes, 1Q GDP Release
- Euro Tumbles after Sentiment Data Sours, Italian Auction Struggles
- British Pound Taking Cues More from Risk Trends than Data
- New Zealand Dollar at Risk of Serious Reversal as Rate Outlook Collapses
- Canadian Dollar Traders Ready for GDP Data, Comparisons to US Growth
- Japanese Yen Slips after Employment, Spending and Production Data Disappoints
- Gold Oscillates as US Congress Running down to the Wire on Budget
Dollar Drifting Ahead of Important Budget Votes, 1Q GDP Release
Technically, the dollar put in for its first back-to-back advance in nearly two weeks through Thursday’s close. Yet, if we were referring to the conviction in this follow up move, it would be more appropriate to call this a phase of congestion. The dollar is quickly closing in on the budget deficit deadline; and the market is reflecting a heightened since of speculation that fits the frenetic mood building in Washington DC. And when uncertainty is the order of the day, it is just as difficult to maintain and build the selloff that developed over the past week as it is to jump start a rally from the beleaguered currency. These distorting conditions will only worsen as we inch towards August 2nd without a definitive plan to rein in the United States’ record deficit – and the fact that the upcoming session will bring a closely-watched 2Q GDP report and the an uncertain close to a long and headline-filled weekend only makes the situation worse.
Looking back at the fundamental developments of the past 48 hours, it isn’t a stretch to suggest that the dollar would have stalled (or more likely extended its tumble) if it weren’t for the marked drop in risk appetite. The S&P 500 has intensified the feeling of uncertainty in the broader capital markets with its dramatic decline this past week to hug the critical 1,300 level. The rush to safety that this move reflects immobilizes investors from moving away from US Treasuries because it is difficult to determine what the reasonable alternatives would be. As a result, we find the Dow Jones FXCM Dollar Index (ticker = USDollar) hovering not far above its recently set record lows without a clear bearing for the future but with a disturbing level of certainty that volatility will explode in the not too distant future.
Heading cautiously into the final trading day of the week, the Asian session was already delivering a disappointment for risk appetite and the dollar with the news that the House of Representatives canceled its vote on the Boehner-led budget proposal – as it was clearly on track to be shot down. The probability that a vote is squeezed in on Friday is not high; and that leads to a down-to-the-wire atmosphere that will translate into a volatile open Monday (meaning this is not a good time to hold a short or medium-term trades over the weekend). Competing for headlines as liquidity winds down, the market will digest the US 2Q GDP figures promptly after its 12:30 GMT release. The fact that the world’s largest economy was quickly decelerating was a fundamental concern before the market’s interest in the budget intensified – remember the QE3 debate? The wealth of more timely economic readings that have crossed the wires over the past three months raises the risk that the 1.8 percent consensus for the annualized growth figure is set a little too high. The impact this has on the market is complicated because of the deficit troubles and the lingering discussions over necessity of further quantitative easing.
Related:Discuss the Dollar in the DailyFX Forum, John’s Picks: EURUSD and NZDUSD See Technical Corrections, But Risk is Very High
Euro Tumbles after Sentiment Data Sours, Italian Auction Struggles
If it weren’t for the euro’s pained performance through this past trading session, it is very likely that the dollar would have ended the dollar effectively unchanged or in the red. The shared currency tumbled against all of its liquid counterparts on a fundamental wave that undermined both economic and financial expectations. From the docket, a smaller-than-expected drop in German unemployment (11,000) and economic confidence dropped. Digging closer to the bone was the weak showing for the Italian government bond auction. The yield on all four different maturity issued jumped; and the market made its fear of contagion known. If it weren’t for rumors that the ECB was buying periphery government bonds, conditions could have been much worse for the euro – especially after news that three-month liquidity demand jumped to 85 billion euros.
British Pound Taking Cues More from Risk Trends than Data
There are plenty of distractions in the FX market right now to draw the attention away from the pound’s fundamentals. Nevertheless, the deterioration continues and the sterling’s future continues to dim. News that the CBI retail sales report dropped to a 13-month low (-5) for July and consumer confidence slid to an April-low of -30 does little to boost confidence in the midst of an austerity push by the government.
New Zealand Dollar at Risk of Serious Reversal as Rate Outlook Collapses
Though RBNZ Governor Alan Bollard signaled to the market that he would look to reverse the March 50bps rate cut in the near future (likely at the September meeting); it was also suggested that further hikes were unlikely due to the influence of the kiwi. Rate expectations are already deteriorating; but the markets are too preoccupied to invest in the move just yet. That said, rates are the very source of the kiwi’s strength.
Canadian Dollar Traders Ready for GDP Data, Comparisons to US Growth
The Canadian dollar often moves in the shadow of its larger neighbor. Volatility in response to the nation’s employment figures are generally tempered by the later-released US NFPs; and it seems we are heading for the same with Canada’s GDP figures for May. A significant disappointment in the US data will generally weigh on the loonie; but a matching rise from the Canadian data could leverage USDCAD higher.
Japanese Yen Slips after Employment, Spending and Production Data Disappoints
The economic and financial bearings for Japan are important to the health of the Asian region. However, negative data does little to dissuade the yen from rallying – a relationship that has proven unfortunate for the island nation. Despite news that unemployment ticked higher, household spending dropped 4.2 percent and industrial productions cooled; the yen’s slip lasted only until the risk-aversion sweep picked it back.
Gold Oscillates as US Congress Running down to the Wire on Budget
Like the dollar, gold is consolidation – though the metal is turning to congestion at record highs. Uncertainty surrounding the United States’ fiscal and financial future is certainly a boon for the alternative store of wealth; but traders are also considering the scenario whereby Congress passes a viable deficit reduction plan. The need for an alternative to US Treasuries, money markets and the dollar would sharply drop.
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 |
RPData-Rismark House Px Raw (JUN) |
-0.5% |
Housing prices data have shown recent decline, perhaps due to slowing domestic economy |
|
|
0:30 |
AUD |
RPData-Rismark House Px s.a. (JUN) |
-0.3% |
||
|
1:30 |
AUD |
Private Sector Credit (MoM) (JUN) |
0.4% |
0.3% |
Expansion of credit may mean turning point for recently slowing economy |
|
1:30 |
AUD |
Private Sector Credit (YoY) (JUN) |
3.2% |
3.1% |
|
|
3:00 |
NZD |
Money Supply M3 (YoY) (JUN) |
5.7% |
Money supply may expand due to loans |
|
|
4:00 |
JPY |
Vehicle Production (YoY) (JUN) |
-30.9% |
Manufacturer reports could show recovery |
|
|
5:00 |
JPY |
Construction Orders (YoY) (JUN) |
25.5% |
A slower pace of housing constructions could show once-again stagnating domestic economy |
|
|
5:00 |
JPY |
Annualized Housing Starts (JUN) |
0.809M |
0.815M |
|
|
5:00 |
JPY |
Housing Starts (YoY) (JUN) |
4.6% |
6.4% |
|
|
6:00 |
EUR |
German Retail Sales (MoM) (JUN) |
1.7% |
-2.8% |
Expected decline in long-term retail sales could mean delay in raising of rates |
|
6:00 |
EUR |
German Retail Sales (YoY) (JUN) |
-1.6% |
2.2% |
|
|
6:45 |
EUR |
French Producer Prices (MoM) (JUN) |
-0.1% |
-0.5% |
French prices show mixed expectations, although the ECB focuses more on German data |
|
6:45 |
EUR |
French Producer Prices (YoY) (JUN) |
5.9% |
6.1% |
|
|
6:45 |
EUR |
French Consumer Spending (MoM) (JUN) |
0.8% |
-1.5% |
|
|
6:45 |
EUR |
French Consumer Spending (YoY) (JUN) |
2.2% |
-1.0% |
|
|
8:00 |
EUR |
Italian Producer Price Index (MoM) (JUN) |
-0.1% |
-0.2% |
Italian PPI shows continued decline, decreasing demand for goods |
|
8:00 |
EUR |
Italian Producer Price Index (YoY) (JUN) |
4.6% |
4.8% |
|
|
8:30 |
GBP |
Net Consumer Credit (JUN) |
0.3B |
0.2B |
Has been stagnating at post-recession levels due to slowing spending despite some pickup in demand |
|
8:30 |
GBP |
Net Lending Sec. on Dwellings (JUN) |
1.0B |
1.1B |
|
|
8:30 |
GBP |
Mortgage Approvals (JUN) |
46.0K |
45.9K |
|
|
8:30 |
GBP |
M4 Ex OFCs 3M Annualised (JUN) |
1.0% |
Money supply may increase again due to relatively lax bank policies, trying to support growth |
|
|
8:30 |
GBP |
M4 Money Supply (MoM) (JUN) |
0.1% |
||
|
8:30 |
GBP |
M4 Money Supply (YoY) (JUN) |
-0.2% |
||
|
9:00 |
EUR |
Euro-Zone CPI Estimate (YoY) (JUL) |
2.7% |
2.7% |
Though expected same, still higher than ECB’s target, current rate of 1.50% |
|
9:00 |
EUR |
Italian CPI – EU Harmonized (YoY) (JUL P) |
2.9% |
3.0% |
Italian inflation expected to stabilize, will not influence ECB decisions much |
|
9:00 |
EUR |
Italian CPI (NIC incl. tobacco) (MoM) (JUL P) |
0.2% |
0.1% |
|
|
9:00 |
EUR |
Italian CPI (NIC incl. tobacco) (YoY) (JUL P) |
2.7% |
2.7% |
|
|
9:00 |
EUR |
Italian CPI – EU Harmonized (MoM) (JUL P) |
-1.0% |
0.1% |
|
|
12:30 |
CAD |
Gross Domestic Product (MoM) (MAY) |
0.1% |
0.0% |
Canadian output expected to grow only moderately as US recovery slows |
|
12:30 |
CAD |
Gross Domestic Product (YoY) (MAY) |
2.8% |
2.8% |
|
|
12:30 |
CAD |
Industrial Product Price (MoM) (MAY) |
-0.1% |
-0.2% |
Still-declining materials prices may put halt on near-term interest rate hikes |
|
12:30 |
CAD |
Raw Materials Price Index (MoM) (MAY) |
-2.0% |
-5.2% |
|
|
12:30 |
USD |
Employment Cost Index (Q2) |
0.5% |
0.6% |
Slowing cost could decrease hawkishness |
|
12:30 |
USD |
Gross Domestic Product (Annualized) (Q2 A) |
1.8% |
1.9% |
US productivity for Q2 expected to be more moderate than previous, could confirm US is still in a recession economy |
|
12:30 |
USD |
Gross Domestic Product Price Index (Q2 A) |
2.0% |
2.0% |
|
|
12:30 |
USD |
Personal Consumption (Q2 A) |
0.8% |
2.2% |
|
|
12:30 |
USD |
Core Personal Consumption Exp (QoQ) (Q2 A) |
2.3% |
1.6% |
|
|
13:45 |
USD |
Chicago Purchasing Manager (JUL) |
60 |
61.1 |
Has weakened since early 2011 |
|
13:55 |
USD |
U. of Michigan Confidence (JUL F) |
64 |
63.8 |
Final number still shows drop |
|
14:00 |
USD |
NAPM-Milwaukee (JUL) |
56.9 |
59.3 |
Weakness in manufacturing may continue |
|
CNY |
Leading Index (JUN) |
101.98 |
Tightening should reduce index again |
|
GMT |
Currency |
Upcoming Events & Speeches |
|
1:35 |
CNY |
MNI July Business Condition Survey |
|
12:30 |
USD |
Annual Revisions: Gross Domestic Product |
|
19:15 |
USD |
Fed’s Bullard and Lockhart Discuss Monetary Policy in Wyoming |
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 |
0.8900 |
1.0275 |
1.1800 |
0.9020 |
118.00 |
146.05 |
|
Resist 1 |
1.5000 |
1.6475 |
81.50 |
0.8550 |
1.0000 |
1.1000 |
0.8750 |
113.50 |
140.00 |
|
Spot |
1.4310 |
1.6340 |
77.79 |
0.8017 |
0.9510 |
1.0985 |
0.8685 |
111.32 |
127.11 |
|
Support 1 |
1.4000 |
1.5935 |
77.50 |
0.8000 |
0.9425 |
1.0400 |
0.7745 |
109.00 |
125.00 |
|
Support 2 |
1.3700 |
1.5750 |
76.25 |
0.7900 |
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 |
11.7252 |
1.6769 |
6.7454 |
7.7922 |
1.2022 |
Spot |
6.3342 |
5.2055 |
5.4144 |
|
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 |
1.4469 |
1.6404 |
78.22 |
0.8075 |
0.9546 |
1.1106 |
0.8780 |
112.69 |
127.79 |
|
Resist 1 |
1.4389 |
1.6372 |
78.00 |
0.8046 |
0.9528 |
1.1046 |
0.8732 |
112.00 |
127.45 |
|
Pivot |
1.4322 |
1.6333 |
77.82 |
0.8018 |
0.9493 |
1.1014 |
0.8707 |
111.42 |
127.09 |
|
Support 1 |
1.4242 |
1.6301 |
77.60 |
0.7989 |
0.9475 |
1.0954 |
0.8659 |
110.73 |
126.75 |
|
Support 2 |
1.4175 |
1.6262 |
77.42 |
0.7961 |
0.9440 |
1.0922 |
0.8634 |
110.15 |
126.39 |
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 |
1.4497 |
1.6496 |
78.68 |
0.8121 |
0.9604 |
1.1126 |
0.8803 |
112.93 |
128.64 |
|
Resist. 2 |
1.4450 |
1.6457 |
78.45 |
0.8095 |
0.9581 |
1.1090 |
0.8774 |
112.53 |
128.26 |
|
Resist. 1 |
1.4403 |
1.6418 |
78.23 |
0.8069 |
0.9557 |
1.1055 |
0.8744 |
112.13 |
127.87 |
|
Spot |
1.4310 |
1.6340 |
77.79 |
0.8017 |
0.9510 |
1.0985 |
0.8685 |
111.32 |
127.11 |
|
Support 1 |
1.4217 |
1.6262 |
77.35 |
0.7965 |
0.9463 |
1.0915 |
0.8626 |
110.51 |
126.35 |
|
Support 2 |
1.4170 |
1.6223 |
77.13 |
0.7939 |
0.9439 |
1.0880 |
0.8596 |
110.11 |
125.97 |
|
Support 3 |
1.4123 |
1.6184 |
76.90 |
0.7913 |
0.9416 |
1.0844 |
0.8567 |
109.71 |
125.59 |
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.
