- Dollar Faces Retail Sales Data but Fed Decision Still Overwhelming
- Euro May Soon Build an Immunity to Unsubstantiated Headlines
- New Zealand Dollar: Preparing for the RBNZ’s Decision on Rates
- British Pound Tumbles after BoE Member Posen Ups the Call for Stimulus
- Australian Dollar Tumbles Despite Confidence Report, Rate Outlook Dire
- Swiss Franc Virtually Unchanged Just off 1.20 Level Against Euro
- Gold Volume Drops to Seven Day Low – Comparable Levels to Last Breakout
Dollar Faces Retail Sales Data but Fed Decision Still Overwhelming
We still have more than a week until the Federal Reserve is scheduled to wrap up its two day discussion about monetary policy and announce its decided path to the rest of the trading world. However, the influence this particular event can have on the broader FX and capital markets is so expansive that its mere presence acts as an anchor to the development of new trends. Given the progress of the Dow Jones FXCM Dollar Index (ticker = USDollar) and the majors, that may seem an unusual claim; but without this headwind, the benchmark could be much further along. Looking to the Index, that would mean the break to five-month highs above 9,760 could have found meaningful follow even after rallying over 350 points in the previous two weeks. For its crosses, similar liberation could lead the greenback to significant gains against high yielding currencies and fellow safe havens – rather than just the troubled European-based pairs.
To override the threat that the central bank will pursue a third quantitative easing program or a version of ‘Operation Twist’, market conditions need to play to the currency’s strong point – liquidity. Demand for liquidity comes when the financial backdrop is so strained that there is almost no thought of reward and only a scramble for the deepest and safest market. Most panicked traders would agree that market would be Treasuries and the dollar. Yet, we see the S&P 500 (our favored measure of sentiment) continues to carve out the volatile range that has sidelined any prominent trends for more than a month now. This is because another side effect of a possible increase in stimulus is a hesitation from speculators from unwinding their exposure on the hope that they could find a bounce through the normal moral hazard channels. The closer we are to this fateful day, the more entrenched the markets will become – even though doubt is running very high.
In the meantime, those looking for volatility should turn their attention to the scheduled event risk in the upcoming New York session. The retail sales and producer price index figures are potentially worth a burst of activity. Of the two, the consumer spending figure is far more influential as it taps into the prominent concern that the US economy is slowing to the point where recession and financial crisis are real possibilities. Expectations are relatively modest (0.2 percent growth in August); but surprise works best when the market is complacent.
Related:Discuss the Dollar in the DailyFX Forum, John’s Video:EURUSD at Risk of Rally as Market Grows Numb to Headlines
Euro May Soon Build an Immunity to Unsubstantiated Headlines
It seems the situation in Europe worsens with every day that passes. That is a belief that certainly has its bearings in tangible fundamental developments; but it is also heavily skewed by market-driven speculation. On the material side, we see that the Greek one-year government bond yields have driven ahead to 135 percent while sovereign credit default swaps are pricing in a 98 percent chance of a hard default with expectations that bond holders will only recover 40 percent of their initial investment. Another unambiguous development was the higher rates and lower demand for Italy’s 5.6 billion euro bond auction this past session. In contrast, the back and forth with French bank CEOs claiming they have ample liquidity, a Sarkozy spokesman dismissing speculation that French and German policy heads were meeting to establish a further rescue and a former BoE member’s opinion that Greece should “default big” (he is best known for manning the Argentinean central bank after its default) is all conjecture that can eventually be retraced. After enough of these false starts, a tolerance is built up to further headlines that don’t seem to go anywhere. We have seen this resistance build up countless times before; and it can certainly happen for an exhausted euro.
New Zealand Dollar: Preparing for the RBNZ’s Decision on Rates
The biggest scheduled event in the coming 24 hours is arguably the RBNZ rate decision. This meeting is particularly interesting as New Zealand Dollar is currently the only major that is expected to see a hike in the coming year. This stubborn outlook is firmly rooted on Governor Bollard’s suggestion that he would likely replace the 50 bps he cut from the earlier this year in the wake of the Christchurch earthquake. The market has taken him at his word; but the policy official hasn’t seemed as hawkish since global conditions have soured. Will he squash hike forecasts?
British Pound Tumbles after BoE Member Posen Ups the Call for Stimulus
There are many people with loud opinions on the Bank of England; and FX rate speculators are essentially left in the dark. However, after the bank’s remaining hawks dropped into the consensus, we are still left with the group’s most ardent dove – Adam Posen. And, as he is the only one talking up; his suggestion that conditions are worsening and warrant an additional 100 billion pounds of stimulus dominates the outlook.
Australian Dollar Tumbles Despite Confidence Report, Rate Outlook Dire
A Westpac consumer confidence report marked its biggest jump in 14 months this morning; but markets were generally unimpressed. Instead, the Australian dollar would follow risk trends and its discouraging interest rate outlook to a sharp 160-point decline for AUDUSD in the span of a few hours. The Asian session isn’t as quiet as it used to be.
Swiss Franc Virtually Unchanged Just off 1.20 Level Against Euro
If you were to take a look at a daily chart of EURCHF, it would look like the market was closed through past session. This is what a strengthening franc looks like against the ramparts of direct SNB intervention. Speculative interest in the Swiss has certainly dried up against the euro; but risk aversion flows are a natural force that the central bank isn’t properly fighting.
Gold Volume Drops to Seven Day Low – Comparable Levels to Last Breakout
Both the amplitude of gold’s daily swing and the volume behind the move eased this past session. Another victim of the uncertainty of stimulus from the United States and a deteriorating financial situation in the Euro-area; gold bugs need a definitive reason to bid up the expensive currency rather than just the rumor-mongering that has generated such dramatic swings recently.
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ECONOMIC DATA
Next 24 Hours
|
GMT |
Currency |
Release |
Survey |
Previous |
Comments |
|
0:30 |
AUD |
Westpac Consumer Confidence (SEP) |
-3.5% |
Consumer confidence may fall on slower global recovery, cautious bank |
|
|
0:30 |
AUD |
Westpac Consumer Confidence Index(SEP) |
89.6 |
||
|
1:00 |
AUD |
DEWR Internet Skilled Vacancies (MoM) (AUG) |
-0.8% |
Preliminary labor numbers may moderate |
|
|
1:30 |
AUD |
Dwelling Starts (Q2) |
2.0% |
3.1% |
May have second month of growth |
|
3:00 |
NZD |
Non Resident Bond Holdings (AUG) |
60.1% |
Interest could increase on rate expectation |
|
|
4:00 |
JPY |
Tokyo Condominium Sales (YoY) (AUG) |
-1.3% |
Sales low on decreasing demand |
|
|
4:30 |
JPY |
Industrial Production (MoM) (JUL F) |
0.6% |
Final revisions of Japanese industrial and manufacturing data could show slowdown in rebuilding |
|
|
4:30 |
JPY |
Industrial Production (YoY) (JUL F) |
-2.8% |
||
|
4:30 |
JPY |
Capacity Utilization (MoM) (JUL) |
5.2% |
||
|
6:00 |
JPY |
Machine Tool Orders (YoY) (AUG F) |
15.3% |
||
|
7:15 |
CHF |
Producer & Import Prices (MoM) (AUG) |
-0.4% |
-0.7% |
Drop in producer prices may be last month before SNB intervention |
|
7:15 |
CHF |
Producer & Import Prices (YoY) (AUG) |
-1.1% |
-0.6% |
|
|
8:30 |
GBP |
Claimant Count Rate (AUG) |
5.0% |
4.9% |
British labor data expected to improve moderately, though BoE still cautious to start tightening |
|
8:30 |
GBP |
Jobless Claims Change (AUG) |
35.0K |
37.1K |
|
|
8:30 |
GBP |
Average Weekly Earnings (3M/YoY) (JUL) |
2.7% |
2.6% |
|
|
8:30 |
GBP |
Weekly Earnings exBonus (3M/YoY) (JUL) |
2.1% |
2.2% |
|
|
8:30 |
GBP |
ILO Unemployment Rate (3M) (JUL) |
7.9% |
7.9% |
|
|
9:00 |
EUR |
Euro-Zone Industrial Production w.d.a. (YoY) (JUL) |
4.6% |
2.6% |
Zone-wide production expected to increase in July on confidence |
|
9:00 |
EUR |
Euro-Zone Industrial Production s.a. (MoM) (JUL) |
1.5% |
-0.8% |
|
|
11:00 |
USD |
MBA Mortgage Applications (SEP 9) |
-4.9% |
Weekly data indicates direction of housing |
|
|
12:30 |
Capacity Utilization Rate (Q2) |
78.0% |
79.0% |
Demand could fall on US slowdown |
|
|
12:30 |
USD |
Producer Price Index (MoM) (AUG) |
-0.1% |
0.2% |
US producer prices expected to be led by non-core items; FOMC reaction could be muted as recovery slows |
|
12:30 |
USD |
PPI Ex Food & Energy (MoM) (AUG) |
0.2% |
0.4% |
|
|
12:30 |
USD |
Producer Price Index (YoY) (AUG) |
6.4% |
7.2% |
|
|
12:30 |
USD |
PPI Ex Food & Energy (YoY) (AUG) |
2.6% |
2.5% |
|
|
12:30 |
USD |
Advance Retail Sales (AUG) |
0.2% |
0.5% |
Decline in sales points to relaxing consumer confidence, less spending |
|
12:30 |
USD |
Retail Sales Less Autos (AUG) |
0.2% |
0.5% |
|
|
14:00 |
USD |
Business Inventories (JUL) |
0.5% |
0.3% |
Investment spending may improve |
|
14:30 |
USD |
DOE U.S. Crude Oil Inventories (SEP 9) |
-3963K |
Weekly energy levels may show inventories return to surplus on decreasing demand |
|
|
14:30 |
USD |
DOE Cushing OK Crude Inventory (SEP 9) |
-396K |
||
|
14:30 |
USD |
DOE U.S. Distillate Inventory (SEP 9) |
709K |
||
|
14:30 |
USD |
DOE U.S. Gasoline Inventories (SEP 9) |
199K |
||
|
21:00 |
NZD |
Reserve Bank of New Zealand Rate Decision |
2.50% |
2.50% |
Major data of Asian session: RBNZ still expected to undo post-earthquake rate cut |
|
22:30 |
NZD |
Business NZ Performance of Manu Index (SEP 9) |
53.2 |
Manufacturing health trending weaker |
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 |
1.4500 |
1.6745 |
86.00 |
0.9050 |
1.0275 |
1.0750 |
0.9020 |
113.50 |
146.05 |
|
Resist 1 |
1.4000 |
1.6600 |
81.50 |
0.8840 |
1.0000 |
1.0800 |
0.8750 |
110.00 |
140.00 |
|
Spot |
1.3693 |
1.5788 |
76.87 |
0.8794 |
0.9873 |
1.0313 |
0.8249 |
105.26 |
121.35 |
|
Support 1 |
1.3500 |
1.5700 |
76.35 |
0.7800 |
0.9425 |
1.0200 |
0.7745 |
104.00 |
121.00 |
|
Support 2 |
1.2900 |
1.5350 |
75.50 |
0.7500 |
0.9055 |
0.9925 |
0.6850 |
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 |
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 |
12.8763 |
1.7653 |
7.3001 |
7.8042 |
1.2413 |
Spot |
6.6644 |
5.4394 |
5.6078 |
|
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 |
1.3844 |
1.5915 |
77.42 |
0.8933 |
1.0024 |
1.0430 |
0.8326 |
106.33 |
122.90 |
|
Resist 1 |
1.3769 |
1.5851 |
77.14 |
0.8863 |
0.9948 |
1.0372 |
0.8287 |
105.80 |
122.12 |
|
Pivot |
1.3663 |
1.5807 |
76.98 |
0.8811 |
0.9902 |
1.0317 |
0.8234 |
105.10 |
121.73 |
|
Support 1 |
1.3588 |
1.5743 |
76.70 |
0.8741 |
0.9826 |
1.0259 |
0.8195 |
104.57 |
120.96 |
|
Support 2 |
1.3482 |
1.5699 |
76.54 |
0.8689 |
0.9780 |
1.0204 |
0.8142 |
103.87 |
120.57 |
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 |
1.3920 |
1.5994 |
77.79 |
0.8945 |
0.9989 |
1.0493 |
0.8401 |
107.22 |
123.34 |
|
Resist. 2 |
1.3863 |
1.5942 |
77.56 |
0.8907 |
0.9960 |
1.0448 |
0.8363 |
106.73 |
122.84 |
|
Resist. 1 |
1.3807 |
1.5891 |
77.33 |
0.8869 |
0.9931 |
1.0403 |
0.8325 |
106.24 |
122.35 |
|
Spot |
1.3693 |
1.5788 |
76.87 |
0.8794 |
0.9873 |
1.0313 |
0.8249 |
105.26 |
121.35 |
|
Support 1 |
1.3579 |
1.5685 |
76.41 |
0.8719 |
0.9815 |
1.0223 |
0.8173 |
104.28 |
120.36 |
|
Support 2 |
1.3523 |
1.5634 |
76.18 |
0.8681 |
0.9786 |
1.0178 |
0.8135 |
103.79 |
119.86 |
|
Support 3 |
1.3466 |
1.5582 |
75.95 |
0.8643 |
0.9757 |
1.0133 |
0.8097 |
103.30 |
119.37 |
v
Written by: John Kicklighter, Senior Currency Strategist for DailyFX.com
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