- Dollar Pushed Lower as Equities Rally, Both Moves Lacking Conviction
- Euro Financial Problems Deepening Despite Greek Equities Rally
- Japanese: Weighing Financial Stability against Carry Flows
- British Pound Unmoved by Painful Business Confidence Report
- Swiss Franc Extending its Tumble Despite Europe’s Troubled Outlook
- Canadian Dollar: What Should We Expect from the 2Q Trading Data?
- Gold Retreat Comes on the Weakest Level of Volume in Eight Days
Dollar Pushed Lower as Equities Rally, Both Moves Lacking Conviction
Trading conditions were generally lacking Monday. With volatility notably restrained and underlying fundamental themes lacking the conviction necessary to foster meaningful trends; the US dollar would find itself under pressure. In otherwise neutral market conditions, you would expect the world’s largest currency to meander. Yet, as we have seen over the past weeks, months and years; when the greenback is left to its own devices, it has a natural bearish bias. Constantly working against the dollar are the country’s exceptionally low rates and the consistent effort to diversify reserve capital away from a single (and volatile) asset. This puts the benchmark currency in an awkward position: if it wants to produce gains, we need an active fundamental push. And, for the dollar, that either means rate potential (which is far off on the horizon) or safe haven flows need to be in control of the capital and funding markets. Given the holding pattern we have been left to track out on further US quantitative easing, the uneasy stalemate on European financial troubles and the restraint on risk trends; there is little to put the dollar in motion.
It is interesting to draw a contrast between current market conditions to those of two weeks ago. Earlier in the month, even though we were struggling to establish a trend; volatility was exceptionally high. In those conditions, it is much easier to establish a consistent and meaningful trend as the high activity level suggests sentiment and conviction are pliable (hence the dramatic changes in direction). That said, with a drop in activity; there is less will to pick up new trends and thereby build conviction. Though it may have been unintended, this is a direct consequence of Fed Chairman Ben Bernanke’s speech at the Jackson Hole conference that the question of whether further stimulus should be pursued would be held off until next month. A definitive lean towards ‘yes’ or ‘no’ could have freed the market’s up to other important drivers; but it was the ambiguity of an extra day of discussions that will build speculation and curb any meaningful position building until the masses are certain.
In the meantime, both the Dow Jones FXCM Dollar Index (ticker = USDollar) and the S&P 500 have drifted to the boundaries of their respective ranges. The equities index edged just above the swing highs of two weeks ago; but follow through was immediately absent. The same was true of the dollar’s negative bearing. The currency marked its lowest close since August 1st; but this still falls within its broader four-month trend.
Related:Discuss the Dollar in the DailyFX Forum, John’s Video: Looking for a False EURUSD and S&P 500 Break as Volume Stagnates
Euro Financial Problems Deepening Despite Greek Equities Rally
Euro traders were receiving mixed signals Monday. The biggest European headline for the morning was news that Alpha Bank and Eurobank, two of Greece’s largest lenders, would merge to create the country’s largest bank. Is this a dramatic fix for the country’s pained banking system? The reaction from the markets would suggest that that was the case. The Greek FTSE/ASE 20 Index put in for a massive 17.8 percent rally – the biggest drive in decades. Does this materially improve the country’s (much less the region’s) financial health though? Certainly the combined 146 billion euros in assets will improve its chances of raising a planned 1.75 billion euros and prevent the individuals’ collapse; but it doesn’t halt deposit withdrawals or the market’s shut broader Greek shut out. In the meantime, deposits at the ECB jumped to 121.2 billion euros.
Japanese: Weighing Financial Stability against Carry Flows
In a relatively quick transition, former Finance Minister Yoshihiko Noda was announced as the formal successor to the recently resigned Naoto Kan as Japan’s Prime Minister. This is as smooth a transition as officials could have asked for as it suggests larger policy efforts will remain on track and progress can once again be made. Does that necessarily mean the long road to repairing credit markets and economic health will begin soon? Not necessarily. And, from a yen perspective, this transition will be hardly noticed as the focus remains on sidelined carry flows.
British Pound Unmoved by Painful Business Confidence Report
Sentiment is sliding across the board in the UK economy. The most recent update was Monday’s Lloyds business confidence survey which dropped 22 points to slip into negative territory (-3) for the first time since March of 2009. The economic outlook has been relatively dim for the UK; but sentiment can steer the markets away from the gloom. When confidence syncs with reality, the pound will struggle.
Swiss Franc Extending its Tumble Despite Europe’s Troubled Outlook
The franc’s losses are growing. The currency dropped against all its major counterparts Monday (the weakest performance was against the yen which still gained 0.9 percent); and we can’t just attribute this to risk appetite. Sentiment has not improved in a meaningful way, and neither has confidence in Europe’s health. This could reflect a natural lean for the franc should other, broader drivers find themselves sidelined.
Canadian Dollar: What Should We Expect from the 2Q Trading Data?
Crude prices pushed higher through the opening trading day of the week and risk appetite would support higher yielding investments. This combination would work in the Canadian dollar’s favor as a full-fledged member of the commodity bloc and a tag-along in the carry currency group. Yet, this push is weak. A big reading from a heavy indicator like the upcoming 2Q current account balance could leverage volatility.
Gold Retreat Comes on the Weakest Level of Volume in Eight Days
Drawing a direct contrast to Friday’s remarkable rally, gold put in for a notable retracement Monday. However, the low on the session continued a trend of higher lows began over the previous two active days. Furthermore, the drop developed on the weakest level of turnover in futures trading since the 17th. Matching performance with direction, it is self-evidence where the market’s expectations lie. We just await a true driver.
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ECONOMIC DATA
Next 24 Hours
|
GMT |
Currency |
Release |
Survey |
Previous |
Comments |
|
1:30 |
AUD |
Building Approvals MoM (JUL) |
2.0% |
-3.5% |
Moderate improvement in construction points to still robust domestic economy despite strong Aussie |
|
1:30 |
AUD |
Building Approvals YoY (JUL) |
-12.4% |
-15.5% |
|
|
6:00 |
CHF |
UBS Consumption Indicator (JUL) |
1.48 |
Has been tapering from June 2010 peak |
|
|
8:00 |
EUR |
Italian Retail Sales s.a. (MoM) (JUN) |
0.1% |
-0.1% |
Mixed expectations for retail sales not expected to have large bearing on ECB rate decisions |
|
8:00 |
EUR |
Italian Retail Sales (YoY) (JUN) |
-0.8% |
-0.6% |
|
|
8:30 |
GBP |
Net Consumer Credit (JUL) |
0.4B |
0.4B |
Moderate improvement in lending and consumer credit points to slight improvement in credit, construction areas |
|
8:30 |
GBP |
Net Lending Sec. on Dwellings (JUL) |
0.8B |
-0.1B |
|
|
8:30 |
GBP |
Mortgage Approvals (JUL) |
49.0K |
48.4K |
|
|
8:30 |
GBP |
M4 Money Supply (MoM) (JUL) |
-0.5% |
Continued shrink of money supply could result in an extended period of low rates |
|
|
8:30 |
GBP |
M4 Money Supply (YoY) (JUL) |
-0.7% |
||
|
8:30 |
GBP |
M4 Ex OFCs 3M Annualised (JUL) |
0.8% |
||
|
9:00 |
EUR |
Euro-Zone Business Climate Indicator (AUG) |
0.10 |
0.45 |
Business confidence surveys and gauges mostly point weaker, suggests continuation of peripheral, global recovery troubles |
|
9:00 |
EUR |
Euro-Zone Consumer Confidence (AUG F) |
-16.6 |
-16.6 |
|
|
9:00 |
EUR |
Euro-Zone Economic Confidence (AUG) |
100.2 |
103.2 |
|
|
9:00 |
EUR |
Euro-Zone Industrial Confidence (AUG) |
-2 |
1.1 |
|
|
9:00 |
EUR |
Euro-Zone Services Confidence (AUG) |
6 |
7.9 |
|
|
9:00 |
EUR |
Italian Business Confidence (AUG) |
97.1 |
98.5 |
|
|
12:30 |
CAD |
Current Account (BoP) (Canadian dollar) (Q2) |
-$13.7B |
-$8.9B |
May be due to slower US demand |
|
12:30 |
CAD |
Industrial Product Price (MoM) (JUL) |
-0.3% |
-0.3% |
Price index falling could be due to stronger CAD, relieves rates pressure |
|
12:30 |
CAD |
Raw Materials Price Index (MoM) (JUL) |
-0.1% |
-2.2% |
|
|
13:00 |
USD |
S&P/CS 20 City (MoM) (JUN) |
0.0% |
-0.05% |
Housing markets still seen in decline; construction has led economy out of recession in past instances |
|
13:00 |
USD |
S&P/Case-Shiller Composite-20 (YoY) (JUN) |
-4.60% |
-4.51% |
|
|
13:00 |
USD |
S&P/Case-Shiller Home Price Index (JUN) |
139.87 |
||
|
13:00 |
USD |
S&P/Case-Shiller US Home Price Index (YoY) (JUN) |
-5.06% |
||
|
13:00 |
USD |
S&P/Case-Shiller US Home Price Index (JUN) |
125.41 |
||
|
14:00 |
USD |
Consumer Confidence (AUG) |
52 |
59.5 |
Major data of the day: a continued decline in confidence suggests consumers will be less likely to spend, hindering recovery |
|
23:01 |
GBP |
GfK Consumer Confidence Survey (AUG) |
-33 |
-30 |
Survey reaching post-recession lows |
|
23:15 |
JPY |
Nomura/JMMA Manufacturing PMI (AUG) |
52.1 |
PMI could fall as rebuilding slows |
|
|
23:50 |
JPY |
Loans & Discounts Corp (YoY) (JUL) |
-1.8% |
Loans still weak as credit still difficult |
|
|
23:50 |
JPY |
Industrial Production (MoM) (JUL P) |
1.4% |
3.8% |
Slowing of production could mean lower exports orders from China, US, EU |
|
23:50 |
JPY |
Industrial Production (YoY) (JUL P) |
-1.9% |
-1.7% |
|
|
JPY |
Small Business Confidence (AUG) |
47.1 |
Confidence showing signs of decline |
|
GMT |
Currency |
Upcoming Events & Speeches |
|
16:15 |
USD |
Fed’s Kocherlakota Speaks on Economy in Bismarck |
|
18:00 |
USD |
Fed Releases Minutes from Aug. 9 FOMC Meeting |
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 |
0.8275 |
1.0275 |
1.0800 |
0.9020 |
118.00 |
146.05 |
|
Resist 1 |
1.5000 |
1.6600 |
81.50 |
0.8000 |
1.0000 |
1.0645 |
0.8750 |
113.50 |
140.00 |
|
Spot |
1.4505 |
1.6406 |
76.90 |
0.8153 |
0.9784 |
1.0636 |
0.8445 |
111.54 |
126.16 |
|
Support 1 |
1.4000 |
1.5935 |
76.35 |
0.7000 |
0.9425 |
1.0400 |
0.7745 |
109.00 |
124.00 |
|
Support 2 |
1.3700 |
1.5750 |
75.50 |
0.6800 |
0.9055 |
0.9925 |
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 |
1.8000 |
7.3500 |
7.8075 |
1.3250 |
Resist 1 |
6.5175 |
5.3100 |
5.7075 |
|
Spot |
12.4335 |
1.7330 |
7.0554 |
7.7934 |
1.2055 |
Spot |
6.3011 |
5.1364 |
5.3514 |
|
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 |
1.4590 |
1.6525 |
77.27 |
0.8345 |
0.9886 |
1.0697 |
0.8524 |
112.73 |
127.37 |
|
Resist 1 |
1.4547 |
1.6466 |
77.09 |
0.8249 |
0.9835 |
1.0666 |
0.8484 |
112.14 |
126.77 |
|
Pivot |
1.4507 |
1.6395 |
76.83 |
0.8145 |
0.9788 |
1.0614 |
0.8430 |
111.34 |
125.98 |
|
Support 1 |
1.4464 |
1.6336 |
76.65 |
0.8049 |
0.9737 |
1.0583 |
0.8390 |
110.75 |
125.38 |
|
Support 2 |
1.4424 |
1.6265 |
76.39 |
0.7945 |
0.9690 |
1.0531 |
0.8336 |
109.95 |
124.59 |
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 |
1.4701 |
1.6585 |
77.78 |
0.8281 |
0.9891 |
1.0800 |
0.8584 |
113.29 |
127.89 |
|
Resist. 2 |
1.4652 |
1.6540 |
77.56 |
0.8249 |
0.9864 |
1.0759 |
0.8549 |
112.86 |
127.46 |
|
Resist. 1 |
1.4603 |
1.6496 |
77.34 |
0.8217 |
0.9837 |
1.0718 |
0.8515 |
112.42 |
127.02 |
|
Spot |
1.4505 |
1.6406 |
76.90 |
0.8153 |
0.9784 |
1.0636 |
0.8445 |
111.54 |
126.16 |
|
Support 1 |
1.4407 |
1.6316 |
76.46 |
0.8089 |
0.9731 |
1.0554 |
0.8375 |
110.66 |
125.30 |
|
Support 2 |
1.4358 |
1.6272 |
76.24 |
0.8057 |
0.9704 |
1.0513 |
0.8341 |
110.22 |
124.87 |
|
Support 3 |
1.4309 |
1.6227 |
76.02 |
0.8025 |
0.9677 |
1.0472 |
0.8306 |
109.79 |
124.44 |
v
Written by: John Kicklighter, Senior Currency Strategist for DailyFX.com
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