- Dollar Suffers Mixed Signals on Data and Budget Debate
- British Pound Rallies after Mediocre GDP – Growth in Austerity
- Euro Ignores ECB Noyer’s Hawkish Musings, Poor Bond Auctions
- Australian Dollar Surges to Post-Float Highs on Strong CPI Figures
- New Zealand Dollar Looks Exposed as the RBNZ Decision Approaches
- Swiss Franc Seems to Have Dollar Rally Locked Regardless of Euro
- Gold Crawls on to Fresh Record Highs, US Crisis Clock Ticking
Dollar Suffers Mixed Signals on Data and Budget Debate
Though there was a significant drop in risk appetite through capital markets, a strong showing in consumer confidence and a remarkable rally from the US three-month Treasury bill; the greenback put in for a pained performance through Tuesday’s close. In fact, the Dow Jones FXCM Dollar Index (ticker = USDollar) marked its lowest close on records going back to 1999 and hit an intraday low through the new trading day’s Asian session for good measure. Why the disconnect? We have long ago left behind the era where scheduled event risk would generate an immediate and direct reaction from the greenback. However, there are still a few disciples that believe the currency maintains its position as a favored safe haven; and higher market rates would have leveraged a rally as recently as a month ago. The tumble to new lows today is a reflection of the prominent risks that the dollar and its economy faces as the threat of a downgrade grows.
Keeping tabs on the budget standoff, there was no official statement from either US President Obama or House Speaker Boehner since Monday evening’s addresses that levied the blame against their respective counterparts. On the other hand, we did learn that the House of Representatives have postponed the vote on Boehner’s budget after non-partisan experts said it would not lead to the savings that were claimed. Regardless of whether this is the most effective plan or not, pushing back any viable solution for yet another day of debate simply erodes the market’s confidence. In the meantime, Obama’s Chief of Staff Bill Daley reiterated the White House’s belief that Boehner’s bill would not pass the pass the Senate and the Chamber of Commerce’s endorsement of the piece of legislation was “unfortunate”. In response to rumors that the president could evoke the 14th amendment to push through a hike to the budget ceiling, Daley said it would not be a “realistic answer”. Indeed, rating agencies seem to be caught in the gravity of a downgrade should a long-term deficit solution not be adopted.
The threat of even a one-step downgrade to the United States’ top credit rating will completely distract the market until it is clear (or reasonably clear) that the benchmark Treasury is no longer in jeopardy – or until after the volatility dissipates following the market-changing cut. In the meantime, we should take note that the highly-liquid three-month T-Bill enjoyed its biggest single day jump since June 5th 2009 and the equivalent Libor rate is slowly starting to turn higher. One of the most prominent weights on the greenback’s shoulders is its exceptionally low market rate (honing in on the very foundations of any market interest in risk/reward). However, this bump in yield is a reflection of sliding demand or short-term Treasuries; and the return falls far short of compensating for the quickly rising risk. On the data front, the US consumer reported an unexpected improvement in confidence according to the Conference Board’s sentiment survey; but jobs, wages and planned major purchases were all struggling. In the upcoming session, we should watch for the Durable Goods release; but keep expectations for volatility tempered.
Related:Discuss the Dollar in the DailyFX Forum, John’s Video: Short-Term Trade Setups are Necessary Given Market Conditions
British Pound Rallies after Mediocre GDP – Growth in Austerity
Typically, when a data release prints in line with expectations; the market has already priced in the outcome and essentially moves on to the next potential catalyst. Yet, in the United Kingdom’s 2Q GDP release, the cumulative expectations for the indicator were not fully accounted for in the consensus forecast. Investor and consumer confidence has deflated for months as the signs of the government’s austerity measures manifested in themselves in employment, wage and business activity data. As such, when the ONS reported 0.2 percent growth through the quarter a slightly-off 0.7 percent clip of growth over the previous year (the slowest pace since 1Q 2010); it was read as a positive outcome.
Euro Ignores ECB Noyer’s Hawkish Musings, Poor Bond Auctions
Something for bulls to chew on Tuesday, ECB member Christian Noyer remarked in an interview that the central bank is still in a state of “strong vigilance” – the language that many rate watchers consider a sign that a hike is due at the next meeting. On the other hand, market watchers observed strained bond auctions by both Spain and Italy (the largest at-risk EU members). Regardless, this market is too numb to react.
Australian Dollar Surges to Post-Float Highs on Strong CPI Figures
The interest rate outlook for the Australian dollar has taken a distinctly dovish turn recently thanks to the trouble facing the economy’s housing market and trade channels with China. With the market pricing in as much as 55 bps worth of hikes over a 12 month period last week; the two-and-a-half year high 3.6 percent read in headline 1Q CPI gives strong reprieve to a currency holding the highest benchmark of its peers.
New Zealand Dollar Looks Exposed as the RBNZ Decision Approaches
Moving forward, traders will be looking to see if the RBNZ rate decision can deliver the same level of leverage to the kiwi dollar that the Australian CPI figures offered the Aussie currency. That is unlikely. The kiwi is at record highs against the US dollar and is showing extraordinary strength against most of its counterparts. Steady performance is the most likely bullish outcome; but the greatest risk is dovish Bollard remarks.
Swiss Franc Seems to Have Dollar Rally Locked Regardless of Euro
Though it isn’t a solid bull trend, EURCHF has restrained itself from reviving its long-term dive. In fact, the Swiss franc gave back considerable ground against the British pound, Japanese yen and Australian dollar over the past 24 hours. Then why is USDCHF dredging new lows? In a sign that the market is seeking a genuine alternative to the troubled dollar, demand for the yen and franc will remain robust.
Gold Crawls on to Fresh Record Highs, US Crisis Clock Ticking
Another day, another record high. Gold posted a new record high close through the end of Tuesday’s trading session. Yet, what if we look at the metal’s value in euro, sterling or Australian dollar terms? When we price the commodity in these alternative currencies; we are near highs but well off historical peaks. Once again, we are seeing the broad distaste for the US dollar and gold’s strong appeal as an alternative.
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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 |
|
1:00 |
NZD |
NBNZ Activity Outlook (JUL) |
38.7 |
Surveys have moderately increased as rebuilding drives economy |
|
|
1:00 |
NZD |
NBNZ Business Confidence (JUL) |
46.5 |
||
|
1:30 |
AUD |
CPI (QoQ) (Q2) |
0.7% |
1.6% |
Most important data of Asian session – the RBA has said that Q2 inflation data will be the most important when making decisions on future rate decisions for the second half of the year |
|
1:30 |
AUD |
CPI (YoY)(Q2) |
3.4% |
3.3% |
|
|
1:30 |
AUD |
CPI RBA Trimmed Mean (QoQ) (Q2) |
0.7% |
0.9% |
|
|
1:30 |
AUD |
CPI RBA Trimmed Mean (YoY) (Q2) |
2.5% |
2.3% |
|
|
1:30 |
AUD |
CPI RBA Weighted Median (QoQ) (Q2) |
0.7% |
0.8% |
|
|
1:30 |
AUD |
CPI RBA Weighted Median (YoY) (Q2) |
2.5% |
2.2% |
|
|
2:00 |
CNY |
Industrial Profits YTD (YoY) (JUN) |
27.9% |
Though slowing, profits may increase |
|
|
6:00 |
EUR |
German Import Price Index (YoY) (JUN) |
7.0% |
8.1% |
Fall in import prices may reduce inflation pressures on imported German goods |
|
6:00 |
EUR |
German Import Price Index (MoM) (JUN) |
-0.2% |
-0.6% |
|
|
8:00 |
EUR |
Euro-Zone M3 s.a. (3M) (JUN) |
2.3% |
2.2% |
Money supply expected to relatively constant on mild tightening |
|
8:00 |
EUR |
Euro-Zone M3 s.a. (YoY) (JUN) |
2.3% |
2.4% |
|
|
8:00 |
EUR |
Italian Business Confidence (JUL) |
99.7 |
100.5 |
Debt problems expected to hurt sentiment |
|
9:30 |
CHF |
KOF Swiss Leading Indicator (JUL) |
2.11 |
2.23 |
Continued weakness seen as bad |
|
10:00 |
GBP |
CBI Business Optimism (JUL) |
10 |
9 |
Business optimism expected to pick up as the UK gains some “haven” status against EU, US crisis |
|
10:00 |
GBP |
CBI Trends Total Orders (JUL) |
-3 |
1 |
|
|
10:00 |
GBP |
CBI Trends Selling Prices (JUL) |
27 |
27 |
|
|
11:00 |
USD |
MBA Mortgage Applications (JUL 22) |
15.5% |
Could show health of real estate market |
|
|
12:30 |
USD |
Durable Goods Orders (JUN) |
0.3% |
2.1% |
Major data of Americas session – Expected weaker from previous data may show continued problems in US industries and manufacturing from the start of summer |
|
12:30 |
USD |
Durables Ex Transportation (JUN) |
0.5% |
0.7% |
|
|
12:30 |
USD |
Cap Goods Orders Nondef Ex Air (JUN) |
1.0% |
1.6% |
|
|
12:30 |
USD |
Cap Goods Ship Nondef Ex Air (JUN) |
1.4% |
||
|
13:00 |
Teranet/National Bank HP Index (MAY) |
140.47 |
Canadian housing survey shows expected slight weakening of house prices, real estate health |
||
|
13:00 |
CAD |
Teranet/National Bank HPI (MoM%) (MAY) |
0.9% |
1.1% |
|
|
13:00 |
CAD |
Teranet/National Bank HPI (YoY%) (MAY) |
4.1% |
4.4% |
|
|
14:30 |
USD |
DOE U.S. Crude Oil Inventories (JUL 22) |
-2000K |
-3727K |
Crude oil and gasoline inventories expected to fall slightly, pointing to higher demand possibly due to mild recovery |
|
14:30 |
USD |
DOE Cushing OK Crude Inventory (JUL 22) |
-977K |
||
|
14:30 |
USD |
DOE U.S. Distillate Inventory (JUL 22) |
1625K |
3432K |
|
|
14:30 |
USD |
DOE U.S. Gasoline Inventories (JUL 22) |
400K |
757K |
|
|
14:30 |
USD |
DOE U.S. Refinery Utilization (JUL 22) |
-0.3% |
2.3% |
|
|
16:00 |
EUR |
French Total Jobseekers Change (JUN) |
17.7 |
French labor market continues to weaken |
|
|
16:00 |
EUR |
French Total Jobseekers (JUN) |
2686.8 |
||
|
21:00 |
NZD |
Reserve Bank of New Zealand Rate Decision |
2.5% |
2.5% |
Though widely expected to hold at this meeting, many traders are pricing in a 50 bps rise in the next 12 months |
|
23:50 |
JPY |
Retail Trade (YoY) (JUN) |
-0.5% |
-1.3% |
Japanese trade expected to fall not as sharply, may reveal continued weakness in economy |
|
23:50 |
JPY |
Retail Trade s.a. (MoM) (JUN) |
1.5% |
2.4% |
|
|
23:50 |
JPY |
Large Retailers’ Sales (JUN) |
-0.4% |
-2.5% |
|
|
EUR |
German CPI (YoY) (JUL P) |
2.3% |
2.3% |
German inflation expected relatively stable in the long term, not likely to prompt major ECB decisions |
|
|
EUR |
German CPI – EU Harmonised (MoM) (JUL P) |
0.3% |
0.0% |
||
|
EUR |
German CPI (MoM) (JUL P) |
0.3% |
0.1% |
||
|
EUR |
German CPI – EU Harmonised (YoY) (JUL P) |
2.4% |
2.4% |
||
|
CNY |
Leading Index (JUN) |
101.98 |
Could fall as China continues tightening |
|
GMT |
Currency |
Upcoming Events & Speeches |
|
18:00 |
USD |
Fed’s Beige Book |
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 |
1.4518 |
1.6422 |
77.89 |
0.8011 |
0.9431 |
1.0958 |
0.8717 |
113.08 |
127.91 |
|
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 |
11.5985 |
1.6977 |
6.6671 |
7.7910 |
1.2030 |
Spot |
6.2410 |
5.1337 |
5.3448 |
|
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 |
1.4635 |
1.6535 |
79.01 |
0.8098 |
0.9506 |
1.1064 |
0.8821 |
113.99 |
129.05 |
|
Resist 1 |
1.4577 |
1.6479 |
78.45 |
0.8055 |
0.9468 |
1.1011 |
0.8769 |
113.54 |
128.48 |
|
Pivot |
1.4467 |
1.6372 |
78.14 |
0.8026 |
0.9438 |
1.0916 |
0.8691 |
112.90 |
127.77 |
|
Support 1 |
1.4409 |
1.6316 |
77.58 |
0.7983 |
0.9400 |
1.0863 |
0.8639 |
112.45 |
127.20 |
|
Support 2 |
1.4299 |
1.6209 |
77.27 |
0.7954 |
0.9370 |
1.0768 |
0.8561 |
111.81 |
126.48 |
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 |
1.4699 |
1.6578 |
78.74 |
0.8112 |
0.9521 |
1.1094 |
0.8832 |
114.68 |
129.42 |
|
Resist. 2 |
1.4654 |
1.6539 |
78.53 |
0.8087 |
0.9499 |
1.1060 |
0.8803 |
114.28 |
129.04 |
|
Resist. 1 |
1.4608 |
1.6500 |
78.31 |
0.8062 |
0.9476 |
1.1026 |
0.8774 |
113.88 |
128.66 |
|
Spot |
1.4518 |
1.6422 |
77.89 |
0.8011 |
0.9431 |
1.0958 |
0.8717 |
113.08 |
127.91 |
|
Support 1 |
1.4428 |
1.6344 |
77.47 |
0.7960 |
0.9386 |
1.0890 |
0.8660 |
112.28 |
127.16 |
|
Support 2 |
1.4382 |
1.6305 |
77.25 |
0.7935 |
0.9363 |
1.0856 |
0.8631 |
111.88 |
126.78 |
|
Support 3 |
1.4337 |
1.6266 |
77.04 |
0.7910 |
0.9341 |
1.0822 |
0.8602 |
111.48 |
126.40 |
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.
