- Dollar Weathers GDP and Bernanke Commentary, Faces Heavy Event Risk and Speculation Next Week
- Euro Rallies as Crisis Fears Abate but the ECB’s Stubborn Stance on Policy May not be Hailed Next Thursday
- British Pound Gains Little Traction Where it Matters after Upward Revision to 2Q GDP Reading
- Japanese Crosses Back Across Important Threshold Versus the US Dollar
- Australian Dollar Loaded with Event Risk Next Week with Growth Reading at the Center of it All
- Canadian Dollar Traders Brace for a Significant Downgrade in the Forthcoming Growth Reading
Dollar Weathers GDP and Bernanke Commentary, Faces Heavy Event Risk and Speculation Next Week
A third consecutive daily loss would lead the greenback to its worst performance since the long series of declines through August 2nd. However, for context, this week’s disappointing performance more closely resembles a shift to congestion while the previous period of losses was near the exhaustion point of a two-month bear trend. The two cases are hardly comparable. In fact, the greenback’s performance today is somewhat impressive considering the losses were relatively modest when we compare it to the positive performance of the equities market (the S&P 500 rallied 1.7 percent). These two are generally on opposite ends of the risk spectrum; so a negative correlation is a normal state of being. That being said, a divergence in intensity of trend undermines the speculative and fundamental inference from major themes that typically control the broader markets. The greenback’s ability to weather the risk appetite run is particularly remarkable when we take into account the influence that scheduled event risk for the day would have (and exact for many other asset classes).
For all intents and purposes, Friday’s docket held the most encouraging round of event risk for the entire week. Both the revision of the second quarter GDP reading and Fed Chairman Ben Bernanke’s opening remarks from the Jackson Hole Symposium held significant sway over the future of the economy and financial conditions – at least that was what the prevailing speculative concern suggested. For the growth update, the call for a near-stalling of the US economy or even slip back into recession had gained a significant foothold in the financial media through just the past few days. A substantial cooling of the initial ‘snap back’ period following the Great Recession was inevitable; but specific recent indicators (for employment, housing, business investment and others) had leveraged a revived pessimism. As such, the 1.6 percent annualized pace of growth would initially encourage; because the print would come out better than the official consensus had pegged. Furthermore, it seemed that the uptick in personal consumption to a three-year high would offer an irrefutable foundation for future activity levels. In reality, more recent data has already thrown the breaks on consumer spending (accounting for approximately three-quarters of the overall economy) and other former contributors to economic activity into the red. This reading does little to offset a stalling of economic activity in the second half of the year beyond supporting speculative interests for a short time. For the other major event of the day, the presence of Bernanke’s testimony roused fear that the governor could lower his growth expectations or announce what many are calling ‘Quantitative Easing 2.0.’ Ultimately, he did neither. Though, he did say growth was “too slow” and the Fed was “prepared to provide additional monetary accommodation through unconventional measures.” For those that keep up to date on Fed chatter; this isn’t anything new.
So, once again, the markets are stalled by the threat of heavy Friday event risk and then fail to react when it is released. There is a possibility that this may be the scenario next week as well. There are top tier releases scheduled throughout (ISM manufacturing, pending home sales); but NFPs comes on Friday. The real risk of volatility and trend development rests with underlying risk trends. Watch cross market correlations.
Related:Discuss the Dollar in the DailyFX Forum, John’s Analyst Picks: Starting to Build up Long USDJPY Exposure Once Again
Euro Rallies as Crisis Fears Abate but the ECB’s Stubborn Stance on Policy May not be Hailed Next Thursday
Though scheduled event risk was particularly light for the euro’s economic docket, the currency would nevertheless rally through Friday’s session. On tap for the day, the preliminary reading of German CPI for August would disappoint the few interest rate speculators still out there; and a Markit iTraxx measure of credit default risk premium for European sovereign debt maintained its most threatening monthly climb on record. Yet, in spite of these blatantly discouraging signs for currency traders, the shared currency would find its way higher. This strength can be attributed through indirect means. The dollar’s weakness leverages the euro’s appeal as the EURUSD cross is the most liquid in the market. Furthermore, the speculative optimism garnered from the US economic reading and official promise to support expansion added to its recovery. Next week, the focus will be on the ECB. Will they make reference to their bond purchasing program or attempt to draw a contrast to the Fed.
British Pound Gains Little Traction Where it Matters after Upward Revision to 2Q GDP Reading
The British pound should have had the necessary fundamental mix to rally against most of its counterparts – and especially against the weakened US dollar. Instead, GBPUSD was initially in the red through the morning and ultimately finished the day little changed. The surprise in this report comes in reference to the uptick in the nation’s 2Q GDP revision. Edging up to its best performance since 1999; this headline reading was supported by a two year high in personal consumption and 28 year high in construction. Clearly, though, doubt is engrained.
Japanese Crosses Back Across Important Threshold Versus the US Dollar
It was a long and arduous battle of wills to push USDJPY below 85. However, this move would last for only a few days as Friday would see a move back up above this closely watched level. Much of this strength can be attributed to the fact that the US dollar actually plays the role of a risky asset to the yen’s funding currency-based safe haven role. That being said, we cannot write off the effect that intervention fear plays.
Australian Dollar Loaded with Event Risk Next Week with Growth Reading at the Center of it All
The Australian dollar made a critical rally through the end of the week to offset a slow but progressive bearish turn. Having pulled itself out of a discouraging current, the Aussie currency now has a dense economic docket to look forward to next week. A broad range of top tier indicators will ultimately be overlooked as the focus turns to the second quarter GPD reading. The pace is expected to change relatively little.
Canadian Dollar Traders Brace for a Significant Downgrade in the Forthcoming Growth Reading
The Canadian dollar has steadied itself after its worst run in months. The surface stability implied in the US GDP reading and vow by Bernanke to stabilize the economy has the implicit effect of stabilizing Canada’s largest trade partner. This may ultimately matter little, however, if the Canadian economy itself falters. As it is, the 2Q annualized pace is expected to slow to a 2.5 percent clip from 6.1 percent.
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
|
Currency |
GMT |
Release |
Survey |
Previous |
Comments |
|
NZD |
22:45 |
Trade Balance (New Zealand dollars) (JUL) |
-40M |
276M |
New Zealand’s trade surplus narrowed in June as a seasonal decline in farm production and falling prices curbed exports. |
|
NZD |
22:45 |
Balance (YTD) (New Zealand dollars) (JUL) |
793.5 |
639.0 |
|
|
NZD |
22:45 |
Imports (New Zealand dollars) (JUL) |
3.70B |
3.51B |
|
|
NZD |
22:45 |
Exports (New Zealand dollars) (JUL) |
3.65B |
3.78B |
|
|
GBP |
23:01 |
Hometrack Housing Survey (MoM) (AUG) |
-0.1% |
U.K. housing at ‘turning point’, says Hometrack’s Richard Donnell. |
|
|
GBP |
23:01 |
Hometrack Housing Survey (YoY) (AUG) |
2.0% |
||
|
AUD |
1:30 |
Company Operating Profit (QoQ) (2Q) |
5.8% |
3.9% |
Likely rose for a third quarter in 2Q. |
|
AUD |
1:30 |
Inventories (2Q) |
0.4% |
0.5% |
Increased in 1Q for a third quarter. |
|
AUD |
1:00 |
HIA New Home Sales (MoM) (JUL) |
-5.1% |
Home sales fell in last two month. |
|
|
NZD |
3:00 |
NBNZ Business Confidence (AUG) |
27.9 |
Declined for second month in July. |
|
|
NZD |
3:00 |
Money Supply M3 (YoY) (JUL) |
-3.3% |
M3 fell annually in last 8 months. |
|
|
NZD |
3:00 |
NBNZ Activity Outlook (AUG) |
32.4 |
Sits at lowest level since October. |
|
|
EUR |
9:00 |
Euro-Zone Economic Confidence (AUG) |
101.6 |
101.3 |
European consumer confidence unexpectedly improved in August as economic growth accelerated to the fastest pace in four years in the second quarter. |
|
EUR |
9:00 |
Euro-Zone Business Climate Indicator (AUG) |
0.70 |
0.66 |
|
|
EUR |
9:00 |
Euro-Zone Consumer Confidence (AUG F) |
-12 |
-12 |
|
|
EUR |
9:00 |
Euro-Zone Industrial Confidence (AUG) |
-4 |
-4 |
|
|
EUR |
9:00 |
Euro-Zone Services Confidence (AUG) |
7 |
6 |
|
|
12:30 |
Current Account (BoP) (Canadian dollar) (2Q) |
-$10.6B |
-$7.8B |
C.A. gap likely widened in 2Q. |
|
|
CAD |
12:30 |
Industrial Product Price (MoM) (JUL) |
0.4% |
-0.9% |
Industrial prices likely rose in July for a third time in four months. |
|
CAD |
12:30 |
Raw Materials Price Index (MoM) (JUL) |
0.4% |
-0.3% |
|
|
USD |
12:30 |
Personal Income (JUL) |
0.3% |
0.0% |
Personal incomes showed no growth in June after steadily rising in the eight months prior. Likely increased 0.3% in July. |
|
USD |
12:30 |
Personal Spending (JUL) |
0.3% |
0.0% |
|
|
USD |
12:30 |
PCE Deflator (YoY) (JUL) |
1.5% |
1.4% |
|
|
USD |
12:30 |
PCE Core (MoM) (JUL) |
0.1% |
0.0% |
|
|
USD |
12:30 |
PCE Core (YoY) (JUL) |
1.4% |
1.4% |
|
|
USD |
14:30 |
Dallas Fed Manufacturing Activity (AUG) |
-10.0% |
-21.0% |
Likely fell for a third month in July. |
|
Currency |
GMT |
Upcoming Events & Speeches |
|
JPY |
4:30 |
BoJ’s Hirohide Yamaguchi Speaks in Tokyo |
|
USD |
17:30 |
Fed’s James Bullard Speaks in St. Louis, Missouri |
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 |
EUR/GBP |
|
Resistance 2 |
1.3815 |
1.6375 |
95.05 |
1.0600 |
1.0922 |
0.9850 |
0.7635 |
127.60 |
146.05 |
0.8725 |
|
Resistance 1 |
1.3500 |
1.5965 |
89.00 |
1.0460 |
1.0750 |
0.9335 |
0.7440 |
120.00 |
140.00 |
0.8600 |
|
Spot |
1.2733 |
1.5506 |
85.32 |
1.0292 |
1.0532 |
0.8982 |
0.7111 |
108.64 |
132.29 |
0.8212 |
|
Support 1 |
1.2500 |
1.5125 |
83.00 |
1.0130 |
0.9950 |
0.8100 |
0.6850 |
103.80 |
125.00 |
0.8065 |
|
Support 2 |
1.2150 |
1.5000 |
80.00 |
0.9960 |
0.9700 |
0.7835 |
0.6585 |
100.00 |
119.00 |
0.7780 |
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 |
|
Resistance 2 |
14.4500 |
1.8025 |
8.7915 |
7.8165 |
1.4945 |
Resistance 2 |
7.7500 |
5.7800 |
6.2750 |
|
Resistance 1 |
13.8500 |
1.6755 |
8.3675 |
7.8075 |
1.4655 |
Resistance 1 |
7.5800 |
5.5400 |
6.1150 |
|
Spot |
13.0302 |
1.5166 |
7.3038 |
7.7793 |
1.3530 |
Spot |
7.3576 |
5.8487 |
6.2499 |
|
Support 1 |
12.0500 |
1.4500 |
7.1615 |
7.7490 |
1.3440 |
Support 1 |
1.1650 |
5.3000 |
5.8000 |
|
Support 2 |
11.7200 |
1.3665 |
6.6950 |
7.7450 |
1.3000 |
Support 2 |
7.0000 |
5.1000 |
5.6000 |
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 |
EUR/GBP |
|
Resistance 2 |
1.2832 |
1.5592 |
86.20 |
1.0351 |
1.0695 |
0.9084 |
0.7200 |
110.07 |
133.88 |
0.8262 |
|
Resistance 1 |
1.2783 |
1.5549 |
85.76 |
1.0322 |
1.0613 |
0.9033 |
0.7155 |
109.36 |
133.09 |
0.8237 |
|
Pivot |
1.2729 |
1.5496 |
85.02 |
1.0271 |
1.0568 |
0.8939 |
0.7087 |
108.17 |
131.77 |
0.8208 |
|
Support 1 |
1.2680 |
1.5453 |
84.58 |
1.0242 |
1.0486 |
0.8888 |
0.7042 |
107.46 |
130.98 |
0.8182 |
|
Support 2 |
1.2626 |
1.5400 |
83.84 |
1.0191 |
1.0441 |
0.8794 |
0.6974 |
106.27 |
129.66 |
0.8153 |
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 |
EUR/GBP |
|
Resistance 3 |
1.2901 |
1.5696 |
86.41 |
1.0423 |
1.0662 |
0.9115 |
0.7221 |
110.44 |
134.52 |
0.8296 |
|
Resistance 2 |
1.2859 |
1.5648 |
86.14 |
1.0390 |
1.0630 |
0.9082 |
0.7194 |
109.99 |
133.96 |
0.8275 |
|
Resistance 1 |
1.2817 |
1.5601 |
85.87 |
1.0357 |
1.0597 |
0.9049 |
0.7166 |
109.54 |
133.41 |
0.8254 |
|
Spot |
1.2733 |
1.5506 |
85.32 |
1.0292 |
1.0532 |
0.8982 |
0.7111 |
108.64 |
132.29 |
0.8212 |
|
Support 1 |
1.2649 |
1.5411 |
84.77 |
1.0227 |
1.0467 |
0.8915 |
0.7056 |
107.74 |
131.17 |
0.8170 |
|
Support 2 |
1.2607 |
1.5364 |
84.50 |
1.0194 |
1.0434 |
0.8882 |
0.7028 |
107.29 |
130.62 |
0.8149 |
|
Support 3 |
1.2565 |
1.5316 |
84.23 |
1.0161 |
1.0402 |
0.8849 |
0.7001 |
106.84 |
130.06 |
0.8128 |
v
Written by: John Kicklighter, 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
