- Dollar and Risk Appetite Trends Left Unfazed by Consumer Sentiment Data, Durable Goods Ahead
- British Pound Rallies after Strong GDP Reading Curbs Fear of a Renewed Recession, Stimulus Injection
- Euro Fails to Mount a Defense on its Own Fundamentals against a Strong Dollar and Pound
- New Zealand Dollar could Show Volatility in the Face of an RBNZ Hold
- Australian Dollar Tumbles after an otherwise Modest Disappointment from CPI
- Japanese Yen Benefits Speculative Wave even as another Stimulus Program Nears Approval
Dollar and Risk Appetite Trends Left Unfazed by Consumer Sentiment Data, Durable Goods Ahead
In an otherwise quiet session for capital markets, the dollar was able to post a significant gain Tuesday. This progress is all the more remarkable when we consider that the usual suspects for trend encouragement (stimulus speculation and risk appetite) were not in play. Looking at investor optimism, we find that the S&P 500 generated another narrow range through the session and would put in for a recovery from early morning losses. The same level of restraint was seen for other risk-sensitive assets including crude, the iShares Investment Grade Corporate Bond Fund and gold. The deviation in performance between gold and the greenback is particularly interesting considering the metal has recently found its place in the financial world as an alternative to the US dollar and the all securities that will be devalued by the expansion of stimulus programs. For developing a true bull trend, the burden likely still falls to EURUSD to hold below 1.38 and overtake last week’s swing lows at 1.37. That said, the bullish progress made by USDJPY and USDCHF should not be overlooked. Where the more fundamentally challenged (EURUSD and GBPUSD) and yield intensive (AUDUSD and NZDUSD) pairs have seen corrections and congestion; the yen and franc based majors have remained incredibly consistent in their respective declines. Should these pairs reverse course, it could point to a critical shift for the dollar.
The absence of a meaningful risk appetite tendency Tuesday would prove beneficial for data that could be easily construed as supportive of stimulus – and thereby detrimental to the dollar. Top event risk was the October consumer sentiment survey from the Conference Board. The 50.2 reading was modestly better than what was forecasted; but being so close to a balance between optimists and pessimists does not bode well for this critical sector’s contribution to economic activity. Looking into the breakdown of the survey, we see that both expectations and current conditions figures advanced from a seven-month low. More influential at this stage in the game though is the deterioration in Americans’ confidence in employment and income trends. The percentage of participants reporting jobs as plentiful dropped to its lowest level this year while income expectations fell to levels last seen since April of 2009. Housing data would also give motive for pause. While home prices reportedly rose 0.4 percent in the lagging Federal House Finance Agency’s August report; the Case-Shiller price index slowed to a 1.7 percent annual clip from 3.18 percent in the previous reading. We will have to watch the health of the housing and lending markets closely as foreclosures revive the risk of massive mortgage-backed securities failures. This has the potential to be a new crisis for the US and globe.
For the coming 24 hours, the docket is once again full; but should we expect a different reaction from the dollar to this round of data than what we saw through Tuesday? That depends on whether the data taps into deeper uncertainties about the future of the United States’ economic and financial health. Ahead of Friday’s GDP reading, the durable goods report likely carries the most weight. Manufacturing has shoulder more than its fair share of the recovery burden; so a stumble in this figure’s pace can wear down confidence quickly. New home sales will hold the same level of influence of Monday’s existing sales report; but here the bigger picture of the housing market is more important. Look for a lean in risk trends prior to the release to garner of sense of whether this data will be market-moving.
Related: Discuss the Dollar in the DailyFX Forum, John’s Analyst Picks: Great trade Potential in Aussie Dollar and Pound Crosses
British Pound Rallies after Strong GDP Reading Curbs Fear of a Renewed Recession, Stimulus Injection
The advanced reading of third quarter GDP for the United Kingdom certainly proved market-moving for the pound. Set against the backdrop of last week’s announcement of record government spending cuts (81 billion sterling) and a growing conviction for an expanded stimulus effort from the Bank of England next week, traders were watching this data particularly close. This focus would ultimately prove favorable as the 0.8 percent expansion of Europe’s second largest economy through September was double what the consensus was calling for and the annualized reading accelerated to its fastest pace in three years (at 2.8 percent). Does this mean that the UK will weather the economic fallout of fiscal restraint and the central bank find room to maintain its policy? Not necessarily. Yet, this does provide hope; and Standard & Poor’s decision to raise the nation’s credit outlook from ‘negative’ to ‘stable’ certainly helps. Nonetheless, expect speculation to heat up as the BoE decision approaches.
Euro Fails to Mount a Defense on its Own Fundamentals against a Strong Dollar and Pound
With both the US dollar and British pound climbing in an otherwise quiet session, it should come as little surprise that the euro was weakening. The liquidity on these two particular pairs carries a lot of weight for the crosses. For a fundamental perspective, the GfK’s consumer confidence survey for November held at its 30-month high. Wednesday, the focus is on inflation in the German CPI and Eurozone M3 statistics.
New Zealand Dollar could Show Volatility in the Face of an RBNZ Hold
In the afternoon hours of the upcoming US session, the RBNZ will announce its policy decision. Both economists and market participants are predicting that the central bank will keep the benchmark lending rate unchanged at 3.00 percent; but this could still be a market-moving event. Comparisons to the Aussie dollar are inevitable; and any dovish commentary from Governor Bollard can prove a significant burden to the kiwi.
Australian Dollar Tumbles after an otherwise Modest Disappointment from CPI
Interest rates are the key to the Aussie dollar’s success. Doubt of this assessment should be directed to the currency’s reaction to the third quarter CPI data. Headline inflation cooled more quickly than expect to a 2.8 percent clip (from above target at 3.1 percent previously) while the core figure slipped to 2.5 percent. If the RBA is more cautious about their stance, this relieves significant pressure for forced hikes.
Japanese Yen Benefits Speculative Wave even as another Stimulus Program Nears Approval
Japanese Prime Minister Naoto Kan’s cabinet reportedly approved the proposed next 5.1 trillion yen stimulus plan. While this program still needs to go through congress, it is highly likely that this program will pass. In comparison to the US or UK, Japan is proving far more liberal with its stimulus and fiscal support. And, yet the yen continues to appreciate. This is a speculative trend; and will therefore not last for very long.
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ECONOMIC DATA
Next 24 Hours
|
Currency |
GMT |
Release |
Survey |
Previous |
Comments |
|
AUD |
0:30 |
Consumer Prices Index (QoQ) (3Q) |
0.8% |
0.6% |
Australian consumer prices probably rose at a slower pace in 3Q than the quarter prior. The report may help sway policy makers, who may resume rate hikes at the next meeting. |
|
AUD |
0:30 |
Consumer Prices Index (YoY) (3Q) |
2.9% |
3.1% |
|
|
AUD |
0:30 |
CPI RBA Trimmed Mean (QoQ) (3Q) |
0.7% |
0.5% |
|
|
AUD |
0:30 |
CPI RBA Trimmed Mean (YoY) (3Q) |
2.6% |
2.7% |
|
|
AUD |
0:30 |
CPI RBA Weighted Median (QoQ) (3Q) |
0.7% |
0.5% |
|
|
AUD |
0:30 |
CPI RBA Weighted Median (YoY) (3Q) |
2.6% |
2.7% |
|
|
JPY |
1:00 |
Small Business Confidence (OCT) |
47.3 |
Currently at lowest level since May. |
|
|
NZD |
2:00 |
NBNZ Activity Outlook (OCT) |
Only 14% of firms expect economic improvement over the next year. |
||
|
NZD |
2:00 |
NBNZ Business Confidence (OCT) |
|||
|
EUR |
6:45 |
French Consumer Spending (MoM) (SEP) |
0.4% |
-1.6% |
Spending likely rose in September for the second time in 3 months. |
|
EUR |
6:45 |
French Consumer Spending (YoY) (SEP) |
-0.3% |
1.2% |
|
|
EUR |
7:30 |
Italian Business Confidence (OCT) |
98.5 |
98.4 |
Declined for first time in 18 months. |
|
EUR |
8:00 |
Euro-Zone M3 s.a. (3M) (SEP) |
0.9% |
0.5% |
Euro-Zone M3 money supply rose annually in the last three months. |
|
EUR |
8:00 |
Euro-Zone M3 s.a. (YoY) (SEP) |
1.3% |
1.1% |
|
|
USD |
11:00 |
MBA Mortgage Applications (OCT 22) |
-10.5% |
Declined in 6 of past 7 weeks. |
|
|
USD |
12:30 |
Durable Goods Orders (SEP) |
2.0% |
-1.5% |
Durable goods orders fell in three of the past four months. |
|
USD |
12:30 |
Durables Ex Transportation (SEP) |
0.5% |
1.7% |
|
|
USD |
12:30 |
Cap Goods Orders Nondef Excluding Air (SEP) |
0.8% |
5.1% |
Cap goods orders increased in August for a third time in 4 months. |
|
USD |
12:30 |
Cap Goods Ship Nondef Excluding Air (SEP) |
1.7% |
||
|
13:00 |
Teranet/National Bank HPI (MoM) (AUG) |
0.5% |
Home prices increased annually in July for a tenth consecutive month. |
||
|
CAD |
13:00 |
Teranet/National Bank HPI (YoY) (AUG) |
11.0% |
12.4% |
|
|
USD |
14:00 |
New Home Sales (MoM) (SEP) |
4.2% |
0.0% |
September home sales likely rose for the first time in three months. |
|
USD |
14:00 |
New Home Sales (SEP) |
300K |
288K |
|
|
USD |
14:30 |
DOE U.S. Crude Oil Inventories (OCT 22) |
1250K |
667K |
Crude inputs averaged 14.0M barrels per day last week, 47K per day higher than the week prior. |
|
USD |
14:30 |
DOE U.S. Gasoline Inventories (OCT 22) |
750K |
1155K |
|
|
USD |
14:30 |
DOE U.S. Distillate Inventory (OCT 22) |
-1500K |
-2155K |
|
|
NZD |
20:00 |
RBNZ Rate Decision |
3.00% |
3.00% |
Market implies no chance of hike. |
|
Currency |
GMT |
Upcoming Events & Speeches |
|
JPY |
0:00 |
BOJ Deputy Governor Kiyohiko Nishimura To Speak in Tokyo |
|
USD |
20:00 |
Fed’s William Dudley Speaks on The National and Regional Economy |
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 |
1.6375 |
89.00 |
1.0460 |
1.0922 |
1.0100 |
0.8230 |
127.60 |
146.05 |
|
Resist 1 |
1.4000 |
1.6000 |
86.00 |
0.9950 |
1.0750 |
1.0000 |
0.7650 |
120.00 |
140.00 |
|
Spot |
1.3846 |
1.5839 |
81.51 |
0.9859 |
1.0241 |
0.9841 |
0.7486 |
112.86 |
129.10 |
|
Support 1 |
1.3685 |
1.5500 |
80.00 |
0.9500 |
0.9950 |
0.9100 |
0.6850 |
103.80 |
125.00 |
|
Support 2 |
1.3500 |
1.5300 |
75.00 |
0.9000 |
0.9700 |
0.8100 |
0.6585 |
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 |
14.4500 |
1.6755 |
8.7915 |
7.8165 |
1.4945 |
Resist 2 |
7.7500 |
5.7800 |
6.2750 |
|
Resist 1 |
13.8500 |
1.4865 |
8.3675 |
7.8075 |
1.4655 |
Resist 1 |
7.5800 |
5.5400 |
6.1150 |
|
Spot |
12.4190 |
1.4282 |
6.9468 |
7.7593 |
1.2978 |
Spot |
6.7358 |
5.3871 |
5.8787 |
|
Support 1 |
12.0500 |
1.4070 |
6.6950 |
7.7490 |
1.2900 |
Support 1 |
6.4500 |
5.3000 |
5.7030 |
|
Support 2 |
11.7200 |
1.3665 |
6.4300 |
7.7450 |
1.2500 |
Support 2 |
6.1250 |
5.1000 |
5.5200 |
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 |
1.4041 |
1.6015 |
82.30 |
0.9994 |
1.0315 |
0.9973 |
0.7571 |
113.71 |
130.69 |
|
Resist 1 |
1.3943 |
1.5927 |
81.91 |
0.9926 |
1.0278 |
0.9907 |
0.7529 |
113.29 |
129.90 |
|
Pivot |
1.3885 |
1.5809 |
81.26 |
0.9815 |
1.0230 |
0.9861 |
0.7500 |
112.85 |
128.36 |
|
Support 1 |
1.3787 |
1.5721 |
80.87 |
0.9747 |
1.0193 |
0.9795 |
0.7458 |
112.43 |
127.57 |
|
Support 2 |
1.3729 |
1.5603 |
80.22 |
0.9636 |
1.0145 |
0.9749 |
0.7429 |
111.99 |
126.03 |
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 |
1.4042 |
1.6028 |
82.51 |
0.9991 |
1.0367 |
0.9996 |
0.7603 |
114.50 |
131.00 |
|
Resist. 2 |
1.3993 |
1.5980 |
82.26 |
0.9958 |
1.0335 |
0.9957 |
0.7574 |
114.09 |
130.52 |
|
Resist. 1 |
1.3944 |
1.5933 |
82.01 |
0.9925 |
1.0304 |
0.9918 |
0.7545 |
113.68 |
130.05 |
|
Spot |
1.3846 |
1.5839 |
81.51 |
0.9859 |
1.0241 |
0.9841 |
0.7486 |
112.86 |
129.10 |
|
Support 1 |
1.3748 |
1.5745 |
81.01 |
0.9793 |
1.0178 |
0.9764 |
0.7427 |
112.04 |
128.15 |
|
Support 2 |
1.3699 |
1.5698 |
80.76 |
0.9760 |
1.0147 |
0.9725 |
0.7398 |
111.63 |
127.68 |
|
Support 3 |
1.3650 |
1.5650 |
80.51 |
0.9727 |
1.0115 |
0.9686 |
0.7369 |
111.22 |
127.20 |
v
Written by: John Kicklighter, Currency Strategist for DailyFX.com
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