- Dollar Suffers Another Critical Breakdown as EURUSD Rallies above 1.35
- Euro Uncertainty in Coming Financial Wave Masked by Poor Dollar, Pound Performance
- British Pound Dives on Pro-Stimulus Recommendations from BoE’s Posen
- Japanese Yen Slips as Risk Appetite Slowly Advances, Tankan Spending Plans Stumble
- Australian Dollar Gains on Yield, Financial Stability and Today a Building Growth Outlook
- New Zealand Dollar sees Trade and Money Supply Contract
Dollar Suffers Another Critical Breakdown as EURUSD Rallies above 1.35
Another speculative barrier to the dollar’s consistent bleeding has been removed. With yet another aggressive selling effort by the market at large, EURUSD has overtaken the closely monitored 1.35 level. From a technical perspective this figure marked the midpoint of the greenback’s remarkable rally between November and June. Yet, the influence of this shift is more psychological in nature. It represents one less opportunity for holdout dollar bulls to fight prevailing capital flows. On the other hand, the break of a technical level and capitulation of another portion of a dwindling bullish sect does not immediately guarantee a renewed bear trend for the greenback. Momentum is a unique factor in this equation that requires fundamental encouragement. That being the case, we look at the lack of progress made by the S&P 500, corporate bonds and speculative commodities today; and we can see the divergence in the markets that could quickly curb the dollar’s run. If we don’t see a meaningful acceleration in investor optimism to further lure capital out of safe havens like the dollar, the dollar’s tumble could quickly stall.
Currently, risk appetite isn’t the primary driver for world’s reserve. It is a balance between the potential harmful effects of stimulus expansion and the bearings for investor sentiment. Considering risk trends were little moved through the session, the dollar was open to the ever-evolving topic of devaluation through monetary manipulation and global diversification away from the benchmark. An effort to move away from the dollar as a portfolio and central bank reserves anchor has been a slow build effort for years now. With the financial crisis of 2007 and 2008, investors and policy officials recognized the troubles that can be associated to too closely linking a nation’s economic and financial performance to one region. However, this general trend (like almost any other fundamental current) can be overlooked as long as something more pressing is distracting the masses. At the moment, that distraction happens to throw a spotlight on this larger trend. The market is preoccupied with speculating on the timeframe for an expansion of stimulus. In fact, it seems that the market has made a decision on the likelihood of such a significant step actually taking place or not – which could be a meaningful driver in the dollar’s favor should the Fed not pursue the next expansionary step. That being said, evidence to that effect would be found far down the road; and it could take a considerable amount of time before sentiment readjusts to such a belief. In the meantime, the central bank has purchased another $550 million in Treasuries as part of its Permanent Open Market Operations to keep a $2 trillion floor under the level of stimulus in the market.
Furthermore, event risk continues to add to the potential that the policy authority will have to act to stabilize the economy and markets. Today, we would receive three notable pieces of event risk. The S&P/Case-Shiller home price composite is meaningful with its second consecutive slip in annual growth after 16 consecutive improvements. Yet, it is a lagging indicator. As for the Richmond Fed Index, this report is regional and therefore too narrow in scope; but it does add to mounting evidence that the manufacturing sector as a whole will withdrawal is support to the economic recovery. The real event risk for the day was the Conference Board’s consumer confidence survey for September. The 48.5 read is an eight-month low and net pessimism. That being said, this is not a surprising development; so it doesn’t undermine stubborn risk appetite.
Related: Discuss the Dollar in the DailyFX Forum, John’s Analyst Picks: What Would it Take to Trade EURUSD Near EURUSD?
Euro Uncertainty in Coming Financial Wave Masked by Poor Dollar, Pound Performance
If we were looking at the euro’s performance against the dollar or pound, we would see strength. However, it is important to differentiate actual euro strength from the depreciation of its counterparts. For EURUSD and EURGBP, counter-currency weakness is the more influential factor here. If we looked at event risk for the day, we would see a positive reading from the 29-month high in the German GfK consumer confidence survey; but this is not in itself very market moving. More interesting is the steady deterioration in confidence related to the region’s financial health. Today, a Standard & Poor’s said that the Allied Irish bank bailout could actually top 35 billion euros, sending periphery bond yield soaring. And, Spain’s poor debt auction reminds us that Moody’s is set to reassess the nation’s rating sometime this week.
British Pound Dives on Pro-Stimulus Recommendations from BoE’s Posen
The British pound tumbled Tuesday; and the uninvolved fundamental trader could simply attribute the performance to the GDP data. However, the second revision to the second quarter reading offered a positive development in government spending as well as fixed investment. The real market mover: BoE Member Posen. The policy maker said inflation was a “misplaced” concern and the bank should consider further purchases.
Japanese Yen Slips as Risk Appetite Slowly Advances, Tankan Spending Plans Stumble
While risk appetite was not experiencing a hearty rally or plunge, it was generally trending higher Tuesday – giving traders to sell the yen while other more prominent drivers were absent. Where has the intervention fear gone? It will naturally dissipate as the market tests its limits. And, as for data, the Japanese Tankan business sentiment report for the 3Q reported negative forecasts and weaker spending plans.
Australian Dollar Gains on Yield, Financial Stability and Today a Building Growth Outlook
The Australian dollar seems to have everything going for it. Interest rates are high and forecasts are for further hikes within a period where most of its counterparts will remain quiet. Furthermore, with so much financial stress globally, Australia more or less avoided a crisis. Today, we see growth expectations improving through an unexpected 0.6 percent rise in the leading indicators index. All of it seems so ideal…
New Zealand Dollar sees Trade and Money Supply Contract
A direct contrast to the seeming steady improvement in Australian fundamentals, New Zealand continues to lose ground. Feeding objective data to subjective speculative forecasts, we would see the M3 money supply for August – a good measure of inflation – contract at a 3.3 percent annualized pace. And, trade, one of the key drivers for the economy, reported its biggest deficit in 10 months.
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ECONOMIC DATA
Next 24 Hours
|
Currency |
GMT |
Release |
Survey |
Previous |
Comments |
|
JPY |
23:50 |
Tankan Large All Industry Capex (3Q) |
3.0% |
2.7% |
Tankan survey may show a slowing pace of improvement in business confidence due to rising yen. |
|
JPY |
23:50 |
Tankan Large Manufacturers Outlook (3Q) |
3 |
3 |
|
|
JPY |
23:50 |
Tankan Large Manufacturers Index (3Q) |
7 |
1 |
|
|
JPY |
23:50 |
Tankan Non-Manufacturing Outlook (3Q) |
-4 |
-4 |
Non-manufacturing outlook has been negative for the last 7 months. |
|
JPY |
23:50 |
Tankan Non-Manufacturing Index (3Q) |
-2 |
-5 |
|
|
AUD |
0:00 |
Conference Board Leading Index (JUL) |
0.1% |
Index rose as rural goods improved. |
|
|
NZD |
2:00 |
Money Supply M3 (YoY) (AUG) |
-2.8% |
M3 fell annually in last 9 months. |
|
|
CNY |
2:30 |
HSBC PMI Manufacturing (SEP) |
51.9 |
August rise snapped 2-month skid. |
|
|
EUR |
6:45 |
French Consumer Confidence Indicator (SEP) |
-39 |
-39 |
Sits at lowest reading of the year. |
|
EUR |
7:30 |
Italian Business Confidence (SEP) |
100.1 |
100.5 |
At highest level since April 2008. |
|
EUR |
8:00 |
Italian Producer Price Index (MoM) (AUG) |
0.3% |
-0.1% |
Italian producer prices rose annually in the last five months. |
|
EUR |
8:00 |
Italian Producer Price Index (YoY) (AUG) |
3.7% |
4.1% |
|
|
GBP |
8:30 |
Mortgage Approvals (AUG) |
47.0K |
48.7K |
U.K. mortgage approvals fell for a third month in August to the lowest reading since April 2009. |
|
GBP |
8:30 |
Net Consumer Credit (AUG) |
0.1B |
0.2B |
|
|
GBP |
8:30 |
Net Lending Sec. on Dwellings (AUG) |
0.3B |
0.1B |
|
|
GBP |
8:30 |
M4 Money Supply (MoM) (AUG F) |
-0.2% |
U.K. M4 money supply rose by 1.8% annually in August, the lowest amount in the last 27 years. |
|
|
GBP |
8:30 |
M4 Money Supply (YoY) (AUG F) |
1.8% |
||
|
GBP |
8:30 |
Index of Services (3Mo3M) (JUL) |
0.7% |
0.7% |
Increased in the last eight months. |
|
EUR |
9:00 |
Euro-Zone Economic Confidence (SEP) |
101.3 |
101.8 |
European consumer confidence improved less than economists forecast in September, increasing to -11.2 from a revised -11.4 reading in August. |
|
EUR |
9:00 |
Euro-Zone Consumer Confidence (SEP F) |
-11 |
-11 |
|
|
EUR |
9:00 |
Euro-Zone Business Climate Indicator (SEP) |
0.58 |
0.61 |
|
|
EUR |
9:00 |
Euro-Zone Industrial Confidence (SEP) |
-5 |
-4 |
|
|
EUR |
9:00 |
Euro-Zone Services Confidence (SEP) |
7 |
7 |
|
|
CHF |
9:30 |
KOF Swiss Leading Indicator (SEP) |
2.11 |
2.18 |
Leading indicators fell in August. |
|
USD |
11:00 |
MBA Mortgage Applications (SEP 24) |
-1.4% |
Apps declined in the last 3 weeks. |
|
|
12:30 |
Industrial Product Price (MoM) (AUG) |
0.2% |
0.1% |
Industrial product prices increased in July for a third time in 4 months. |
|
|
CAD |
12:30 |
Raw Materials Price Index (MoM) (AUG) |
0.5% |
1.8% |
|
|
USD |
14:30 |
DOE U.S. Crude Oil Inventories (SEP 24) |
-700K |
970K |
U.S. crude imports averaged 9.3 million barrels per day last week, up by 295K per day from prior week. |
|
USD |
14:30 |
DOE U.S. Gasoline Inventories (SEP 24) |
350K |
1590K |
|
|
USD |
14:30 |
DOE U.S. Distillate Inventory (SEP 24) |
325K |
347K |
|
Currency |
GMT |
Upcoming Events & Speeches |
|
USD |
21:30 |
Fed’s Dennis Lockhart Speaks in Sewanee, Tennessee |
|
USD |
14:15 |
Fed’s Narayana Kocherlakota Speaks in London |
|
USD |
16:30 |
Fed’s Charles Plosser Speaks in Vineland, New Jersey |
|
USD |
17:15 |
Fed’s Eric Rosengren Speaks in New York City |
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 |
|
Resistance 2 |
1.3815 |
1.6375 |
89.00 |
1.0460 |
1.0922 |
0.9850 |
0.7635 |
127.60 |
146.05 |
|
Resistance 1 |
1.3690 |
1.5965 |
86.00 |
0.9950 |
1.0750 |
0.9665 |
0.7440 |
120.00 |
140.00 |
|
Spot |
1.3565 |
1.5787 |
83.93 |
0.9772 |
1.0312 |
0.9664 |
0.7387 |
113.86 |
132.50 |
|
Support 1 |
1.3300 |
1.5500 |
83.00 |
0.9650 |
0.9950 |
0.8100 |
0.6850 |
103.80 |
125.00 |
|
Support 2 |
1.2500 |
1.5300 |
80.00 |
0.9500 |
0.9700 |
0.7835 |
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 |
|
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 |
12.5136 |
1.4651 |
6.9558 |
7.7583 |
1.3182 |
Spot |
6.7741 |
5.4935 |
5.8636 |
|
Support 1 |
12.0500 |
1.4500 |
6.6950 |
7.7490 |
1.3000 |
Support 1 |
6.7600 |
5.3000 |
5.8000 |
|
Support 2 |
11.7200 |
1.3665 |
6.4300 |
7.7450 |
1.2500 |
Support 2 |
6.4440 |
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 |
|
Resistance 2 |
1.3728 |
1.5976 |
84.64 |
0.9936 |
1.0396 |
0.9765 |
0.7466 |
114.68 |
134.55 |
|
Resistance 1 |
1.3646 |
1.5882 |
84.28 |
0.9854 |
1.0354 |
0.9714 |
0.7426 |
114.27 |
133.52 |
|
Pivot |
1.3514 |
1.5800 |
83.99 |
0.9796 |
1.0320 |
0.9637 |
0.7366 |
113.47 |
132.75 |
|
Support 1 |
1.3432 |
1.5706 |
83.63 |
0.9714 |
1.0278 |
0.9586 |
0.7326 |
113.06 |
131.72 |
|
Support 2 |
1.3300 |
1.5624 |
83.34 |
0.9656 |
1.0244 |
0.9509 |
0.7266 |
112.26 |
130.95 |
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 |
|
Resistance 3 |
1.3742 |
1.5969 |
84.92 |
0.9898 |
1.0438 |
0.9810 |
0.7505 |
115.72 |
134.66 |
|
Resistance 2 |
1.3698 |
1.5924 |
84.67 |
0.9867 |
1.0406 |
0.9774 |
0.7475 |
115.25 |
134.12 |
|
Resistance 1 |
1.3654 |
1.5878 |
84.43 |
0.9835 |
1.0375 |
0.9737 |
0.7446 |
114.79 |
133.58 |
|
Spot |
1.3565 |
1.5787 |
83.93 |
0.9772 |
1.0312 |
0.9664 |
0.7387 |
113.86 |
132.50 |
|
Support 1 |
1.3476 |
1.5696 |
83.43 |
0.9709 |
1.0249 |
0.9591 |
0.7328 |
112.93 |
131.42 |
|
Support 2 |
1.3432 |
1.5650 |
83.19 |
0.9677 |
1.0218 |
0.9554 |
0.7299 |
112.47 |
130.88 |
|
Support 3 |
1.3388 |
1.5605 |
82.94 |
0.9646 |
1.0186 |
0.9518 |
0.7269 |
112.00 |
130.34 |
v
Written by: John Kicklighter, Currency Strategist for DailyFX.com
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