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Structural changes in the Australian economy pose a risk for AUDUSD (based on tradingfloor article)
A chart showing the long term history of the terms of trade is shown below. The move up in the last decade was spectacular, peaking in 2010/2011 in line with the top in commodity prices. It’s no coincidence that AUDUSD also reached its high at 1.1080 in July 2011 and, in sympathy with the terms of trade, has been declining ever since.
Another factor that kicked in around the same time the terms of trade were peaking was a decline in the interest rate differential in favour of the AUD. The global “reach for yield” after the introduction of quantitative easing in the US, has seen the spread between Australian and US bond yields decline from 250 to 100 basis points. Almost 70 percent of Australian government bonds outstanding are held by offshore investors.
The RBA has kept its policy interest rate at a record low of 2.50 percent for the last year, trying to encourage the non-mining economy to fill the gap being left by the fading resources boom. The central bank seems unconcerned that one of the areas this is showing up is in dwelling investment, spurred on by a strong housing market. This is because there is little evidence of domestic inflationary pressures in the rest of the economy and conditions in the labour market remain subdued with low wage growth, spare capacity and an elevated unemployment rate. This restraint on domestic costs has helped to offset the effects of the depreciation in the exchange rate over the last couple of years. Even so, the Consumers Price Index is up at the upper limit of the RBA’s target range of 2 to 3 percent. However, the RBA expects the counteracting forces of subdued domestic costs and a lower currency will mean inflation remains consistent with its target range.
2014-08-13 23:50 GMT (or 01:50 MQ MT5 time) | [JPY - Core Machinery Orders]
if actual > forecast = good for currency (for JPY in our case)
[JPY - Core Machinery Orders] = Change in the total value of new private-sector purchase orders placed with manufacturers for machines, excluding ships and utilities. It's a leading indicator of production - rising purchase orders signal that manufacturers will increase activity as they work to fill the orders.
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Japan Core Machine Orders Climb 8.8% In JuneCore machine orders in Japan gained 8.8 percent on month in June, the Cabinet Office said on Thursday - worth 745.8 billion yen.
The headline figure was well shy of forecasts for an increase of 15.3 percent following the record 19.5 percent decline in May.
On a yearly basis, core machine orders dipped 3.0 percent - also missing expectations for an increase of 3.0 percent following the 14.3 percent contraction in the previous month.
The total number of machinery orders, including those volatile ones for ships and from electric power companies, added 17.1 percent on month and 30.3 percent on year in June to 2,545.1 billion yen.
Manufacturing orders gained 6.7 percent on month but fell 1.3 percent on year to 302.4 billion yen in June, while non-manufacturing orders added 4.0 percent on month and lost 4.1 percent on year to 444.1 billion yen.
Government orders plummeted 24.0 percent on month and gained 6.4 percent on year to 276.6 billion yen. Orders from overseas surged 62.8 percent on month and 87.5 percent on year to 1,422.6 billion yen. Orders from agencies added 3.1 percent on month and 7.9 percent on year to 104.1 billion yen.
For the second quarter of 2014, core machine orders tumbled 10.4 percent on quarter and 0.4 percent on year.
For the third quarter of 2014, core machine orders are forecast to rise 2.9 percent on quarter but fall 2.3 percent on year to 2,348.4 billion yen.
Aussie Posts Gains as US Retail Sales Soften (adapted from marketpulse article)
Australian data has enjoyed a strong week. On Wednesday, Westpac Consumer Sentiment climbed 0.8%, its strongest gain since October 2012. Stronger consumer confidence often translates into increased consumer spending, a key component for economic growth. Wage Price Index, an important gauge of inflationary pressure, dropped to 0.6%, short of the estimate of 0.8%. Earlier in the week, NAB Business Confidence and HPI posted strong gains.
Further levels in both directions:
AUDUSD Trading Range Update (adapted from dailyfx article)
Trading the News: UoM Consumer Sentiment (adapted from dailyfx article)
A rebound in the U. of Michigan Confidence survey may generate a bullish reaction in the U.S. dollar (bearish EUR/USD) as it raises the outlook for growth and inflation.
What’s Expected:
Why Is This Event Important:
A pickup in household sentiment may spur a larger dissent within the Federal Open Market Committee (FOMC) as central bank officials look for a stronger recovery in the second-half of the year, and the Fed may show a greater willingness to normalize monetary policy sooner rather than later as the committee turns increasingly confident in achieving the dual mandate for full-employment & price stability.
Higher wage growth paired with marked rebound in 2Q GDP may prop up household confidence, and an upbeat U. of Michigan print may heighten the bullish sentiment surrounding the U.S. dollar as the Fed looks to move away from its easing cycle later this year.
However, the slowdown in private sector credit along with the recent weakness in household consumption may warn of a further decline in consumer sentiment, and another unexpected decline in the confidence survey may trigger a near-term correction in the greenback as it drags on interest rate expectations.
How To Trade This Event Risk
Bullish USD Trade: U. of Michigan Survey Climbs to 82.5 or Higher
- Need to see red, five-minute candle following the release to consider a short trade on EURUSD
- If market reaction favors a long dollar trade, sell EURUSD with two separate position
- Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward
- Move stop to entry on remaining position once initial target is hit; set reasonable limit
Bearish USD Trade: Consumer Sentiment Continues to Disappoint- Need green, five-minute candle to favor a long EURUSD trade
- Implement same setup as the bullish dollar trade, just in the opposite direction
Potential Price Targets For The ReleaseEURUSD Daily
- Will continue to look for string of lower-highs as descending triangle takes shape.
- Interim Resistance: 1.3650 (78.6% expansion) to 1.3670 (61.8% retracement)
- Interim Support: 1.3490 (50.0% retracement to 1.3500 Pivot
Impact that the U. of Michigan Confidence has had on EUR/USD during the last release(1 Hour post event )
(End of Day post event)
2014
The U. of Michigan Confidence survey unexpectedly weakened in July, with the index slipping to 81.3 from 82.5 the month prior, while 12-month inflation expectations climbed to an annualized 3.3% from 3.1% in June. Nevertheless, the greenback struggled to hold its ground following the dismal confidence report, with the EURUSD trading back above the 1.3500 handle, and the reserve currency continued to trade heavy throughout the North American trade as the pair ended the day at 1.3521.
MetaTrader Trading Platform Screenshots
AUDUSD, M5, 2014.08.15
MetaQuotes Software Corp., MetaTrader 5, Demo
AUDUSD M5 : 6 pips price movement by USD - UoM Consumer Sentiment news event
US housing data, Inflation data in the UK, the US and Canada, FOMC Meeting Minutes, Philly Fed Manufacturing Index, Janet Yellen’s speech are a few of the major events on Forex calendar. Follow along as we explore the Forex market movers for this week.
Last week US retail sales disappointed with a flat reading in July, a poor start to the third quarter, suggesting some loss of momentum. Economists expected 0.2% increase. The unchanged reading was the weakest since January, preceded by a 0.2% gain in June. However, despite the lukewarm release, sales are expected to rise in the coming months thanks to the growth trend in the labor market, strengthening domestic demand. The uneven economic growth will enable Fed Chair Janet Yellen to keep interest rates low for a longer period.
EURUSD Technical Analysis forecast for the week of August 18, 2014 (based on fxempire article)
The EUR/USD pair initially fell during the course of the week, but for the third week in a row found support below, and ended up forming a hammer. Because of that, we believe that the Euro is about to get a bounce, not only because of this chart, but because of some other EUR related charts. With that, we think that we are heading to the 1.35 handle first, and then will have to make more significant decisions at that level. In the meantime, we would not be interested in selling this market until we get below the 1.33 level.
The dollar was lower against the yen and the Swiss franc on Friday as heightened geopolitical tensions underpinned safe haven demand, while the euro moved higher, bolstered by expectations for fresh stimulus by the European Central Bank.
Tensions over the crisis in Ukraine escalated on Friday following reports that Ukraine's military attacked and destroyed a number of armored vehicles that entered the country from Russia.
USD/JPY touched session lows of 102.14 and was down 0.09% to 102.35 late Friday. USD/CHF ended Friday’s session at a three week low of 0.9024, down 0.46%.
The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.20% to 81.48.
The euro pushed higher, with EUR/USD up 0.27% to 1.3400 late Friday. Data on Thursday showing that the euro zone economy stagnated in the second quarter fuelled speculation that the ECB will embark on quantitative easing to bolster the faltering recovery in the region.
Elsewhere, the pound posted its sixth straight weekly loss against the dollar, with GBP/USD at 1.6691 late Friday. For the week, the pair was down 0.51%.
The pound found some support after revised data on Friday showed that the U.K. economy grew at a rate of 3.2% in the year to June. Second quarter growth remained unchanged from the initial estimate of 0.8%.
The Canadian dollar rallied to more than two week highs against the U.S. dollar on Friday before later retracing most of those gains, after a revised jobs report showed that the Canadian economy added more jobs than expected in July.
Statistics Canada reported that the economy added 41,700 jobs in July, well above the original estimate of just 200 jobs and ahead of expectations for jobs growth of 20,000. The unemployment report ticked down to 7% from 7.1% in June.
The statistics agency released a revised version of the jobs report after detecting an error in the original jobs report released on August 8.
USD/CAD fell to lows of 1.0860 before pulling back to 1.0896 late Friday.
In the week ahead, investors will be looking ahead to Wednesday’s minutes of the Federal Reserve’s latest meeting, while the Bank of England and the Reserve Bank of Australia are also to publish meeting minutes. Thursday’s data on euro zone private sector activity will also be in focus.
Monday, August 18
- Germany’s Bundesbank is to publish its monthly report.
- Canada is to release data on foreign securities purchases.
- The U.S. is to produce private sector data on the housing market.
Tuesday, August 19- The RBA is to publish the minutes of its latest policy
meeting, which contain valuable insights into economic conditions from
the bank’s perspective.
- New Zealand is to release reports on producer price inflation and inflation expectations.
- The U.K. is to produce data on consumer inflation, which accounts for the majority of overall inflation.
- The U.S. is to release reports on building permits, housing starts and consumer inflation.
Wednesday, August 20- RBA Governor Glenn Stevens is to speak, his comments will be closely watched.
- Japan is to publish data on the trade balance, the difference in value between imports and exports.
- The BoE is to publish the minutes of its latest policy meeting.
- Canada is to release data on wholesale sales.
- Later Wednesday, the Federal Reserve is to publish the minutes of its latest policy meeting.
Thursday, August 21- China is to release the preliminary reading of the HSBC manufacturing index.
- Switzerland is to release data on the trade balance.
- The
euro zone is to publish preliminary data on private sector activity,
while Germany and France are to also to publish data on private sector
growth.
- The U.K. is to release data on retail sales,
the government measure of consumer spending, which accounts for the
majority of overall economic activity.
- The U.S. is to produce data on unemployment claims, manufacturing activity and existing home sales.
- The first day of the annual economic symposium is due to take place in Jackson Hole, Wyoming.
Friday, August 22The euro pushed higher against the dollar on Friday as weak data on euro zone second quarter growth fuelled expectations for fresh stimulus by the European Central Bank.
EUR/USD was up 0.27% to 1.3400 late Friday and ended the week little changed.
The pair is likely to find support at 1.3347, Thursday’s low and an almost nine month trough and resistance at the 1.3450 level.
Preliminary data on Thursday showed that euro zone gross domestic product failed to grow in the three months to June. Economists had expected a small expansion of 0.1%.
Germany’s economy shrank by 0.2% in the three month to June, the first drop since 2012 and worse than forecasts for a contraction of 0.1%.
French GDP was flat in the second quarter, the second consecutive quarter of stagnation.
The weak data indicated that the economic recovery in the euro area is losing momentum, adding to pressure on the ECB to do more to bolster growth after it cut rates to record lows in June.
The euro’s gains were held in check as heightened geopolitical tensions weighed on market sentiment on Friday.
Tensions over the crisis in Ukraine escalated following reports that Ukraine's military attacked and destroyed a number of armored vehicles that entered the country from Russia.
Elsewhere, the euro drifted higher against the yen, with EUR/JPY rising 0.18% to 137.16 late Friday.
In the week ahead, investors will be looking ahead to Wednesday’s minutes of the Federal Reserve’s latest meeting, while Thursday’s data on euro zone private sector activity will also be in focus. Speeches by central bank heads Janet Yellen and Mario Draghi on Friday will also be closely watched.
Monday, August 18
- Germany’s Bundesbank is to publish its monthly report.
- The U.S. is to produce private sector data on the housing market.
Tuesday, August 19- The U.S. is to release reports on building permits, housing starts and consumer inflation.
Wednesday, August 20- The Federal Reserve is to publish the minutes of its latest policy meeting.
Thursday, August 21- The euro zone is to publish preliminary data on private
sector activity, while Germany and France are to also to publish data
on private sector growth.
- The U.S. is to produce data on unemployment claims, manufacturing activity and existing home sales.
- The first day of the annual economic symposium is due to take place in Jackson Hole, Wyoming.
Friday, August 22EURUSD Technical Analysis: Holding Short in Consolidation (based on dailyfx article)
The Euro may be preparing for a rebound against the US Dollar having declined as expected after showing a bearish Evening Star candlestick pattern. The appearance of a Hammer candle coupled with positive RSI divergence now argues for an on-coming correction. Near-term resistance is at 1.3419, the 23.6% Fibonacci retracement, with a daily close above that exposing the intersection of the 38.2% level and a falling channel top at 1.3472. Alternatively, a reversal below the 23.6% Fib expansion at 1.3345 clears the way for a challenge of the 38.2% threshold at 1.3291.