Press review - page 196
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NZDUSD Fundamentals (based on dailyfx article)
Fundamental Forecast: BullishThe NZD/USD remains at risk of marking fresh record-highs ahead of the next Reserve Bank of New Zealand (RBNZ) policy meeting on July 23 as the economic docket is expected to show heightening price pressures across the region.
Indeed, the headline reading for New Zealand inflation is expected to increase an annualized 1.8% in the second-quarter, which would mark the fastest pace of growth since the last three-months of 2011, and heightening price pressures may generate a further advance in the exchange rate as it fuels interest rate expectations. According to Credit Suisse overnight index swaps, market participants are pricing a 90% chance for another 25bp rate hike in July, but we may see the RBNZ take a more aggressive approach in normalizing monetary policy as the stronger recovery raises the risk for inflation.
RBNZ Assistant Governor John McDermott warned that the central bank will aim for ‘low and stable inflation’ as the central bank raises its outlook for growth, and the stronger recovery should continue to heighten the appeal of the New Zealand dollar, especially as Fitch Ratings raising its credit rating outlook for the region. With that said, the positive developments coming out of the region may continue to limit the downside risk for the NZD/USD, and we may see the RBNZ do little to halt the advance in the local currency as it helps the central bank to achieve price stability.
As a result, we will retain a bullish outlook for the NZD/USD as it approaches the 2011 high (0.8841), and we will continue to look for opportunities to ‘buy dips’ ahead of the RBNZ interest rate decision should the inflation report further boost interest rate expectations.
The NZD/USD pair broke above the 0.88 level during the previous week, suggesting that a break out was in the process of happening. If we can break above the top of the range for the week, we believe that this market will continue to head towards the 0.90 level. That level is the next resistance barrier that we can see on the longer-term charts, so therefore that’s where the market should head towards. We see a significant amount of support below as well, so really it’s not likely we find an opportunity to sell.
The EUR/USD pair tried to rally during the course of the week, but as you can see gave back quite a bit of the gains in order to form a shooting star. Nonetheless, the market seems to be stuck between the 1.35 level as support, and the 1.37 level as resistance. The resistance above should extend all the way from 1.37 to the 1.3750 level. Ultimately though, if we can break out of that range, we should continue to make a longer-term move. If it’s to the upside, we go to the 1.40 level, but to the downside below the 1.35 level, we would head to the 1.33 region.
The New Zealand dollar ended Friday’s session close to a three-year high against its U.S. counterpart, amid indications the Federal Reserve is in no rush to raise interest rates.
NZD/USD hit 0.8835 on Thursday, the pair’s highest since August 1, 2011, before subsequently consolidating at 0.8816 by close of trade on Friday, down 0.07% for the day but 0.86% higher for the week.
The pair is likely to find support at 0.8780, the low from July 9 and resistance at 0.8835, the high from July 10.
The U.S. dollar came under pressure after Wednesday’s minutes of the Federal Reserve’s June meeting indicated that interest rates are unlikely to rise soon.
The minutes showed that officials agreed to end the central bank’s asset purchase program in October, but revealed little new information on when rates could start to increase.
Meanwhile, the kiwi was boosted after ratings agency Fitch raised New Zealand’s credit outlook to positive from stable on Tuesday and reaffirmed the country's AA rating.
In the week ahead, investors will be watching testimony on monetary policy by Fed Chair Janet Yellen, as well as key data on U.S. June retail sales.
Market players will also look ahead to a raft of Chinese economic data this week, including reports on second quarter gross domestic product, industrial production and retail sales.
Tuesday, July 15
- The U.S. 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 also to release data on
import prices, business inventories and manufacturing activity in the
Empire state.
Wednesday, July 16- New Zealand is to release data on consumer inflation.
- China
is to publish data on gross domestic product, the broadest indicator of
economic activity and the leading measure of the economy’s health. The
country is also to publish reports on industrial production and fixed
asset investment.
- The U.S. is to release reports on
producer price inflation and industrial production. Meanwhile, Fed Chair
Janet Yellen Carney is to testify on monetary policy to the House
financial committee.
Thursday, July 17- The U.S. to publish reports on initial jobless claims,
housing starts, building permits, and the Philly Fed manufacturing
index.
Friday, July 18The euro was almost unchanged against the dollar on Friday as concerns over a major Portuguese lender eased, curbing safe haven demand for the greenback.
EUR/USD was at 1.3606 late Friday, little changed for the day.
The pair was likely to find support at 1.3575 and resistance at 1.3650, Thursday’s high.
Worries over the fiscal stability of Portugal’s largest lender, Banco Espirito Santo, fuelled a sharp selloff in markets on Thursday, amid fears over the risk of contagion.
Concerns eased after Portugal’s central bank said Friday it was satisfied that the bank is able to fulfill its capital requirements.
The single currency remained under pressure as a slew of weak economic data on Thursday fuelled concerns over the outlook for the recovery in the region.
Italy's industrial output unexpectedly fell 1.2% in May, official data showed. Meanwhile, French industrial production plunged 1.7% in May and inflation rose by just 0.6%, the lowest level since November 2009.
The dollar fell to one week lows against the euro earlier in the week after Wednesday’s minutes of the Federal Reserve’s latest meeting indicated that interest rates are unlikely to rise soon.
The minutes of the central bank’s June meeting showed that officials agreed to end the bank’s asset purchase program in October, but revealed little new information on when rates could start to increase.
Officials said policy depends most “on the evolution of the economic outlook.”
In the week ahead, investors will be watching testimony on monetary policy by Federal Reserve Chair Janet Yellen and European Central Bank President Mario Draghi.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, July 14
- The euro zone is to release data on industrial production.
- ECB
President Mario Draghi is to testify on monetary policy to the
Committee on Economic and Monetary Affairs of the European Parliament.
His comments will be closely watched.
Tuesday, July 15- The ZEW Institute is to release its closely watched report on German economic sentiment, a leading indicator of economic health.
- The
U.S. 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 also to release data on import prices, business
inventories and manufacturing activity in the Empire state.
Wednesday, July 16- The U.S. is to release reports on producer price
inflation and industrial production. Meanwhile, Fed Chair Janet Yellen
Carney is to testify on monetary policy to the House financial
committee.
Thursday, July 17- The euro zone is to release data on consumer prices.
- The
U.S. to publish reports on initial jobless claims, housing starts,
building permits, and the Philly Fed manufacturing index.
Friday, July 182014-07-13 22:03 GMT (or 00:03 MQ MT5 time) | [NZD - REINZ HPI]
if actual > forecast = good for currency (for NZD in our case)
[NZD - REINZ HPI] = Change in the selling price of all homes. It's a leading indicator of the housing industry's health because rising house prices attract investors and spur industry activity
Acro Expand = Real Estate Institute of New Zealand (REINZ), House Price Index (HPI).
==========
New Zealand Performance Of Services Index Rises To 54.7 In June
New Zealand's services sector expanded at an accelerated pace in June, the latest survey from Business New Zealand revealed on Monday - showing an index score of 54.7.
That's up from a downwardly revised 54.1 in May (originally 54.2).
A score above 50 signals expansion in a sector, while a reading below 50 means contraction.
Among the individual components of the survey, all five elements expanded, including supplier deliveries, new orders, stock inventories, sales and employment.
"Many economic indicators have been going gangbusters over the past 12 months, pointing to strong growth," Bank of New Zealand economist Doug Steel said. "More recently, there have been a few hinting at some degree of cooling, but to levels that are still above average."
Gold and Silver Facing Pivotal Week, Crude Oil Sell-Off Lacking Drive
Gold and silver are at a critical juncture at the outset of the week with the precious metals testing key technical levels ahead of a busy docket for the US Dollar. Meanwhile, WTI is holding steady with a string of US data prints over the week ahead likely to offer the commodity some guidance.
Gold Traders Taking Stock Ahead of Heavy US Docket
Gold is edging lower in Asian trading as investors likely reposition themselves ahead of several noteworthy pieces of event risk for its pricing currency, the USD, over the remainder of the week. Headlining the calendar will be the Semi-Annual Testimony from Fed Chief Janet Yellen. As noted in Friday’s commodities report, the greenback has been unimpressed by recent guarded comments by Fed officials on the prospect of rate hikes. If we hear a similar tone and see an absence of hawkish guidance from Dr. Yellen the greenback could continue to struggle, which in turn may afford gold and silver some breathing room.
Reports of renewed unrest in Israel and the Gaza Strip will also be on traders’ radars. The alternative assets tend to perform well during periods of heightened geopolitical tension, meaning should the situation escalate it could offer a source of support to the precious metals. Additionally, while the Portuguese debt debacle has faded from headlines, some embers may remain, which if sparked could yield additional demand for the yellow metal.
Crude At A Crossroads As Middle East News Flow Set To Fade
Crude oil benchmarks have managed to hold their ground during the Asian session thus far. This follows a relentless sell-off during the Euro and US sessions on Friday, which saw WTI suffer its largest one day percentage decline (-2.04 percent) since March.
The easing of supply disruption fears from the Middle East are a likely contributor to the precipitous drop. However, with fresh news-flow from the region slowing, the prospect of a sustained sell-off on fading production concerns alone is questionable. At the same time, long positions as reported by the CFTC remain near extremes which leaves the commodity vulnerable to weakness should the right catalyst emerge.
An absence of major oil-impacting news flow from the Middle East may leave the commodity to takes its cues from upcoming US data this week via its implications for the demand side of the equation. Advance Retail Sales, Industrial Production and Consumer Confidence figures as leading indicators for the state of the US economy will be of particular note. Upside surprises to the key pieces of data could help signal a strong economic recovery following a dismal first quarter, which in turn would bode well for crude oil.
CRUDE OIL TECHNICAL ANALYSIS
As suggested in last week’s commodities report the retest of the ascending trendline on the daily offered a new entry for short positions for WTI. With a break below 101.30, signs of a downtrend, as well as the nullification of the Piercing Line pattern, the downside remains preferred. The next definitive support rests at 98.90, however expect some buyers to slow the descent at the psychologically-significant 100.00 handle.
GOLD TECHNICAL ANALYSIS
The gold bulls’ resolve is being tested in Asian trading with the commodity pulling back to its breakout point at 1,330. At this stage the slight correction is seen as a buying opportunity given the uptrend remains in force. A target is offered by the 2014 high near 1,392.
Gold: Pullback To Support Offers New Buying Opportunities
SILVER TECHNICAL ANALYSIS
In a similar fashion to its bigger brother gold, silver’s retreat in Asian trading may offer new entries for long positions. However, some caution may be warranted given the Rate of Change indicator signals fading upside momentum for the precious metal. Additionally, a break below the ascending trendline on the daily would suggest a potential shift in sentiment.
Silver: Pulling Back To Trendline Support
COPPER TECHNICAL ANALYSIS
Copper is at a crossroads as the base metal consolidates between its ascending trendline on the daily and key resistance at 3.29. With the uptrend in force a breakout would offer new long opportunities with a target offered by 3.36.
Copper: At A Critical Juncture As Prices Consolidate
PALLADIUM TECHNICAL ANALYSIS
With an uptrend still in force for palladium, longs remain preferred. However, with such close proximity to resistance at 875 a pullback to support at 861 may offer more favorable entries.
Palladium: Pullback To Offer New Entry Opportunities
PLATINUM TECHNICAL ANALYSIS
Sellers remain prepared to cap gains for platinum at the 1,518, mark which suggests new entries for longs may be better served on a breakout or retreat to 1,489. A daily close below support would negate a bullish bias and suggest a drop to the former range-bottom at 1,424.
Platinum: Sellers Keep Gains Capped Below 1,518
EUR/USD Pinned as EUR/JPY Pivots from June Swing; USD/CAD Emerges
If there was ever a week that could transpire a series of events flush in Euro negativity, last week failed to live up to the billing. A revival of Euro-Zone debt crisis fears made its way through bond and equity markets, June US labor market data clobbered expectations, and the June FOMC minutes showed a Fed more eager to wind down its QE3 program.
Nevertheless, EURUSD finished higher on the week, highlighting the drag low volatility conditions have placed on meaningful follow through in some of the major currency pairs.
So while we continue to monitor EURJPY and EURUSD as their daily charts highlight sell signals in various indicators, there is a admittedly a lack of momentum. The current rangebound states could be the default setting without a more substantial catalyst.
Elsewhere the two non-EUR pairs we're looking at are GBPCHF and USDCAD. Whereas GBPCHF is experiencing a slight pullback amid the EUR rebound, the nature of the Slow Stochastics and MACD indicators thus far offers no reason to think that the uptrend from mid-March is threatened, as the nature of the indicators and price action is still intact.
See the video above for a technical discussion on EURJPY, EURUSD, and GBPCHF, as well as notes on the recent USDCAD buying opportunity at long-term support.
EUR/USD steady to higher as market preps for Yellen testimony
The euro traded steady to higher against the dollar on Monday in a session void of major U.S. economic indicators as investors remained in standby mode ahead of Federal Reserve Chair Janet Yellen's congressional testimony on Tuesday and Wednesday.
In U.S. trading, EUR/USD was up 0.14% at 1.3626, up from a session low of 1.3592 and off a high of 1.3640.
The pair was likely to find support at 1.3589, Thursday's low, and resistance at 1.3651, Thursday's high.
In the minutes of the Federal Reserve's June policy meeting released last week, the U.S. central bank predicted an October close to its bond-buying stimulus program but did not provide a timetable as to when interest rates may begin to rise afterwards.
Falling U.S. Treasury yields have many guessing the Fed will take its time when it comes to hiking benchmark interest rates to ensure recovery remains on track, which allowed the dollar to slip against the euro on Monday, a day markets prepped for Yellen's testimony before the Senate Banking Committee on Tuesday and the House Financial Services Committee on Wednesday.
Elsewhere, euro zone industrial output numbers that met market expectations boosted the single currency over the greenback.
Eurostat, the statistical office of the European Union, reported earlier that industrial output across the euro area fell by 1.1% in May from April, less than market calls for a 1.2% contraction.
On an annualized basis, industrial production rose by 0.5%, in line with market expectations.
Elsewhere, the euro was up against the pound, with EUR/GBP up 0.29% at 0.7975, and up against the yen, with EUR/JPY up 0.36% at 138.40.
On Tuesday, the ZEW Institute is to release its closely watched report on German economic sentiment, a leading indicator of economic health.
The U.S. 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 also to release data on import prices, business inventories and manufacturing activity in the New York state.
Strategy Video: Dollar, Pound and S&P 500 Probability vs Impact through Event Risk
In a dense round of event risk through the immediate future, there are scenarios where the headlines can prove exceptionally market moving...or barely tipping the needle. Expectations build up behind certain themes and markets to minimize the impact of likely outcomes and amplify the reaction to the less likely. In today's Strategy Video, we revisit this scenario analysis between 'potential' and 'probability' for Fed Chairwoman Janet Yellen's testimony, UK CPI and the general lean of a busy docket against the Dollar, Pound and S&P 500.