AUDUSD Fundamentals (based on dailyfx article)
The Australian Dollar managed a strong showing last week, rising to a
two-month high just below the 0.95 figure against its US counterpart.
The advance tracked an improvement in monetary policy expectations,
with a Credit Suisse gauge tracking the priced-in 12 month outlook
rising to the highest level since mid-May. High-profile event risk on
the domestic and the external fronts in the week ahead threatens to
undermine the rally however.
The spotlight initially falls on minutes from June’s RBA policy meeting. The policy announcement struck a familiar tone,
arguing for a period of stability in interest rates. With that in
mind, traders will look to the text of the minutes for added color,
attempting to gauge how long the standstill is likely to last and the
direction that policy is likely to take thereafter.
Minutes from a likewise status-quo flat rate decision in May proved telling,
revealing a dovish lean in the Bank’s posture and sending the Aussie
lower. Australian economic data dramatically deteriorated relative to
expectations between the May and June meetings (according to data from
Citigroup), warning that a similar dynamic may play out again.
Later in the week, the focus returns to the Federal Reserve the rate-setting FOMC committee convenes for its policy meeting.
This outing takes on particular significance in that it will be
accompanied by the release of an updated set of policymakers’ economic
forecasts as well as a press conference from Fed Chair Janet Yellen. As
we’ve discussed previously, the fate of the Fed’s effort to
“taper” QE asset purchases with an eye to end the program this year –
paving the way for interest rate hikes – has been a formative catalyst
for the markets this year.
US economic news-flow has broadly improved relative to consensus
forecasts since early April but a string of disappointing releases over
the past three weeks have rekindled doubts about the strength of the
recovery from a dismal performance in the first quarter.
Indeed, the US Dollar has come under renewed selling pressure as traders
scaled back bets on swift Fed policy normalization, putting the
greenback’s multi-year uptrend in jeopardy. For their part, FOMC
officials have adamantly maintained that the first quarter was a
hiccup in an otherwise supportive environment. If that sentiment is
reflected in an upgraded set of economic forecasts and/or an upbeat
Yellen presser this dynamic may be overturned, undermining the Aussie’s
perceived yield advantage and sending it lower anew.
EURUSD Fundamentals (based on dailyfx article)
The Euro finished near four-month lows versus the Dollar, but the lack
of volatility in recent markets makes it unlikely it breaks
significantly lower. We’re watching key event risk for a potential
A relatively empty European economic calendar leaves focus on the upcoming US Federal Open Market Committee meeting, and any surprises from the Fed could force major USD pairs out of their recent trading ranges.
It’s almost a given that the FOMC will taper their Quantitative Easing
purchases by a further $10 billion through their decision. Thus
instead of the actual decision traders will focus on official
statements, changes in Fed inflation and growth forecasts, and the
press conference to follow the announcement. Of particular interest is
whether the Committee hints at the timing of future interest rate
Interest rates are especially important for the Euro as traders have
sent it to multi-month lows on the widely-expected European Central
Bank rate cuts. The fact that the US Federal Reserve is headed in the
opposite direction helps explain why the EURUSD trades near key lows.
Yet clear uncertainty in Fed forecasts leaves ample room for
disappointment and potential for Euro volatility.
Any major FOMC surprises could ultimately force the Euro out of its
recent range versus the Dollar. Yet FX options markets show volatility
prices continue to trade near record-lows, and recent price action
offers few clues on when volatility might return. Even a sharp two-day
sell-off in the US S&P 500 and broader global equities wasn’t enough
to drive the safe-haven US Dollar above key resistance versus the Euro.
The lack of volatility and conviction thus keeps us focused on buying
the Euro near support, selling near resistance. Our Senior Strategist
warns that a close below $1.3520 could spark a larger decline, but
until then watch for the Euro to remain in a tight range versus the
GOLD (XAUUSD Fundamentals (based on dailyfx article)
Gold prices are markedly higher on the week with the precious metal up
1.64% to trade at $1273 ahead of the New York close on Friday. The
gains come amid losses in broader equity markets and continued weakness
in the greenback with the Dow Jones dollar index making fresh monthly
lows on Friday.
Building geopolitical tensions in Iraq and Ukraine have offered some
much needed support to gold prices which had fallen more than 10% off
the March high.
Heading into next week the Federal Open Market Committee Monetary
Policy meeting will be central focus as the Fed releases its quarterly
economic projections as they pertain to growth, interest rates and
inflation. Despite expectations for another $10Billion taper, the
updated economic projections may have the greatest impact on markets as
participants continue to weigh the timing of the first Fed rate hike.
Should the updated forecasts undermine market expectations for a
mid-2015 rate hike, look for gold to remain well supported with a break
above interim resistance targeting levels just below $1300. From a
technical standpoint, gold looks poised to close the week above the
For weeks now we have continued to target this region between $1260/70
as it's offered major pivots in price dating back to June of last year.
Near-term resistance is eyed at the confluence of the 50% retracement
from the May decline and the January High at $1277. A break back below
$1260/70 shifts our focus back broader decline seen off the March highs
with support targets seen lower at $1236 and $1214/16. With the
monthly opening range yielding little in the way of technical clarity
we will maintain a neutral stance heading into the FOMC rate decision
The S&P 500 had a negative week over the last 5 sessions, but as you
can see bounced a bit towards the end in order to show signs of
support. This support of course was found out the 1920 level, an area
that we said was important. With that, we feel that the market should
more than likely bounce from here, and continue to go much higher. We
still have a target of 2000 over the longer term, and therefore have no
interest whatsoever in selling this market.
The silver markets rose during the course of the week, and close the
very strong. We are just above the $19.50 level however, and as a result
we think that the market is starting to pick up steam. It does appear
that we will more than likely clear the resistance, so we are buyers
above the $20 level. At that point time, we would expect the $22 level
to be targeted next, and then perhaps $25 given enough time. The $19
level continues to be a significant amount of support, something that we
anticipate going forward as well.
The USD/CAD pair fell during the course of the week, as you can see on
the chart. This market seems to find plenty of support near the 1.08
handle, so we feel that the market is supportive enough that we can
continue to buy on dips and believe that the market will ultimately be
bullish enough to continue on to the 1.12 level or so. With this, we
also believe that the uptrend line that we have seen for some time now
is going to continue to push the market higher as well. Pullbacks should
be thought of as value.