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
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
Core 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.
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.
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
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
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.
EURUSD 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.