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EUR/USD close to 8-week highs
EUR/USD rose to 100-day MA at $1.2582, but then declined as the sell orders clustered in the $1.2580/00 area come into play.
According to flash estimates released today, euro zone’s CPI edged up to 2.6% in August (cons.: 2.5%; prev.: 2.4%). Euro zone unemployment rate remained unchanged in July at 11.3%.
Euro increased ahead of Ben Bernanke’s speech in Jackson Hole. US dollar weakened against all but two of its 16 major counterparts after Atlanta Fed President Dennis Lockhart said that US central bank has a tough decision on whether to add further stimulus to promote a stronger economic recovery.
Still…
"We're not expecting him (Bernanke) to announce that QE would start any time soon," Christian Schulz, senior economist at Berenberg Bank. "We expect him to announce that the Fed stands ready to act if things deteriorate but there's no sign of that at the moment. Those people who are betting on QE to start imminently will be disappointed and, yes, that would mean that markets would turn south.”
Daily EUR/USD
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Market talk: Buba's Weidmann may resign
There’s talk of Bundesbank President Jens Weidmann’s potential resignation.
It’s a common knowledge that Weidmann has negative attitude towards the ECB’s bond purchase program as he sees it “too close to state financing via the money press.”
To satisfy Bundesbank, the ECB President Mario Draghi might have to put a lot of conditions in the program risking diminishing its impact considerably. A Bundesbank spokesman declined to comment on a report in the Bild newspaper.
Weidmann told Der Spiegel on Sunday: “I can do my task best if I stay in office. I want to work to ensure that the euro is just as hard as the mark was.” We think the odds are that Weidmann won’t give up keeping pressuring Draghi.
Chris Ratcliffe/Bloomberg
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September 3: forex news
On Monday the risk aversion is high. AUD/USD opened a new 5-week minimum at $1.0240 on negative data releases. Worse than expected China manufacturing PMI released on Saturday made the pair open with a gap lower on Monday. Pressure on the Aussie increased after the much worse than expected Australia retail sales data (-0.8% in July vs. a +0.3% forecast and a revised +1.2% in June). Later on the pair bounced back to the $1.0270 levels. NZD/USD also opened with a gap lower and touched $0.7980, but then rebounded towards $0.8015. USD/CAD declines for a second consecutive day.
EUR/USD remains relatively flat around $1.2580, close to a two-month high. GBP/USD consolidates above $1.5850. Meanwhile, USD/JPY moves on a downside as demand for safe currencies increased on the back of concerns on concerns the global growth slows down. Demand for the greenback was limited on speculation the Fed will expand stimulus measures which tend to debase the US currency.
Today watch for important PMI releases in Spain, Italy, Great Britain and the EU and the ECB president Mario Draghi will speak at 13:30 GMT. There are bank holidays in US and Canada.
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CFTC trader positioning data
The latest Commitments of Traders (COT) report for week ended on August 28 was released on Friday, August 31, by the Commodity Futures Trading Commission (CFTC).
Speculative investors turned against the greenback for the first time in nearly a year. Investors held net short USD positions against seven major currencies worth $1.59 billion. EUR shorts fell to the smallest level in about 4 months. The net long JPY position nearly doubled as yen was bought as a safe haven. In recent weeks the market had shown a clear preference to extend long speculative positions in CAD and AUD. In the latest reporting period, CAD was the only one to stay in such favor. The net long AUD position fell by about 10%.
Take a look at the following table.
It’s necessary to note that the figures cited above are always a week old at the time of their release. Never the less, CFTC data gives a good oversight into how the market is positioned and if/how these positions are being unwound. Although the CME speculators represent a small fraction of trading in the currency markets, their trades are widely seen as typical of hedge fund investors' currency movements.
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BMO: CAD is approaching extreme levels
USD/CAD keeps trading close to 3-month minimum at 0.9840 hit on August 21. A breach of 0.9800 would be a very bearish signal. Yet, as this is the bottom of a significant consolidation area, it will be hard for the bears to push the prices lower.
Resistance: 0.9900, 0.9950, 1.0000, 1.0050.
Support: 0.9840, 0.9800, 0.9730.
BMO Capital Markets: “Investors, including central banks and sovereign wealth funds, have favored the loonie to diversify their holdings and as a haven from the debt crisis in the euro region. Canadian dollar is approaching extreme price levels where it is going to have an impact on the domestic economy. The recent strength is going to be hurting the demand we have seen. CAD should become weaker versus the US dollar and fall to around C$1.03 per USD by the end of the year, which would be a more comfortable level for the Canadian economy to operate at.”
Chart. Daily USD/CAD
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AUD/USD keeps on falling
During the last days the Australian dollar has been a weak performer. AUD/USD has left the June-August upward channel and decisively moves down. On Monday the pair opened a new 5-week minimum at $1.0240 on the negative data releases. The pair trades below the 200-day MA. Next support lies at $1.0205 (100-day MA), $1.0176 (July 25 minimum) and $1.0100 (July 12 minimum). On the H4 chart we can see a bearish convergence, so a correction towards $1.0340 is possible.
Most analysts are bearish on the pair’s longer term prospects. For example, specialists at UBS expect AUD/USD to reach parity before the end of 2012. In their view, falling commodity prices and worrying China economic data will weigh on the pair. Strategists at Westpac also believe the pair is moving towards $1.0000/0100.
Tomorrow the RBA will hold a meeting for a policy decision. According to most economists, the regulator is likely to keep the cash rate at 3.50%.
Chart. Daily AUD/USD
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FX majors from top forecasters
Here are the forecasts for EUR/USD, GBP/USD, USD/JPY, USD/CHF and EUR/JPY from top forecasters. Data were submitted on August 31.
Source: FX Week
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UBS, HSBC: Grexit is not an option
Many analysts say that the odds of Greece leaving the euro area have diminished considerably ahead of the Troika (the European Commission, the IMF and the ECB) review of Greek finances and its progress in meeting its repayment require¬ments to its European lenders. The final report is expected by the beginning of October.
UBS: “In the short time span between March and today, the euro crisis has escalated to such an extent that, even theoretically, a Greek exit is no longer an option. The risk would be very high that it could lead to the euro¬zone unravelling altogether, because markets would see little reason why Greece can exit but Portugal, Spain and Italy cannot.”
At the same time, the ECB meeting on September 6 distracts the market’s attention from the Troika.
HSBC: “In more normal circumstances, the Troika report would be at the sharp end of market focus. But the reason it might not be is because there is so much else going on at the same time, with the ECB and Federal Reserve meetings taking place, so there are rather large distrac¬tions that might diminish the market’s fixation. If it were a quieter time, we would be hanging on every word of the Troika review. If the money for Greece is released then it is one less banana skin for the euro, so if the Troika report is positive, or at least neutral, then that will be good for the euro. If it isn’t, that would be a real headache for the mar¬ket because we have got used to the idea that Greece is a manageable crisis. If it looked like bail-out money would be stalled indefinitely, you would open up another unpleasant chapter in the crisis. For that reason it is not the most likely out¬come.”
This image by the anonymous artist known as Colonel Flick aka Willimabanzai7
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USD/JPY is under bearish pressure
USD/JPY is trading in the 78.40/18 area after sliding by 30 pips on Friday.
The pair is now trading below support line connecting the recent minimums which is now providing resistance for the pair. There’s more of resistance at 78.65 (lower border of daily Ichimoku Cloud) and 78.80 (38.2% retracement of the decline from August 20 maximum to August 22 minimum; last week’s highs).
USD/JPY didn’t manage to regain the pivotal 79.00 barrier. The pair remains under negative pressure. We see bearish convergence on H4 MACD, but the general outlook remains bearish.
Nomura: “The dollar may be supported by likely buying from Japanese importers in the near term. But I do think it will test 78 yen.”
Chart. H4 USD/JPY
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GBP/USD: technical comments
GBP/USD consolidates close to the level of its opening ($1.5877) following a spike on positive British manufacturing PMI data (49.5 in August vs. forecasted 46.1 and 45.2 in July). The pair traded within the sideways channel in June-July before breaking its upper boundary ($1.5750) on August 21. GPB/USD trades above the 50-, 100- and 200-day MAs. On the H4 chart upward-directed MAs create a rather strong support for the pair.
Next resistance lies at $1.5900, $1.5911 (August 23 maximum) and $1.5928 (February 8 maximum). Support is seen at $1.5800, $1.5770 (August 30 minimum) and $1.5750 (upper boundary of the flat channel, August 28 minimum and a 100-day MA).
Chart. Daily GBP/USD
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