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Commerzbank: USD/CAD may reverse up
Technical analysts at Commerzbank believe that the greenback will manage to overcome 2-month resistance against its Canadian counterpart at $1.0276. If USD/CAD closes above this level, the pair will be able to rise to $1.0362 (June maximum), $1.0523 (November maximum) and probably to $1.0575 (200-week MA). The specialists recommend buying US currency on the dips in the $1.0111/1.0079 zone (200-day MA and 100-day MA, short term uptrend line).
Chart. Daily USD/CAD
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USD/JPY: short-term – bearish, longer-term bullish
The greenback remains under pressure versus Japanese yen – we see a downtrend on USD/JPY H4 chart. Analysts at RBC Capital Markets note that support for USD/JPY lies at 78.00 and 77.64. Despite the negative picture, there’s the risk of the BOJ intervention below 78.00, so we wouldn’t recommend going short at this point. Resistance for the pair lies at 78.30, 78.64 and 78.80, 80.00 and 80.60. If the pair gets above the latter, it will become able to rise to 84.00.
RBS: Investors try to satisfy their demand for safe haven buying yen. In the near term, yen will likely remain the market’s refuge. However, the underlying fundamentals for JPY have sufficiently deteriorated. This fact may encourage Japanese policymakers in their efforts to weaken the national currency and justify such action on their part. The nation’s policymakers have to convince markets that they are prepared do what it takes to prevent excessive JPY gains. “We continue to hold a medium term long USD/JPY trade recommendation.”
Note: don’t forget about the major risk event – US GDP release on Friday.
Chart. H4 USD/JPY
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EUR recovers on Nowotny’s comments
The single currency rose from the daily/weekly/2-year minimum versus the greenback around $1.2050 to the levels above $1.2100 snapping 5-day decline. The yields on Spanish 10-year bonds went down by 14 bps to 7.48%.
Euro got support after the ECB council member Ewald Nowotny claimed that there were arguments in favor of giving the European Stability Mechanism a banking license. In this case the ESM would get access to ECB lending. Such option eases concerns that 500 billion-euro ($608 billion) fund won’t be enough to cover funding needs of Spain or Italy.
The market is too short on euro, so the positive news provoked some short squeeze. Analysts at UBS don’t believe that the ESM may get banking license as the ECB President Mario Draghi has repeatedly rejected the idea. The specialists view Nowotny’s comments as “being slightly taken out of context" and think that "any such move seems unlikely.”
Analysts at Commerzbank “see temporary corrections of up to $1.2250 in EUR/USD at best, which offer better selling opportunities” expecting $1.2000 to be tested very soon.
Chart. H4 EUR/USD
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July 26: economy & currencies
EUR/USD is consolidating in the $1.2120/65 area after yesterday’s jerk up as the ECB’s Nowotny suggested the ESM might get a banking license. The market’s attention will be focused on Mario Draghi’s speech in a panel discussion in London along with the Bank of England’s governor King – investors will look for Draghi’s reaction on Nowotny’s comments. Germany Gfk сonsumer сonfidence slightly rose from 5.8 in June to 5.9 in July, while the nation’s import prices declined in June by1.5% (vs. –o.6% expected).
The MSCI Asia Pacific Index (MXAP) of stocks advanced 0.4%, capping four days of decline. The high-yielding currencies strengthen on the back of the improved risk appetite and as the U.S. data on Friday may show growth slowed in the world’s largest economy. NZD/USD rose after the RBNZ Governor Alan Bollard left benchmark interest rates on hold at 2.50% and said the economy should grow “modestly.” AUD/USD strengthens for a second consecutive days and trades above $1.3000, while USD/JPY demonstrates a modest growth after the safe Japanese currency strengthened for 6 consecutive days.
There are plenty of data released today: EU M3 and Italian retail sales at 08:00 GMT, US core durable goods and unemployment claims at 12:30 GMT, and US pending home sales at 14:00 GMT.
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EUR/USD: consolidating within downtrend
EUR/USD is consolidating in the $1.2130/65 area after yesterday it gained about 80 pips on the ECB’s Nowonty comments about the possibility of giving a banking license to the ESM. Spanish 10-year government bond yields declined from the record highs around 7.75% to the levels near 7.38%.
Analysts at Credit Agricole think that any bounce of the single currency will be short-lived. “The ECB is still quite divided on the issue of giving the ESM a banking license”, say the specialists. At the same time, the bank underlines that the single currency will be supported ahead of the Fed’s meeting next week (August 1) on the talk that US central bank may take some easing steps. Speculation about the possibility of such action will strengthen if weak US Q2 GDP is released on Friday. Don’t forget, however, that the central bank extended Operation Twist in June to the end of 2012.
Support: $1.2130 (today’s minimums, Monday’s highs, 100-hour MA), $1.2065 (Monday’s minimum), $1.2040 (2-year minimum hit on Tuesday).
Resistance: $1.2165 (yesterday’s maximums/July 12/23 minimums), $1.2180/90 (July 16, 17 minimums).
Chart. H1 EUR/USD
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AUD/USD: technical comments
On Thursday AUD/USD trades above $1.0300, demonstrating growth for a second consecutive day. As can be seen from the daily chart, today the pair trades close to the lower boundary of an upward channel existing since June. Yesterday the bulls managed to fix above an important 200-day MA. On the H4 chart the pair trades close above the up-directed 200-, 100- and 50-period MAs.
Resistance: $1.0400; $1.0443 (July 19 maximum); $1.0450 (April 12-13 double top); $1.0473 (April maximum); $1.0500; $1.0557 (March 27 maximum); $1.0635 (March 19 maximum); $1.0750/60 (Sep. and Oct. 2011 maximums); $1.0855 (2012 maximum)
Support: $1.0300/10 (psychological and 50-period MA on the H4 chart); $1.0280 (200-day MA); $1.0264 (100-period MA on the H4 chart); $1.0200 (psychological and a 100-day MA); $1.0168 (200-period MA on the H4 chart); $1.0100 (July 12 minimum); $1.0057 (50-day MA); $0.9968 (June 22 minimum); $0.9579 (June 1 minimum)
In our view, a medium-term uptrend looks rather resilient: further advance of the Aussie may lead AUD/USD to $1.0443 (July maximum) and $1.0473 (April maximum). On a downside, a break below the 200-day MA ($1.0280) will pave the ground for a further decline to $1.0176 (July 25 minimum) and to $1.0100 (July 12 minimum).
Chart. Daily AUD/USD
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Westpac: outlook for AUD/USD
According to analysts at Westpac, AUD/USD is unlikely to breach the $1.0350-1.0400 area without Fed or ECB intervention.
Specialists, however, note the resilience of demand for the Aussie this month. In their view, in a near term $1.0400 levels look a little bit pricey for the pair. They expect AUD/USD to return to similar levels no later than Q4.
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USD/JPY: technical update
The outlook for USD/JPY is neutral on the H1 chart where the greenback’s fluctuating in narrow range of 78.00/30 and negative on H4 chart where we the pair remains inside descending channel.
The pair will likely stay above 78.00 helped by demand from Japanese importers below this point at the risk of the BOJ intervention. At the same time, from the technical point of view, the next major support is only at 77.65 (June minimum). The bulls will take over the initiative once USD/JPY managed to return above 200-day MA above 79.00.
Resistance: 78.27 (yesterday’s maximum), 78.45 (July 20 minimum), 78.80 (July 20 maximum), 79.00.
Support: 78.00, 77.65 (June minimum), 77.35 (February 14 minimum, January 6 and 19 maximums).
Chart. Daily USD/JPY
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Commerzbank: comments on GBP/USD
GBP/USD trades on a downside for a second day. The sentiment surrounding the sterling remains anxious: the pair remains under pressure mainly after yesterday’s negative UK GDP release. The data could encourage the BoE to ease monetary policy further, weighing on the British currency.
According to technical analysts at Commerzbank, a recent failure to overcome the $1.5736/85 resistance area is likely to bring GBP/USD down to $1.5392 and then to $1.5267.
Chart. Daily GBP/USD
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EUR/JPY: short-term technical
EUR/JPY has hit 12-year minimum this week at 94.10 on concerns about Greece and Spain.
Japanese currency remains strong despite comments and threats of Japan’s monetary authorities. Risk appetite remains lackluster, so yen will likely continue being investors’ refuge.
Some analysts say the level of 94.00 yen may be a kind of a threshold eyed by the Bank of Japan as it’s said about the 78.00 mark for USD/JPY. At the same time, EUR/JPY remains within a clear downtrend and the negative bias here is much stronger than in USD/JPY taking into account the persistent euro zone’s problems. All in all, you may try small shorts below 95.20 as the EUR/JPY will likely revisit the recent lows.
Resistance: 95.20 (yesterday’s maximum), 95.40 (Friday’s closing level) and the 95.80 area (200-hour MA).
Support: 94.65 (50-hour MA), 94.40 and 94.10 (see the chart below).
Chart. H1 EUR/JPY
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