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GBP/USD: technical comments
GBP/USD surged to $1.5678 on ECB and Mario Draghi’s comments, but then slid back to $1.5500 levels. This week the pair declined for three consecutive days, showing the sharpest fall on Wednesday. The pair has been bouncing in a flat range since June after trading in a bearish channel in May.
In our view, GBP/USD is likely to remain in a sideway channel in the nearest future because of the strong resistance levels concentrated in the $1.5735/85 area (200-day MA, 50% Fib. retracement from a May drop and the upper boundary of a daily Ichimoku cloud). A close above $1.5780 could open the way for a further rise to $1.5904. On a downside the next support for the pair out of the bounds of the sideways channel lies at $1.5392 (July 12 minimum) and at $1.5267/33 (June and 2012 minimums).
According to analysts at Commerzbank, GBP/USD may fall to $1.5000 (two-year low) after it failed to overcome the $1.5735/85 resistance area. In their view, repeated failure to break through the resistance means the pair will depreciate in 1-3 month.
Chart. Daily GBP/USD
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Draghi’s press conference
The ECB President Mario Draghi delivered almost nothing today: it seems by claiming that the ECB will do whatever needed to save euro Draghi simply delayed the inevitable slide of the single currency.
The ECB governing council discussed rate cut, but concluded that the time for then isn’t right.
Draghi:
- “There was no mentioning of bond buying last week. I just gave the general philosophy of the ECB’s approach”.
- The EFSF should buy the debt of the euro zone’s problem nations. As for the ECB, it may take further non-standard measures. The central bank’s going to discuss options of future action including unconventional policies and “there’s no need to specify them,” “the relevant committees should examine further measures.”
- Monetary policy can’t solve all the problems of the euro area. Governments have to act.
- Inflation should decline further to below 2% in 2013. Inflation expectations are firmly anchored.
- Euro zone growth remains weak.
- Heightened uncertainty is weighting on euro sentiment. Euro is irreversible. “It’s pointless to go short on euro. It will survive”.
- Risk premium for some nations is exceptionally high. High yields are unacceptable.
- “Any bond buying will be focused on the short part of the yield curve.”
- “Current design of ESM does not allow it to be recognized as a suitable counterparty.”
- “I am surprised by amount of attention ESM banking license has received.”
EUR/USD spiked up to $1.2294 before plunging to $1.2173.
Image by Getty
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PBoC promises to fight slowdown
The People's Bank of Chinar pledged to use multiple monetary policy tools to guide stable and appropriate growth in credit and money supply, to forge ahead with market-based interest rate reforms and to increase the flexibility of the yuan in order to resolve domestic economic problems.
According to regulator's second-quarter monetary policy implementation report, the global economy may fall into recession again. The euro zone’s debt crisis is likely to worsen, while US economy still doesn’t have a necessary ground for a steady rebound.
Photo: Bloomberg
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August 3: forex news
After 2 days of central banks’ meetings the market’s holding its breath ahead of July Non-Farm payrolls report released in the US at 12:30 GMT (cons.: +100K, prev.: +80K). American unemployment rate is seen unchanged at 8.2%. In the US also watch ISM non-manufacturing PMI. On Friday market participants avoid making any moves.
The Asian session was quite as we've got used to this week. High-yielding currencies demonstrate a moderate growth. AUD/USD strengthens for a second consecutive day as yesterday’s drop on ECB was offset. NZD/USD gains as Standard & Poor’s affirmed the nation’s credit rating and said its outlook is stable. USD/CAD moves on a downside after a three-day growth. Japanese yen weakens vs. the greenback ahead of NFP. USD/JPY slid back to the 78.30/00 range. Today the greenback initially fell towards the lower border of this area, but then managed to return to 78.25 yen.
EUR/USD is crawling up from yesterday minimum at $1.2133 hit after the ECB’s Draghi disappointed the markets who expected more. So far, euro has managed to retrace about 50 pips rising to the levels around $1.2185 – most of this move was accomplished during US session. Spanish 10-year yields jumped yesterday from 6.6% to 7.25%. In Europe we’ll get some PMI figures (Spain, Italy, France, and Germany) and euro zone’s retail sales.
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Key options expiring today
Market prices tend to move towards the strike price at the time large vanilla options (ordinary put and call options) expire. It happens (all things equal) as each side of the deal seeks to hedge its risk exposure. This action is most noticeable ahead of 10 a.m. New York time when the majority of options expire (2 p.m. GMT).
Here are the key options expiring today:
EUR/USD: $1.2000, $1.2025, $1.2180, $1.2195, $1.2200, $1.2240, $1.2250, $1.2300, $1.2325, $1.2370;
USD/JPY: 77.30, 77.50, 78.00, 78.50, 78.75;
GBP/USD: $1.5500, $1.5580;
USD/CAD: 1.0000;
AUD/USD: $1.0500, $1.0550.
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Commerzbank: negative bias for EUR/USD
Technical analysts at Commerzbank point out that EUR/USD didn’t manage to overcome resistance at $1.2390 (23.6% Fibonacci of the pair’s decline in 2012). Euro will remain under bearish pressure as long as it’s trading below $1.2406 (yesterday’s peak). Support lies at $1.2130/15 and $1.2042 (July minimum). Resistance is found at $1.2406 and $1.2527.
Chart. H4 EUR/USD
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Barclays: comments on AUD prospects
According to currency strategists at Barclays, in a near-term AUD/USD is likely to get under pressure because of the increased risk aversion, commodity prices drop and slow growth of Australian trading partners. Specialists expect Aussie to decline to $1.0100 in a month.
Chart. Daily AUD/USD
Analysts also remain bearish on AUD/NZD as the Australian currency is very sensitive to global stock prices. They expect the pair to drop to $1.2800 in a month.
Chart. Daily AUD/NZD
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NZD/USD: technical comments
On Friday NZD/USD strengthens for a second consecutive day. The pair trades above $0.8100, staying beyond the sideway channel the pair left last Friday. NZD/USD traded sideways after an uptrend early June. On the H4 and daily charts the pair trades above the 200-, 100- and 50-day MAs. On a daily chart RSI is close to 70, indicating the kiwi will soon become overbought.
In our view, bulls have a clear advantage as NZD/USD remains above $0.8045 (upper boundary of the sideway channel). The pair may strengthen to $0.8240 (April 30 maximum), passing hurdles at $0.8170 (August 2 maximum) and $0.8200. On a downside, nearest support for the pair lies at $0.8045 and at $0.7960 (crossing of the 100- and 200-day MAs).
Сhart. Daily NZD/USD
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Pimco: global growth’s considerably slowing
Strategists at Pacific Investment Management Co. (Pimco), the world’s largest bond fund, think that global economy is suffering its severest slowdown since the global recession ended in 2009.
According to Pimco, the world’s GDP will add 2.25% during the next 12 months. That’s less that in 2011 and 2010 – 3.9% and 5.3% respectively (IMF data). In 2009 global economy contracted by 0.6%.
The main problems are the debt crisis in Europe and economic slowdown in US and China. The odds of recession in America are estimated by 25-33%. The possibility of euro area’s break-up during the next 6 months is estimated by 35%. Pimco expects European economy to contract by 1.5% in the coming year after rising by 1.5% in 2011.
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USD/JPY: technical picture
Things are quite boring at USD/JPY H4 chart – the pair’s consolidating in a slightly broader range than before between 78 yen on the downside (psychological level) and 78.65 yen on the upside (June 15 minimums, last week maximums).
It seems that that as long the greenback’s trading below 78.65, it’s vulnerable for retesting 77.65 (June minimum). If US currency manages to break above the mentioned resistance, it will be able to rise to 79.00/20 (psychological level, 50- and 200-day MAs).
Chart. H4 USD/JPY
Support: 78.00, 77.90, 77.65.
Resistance: 78.65, 78.80, 79.00, 79.20.
The broader technical picture remains negative – the downtrend from June 2007 (124.13) remains in place, though the consolidation may continue for some more time.
Chart. Weekly USD/JPY
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