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USD/CHF: 'head and shoulders'
Last week we’ve written about the potential ‘head and shoulders’ pattern at USD/CHF chart. Now, as you may see at the H4 chart, the pair breached the neckline at 0.9735, so the model is completed.
As a result, we expect the pair to slide to 0.9660 (June 8 and 29 maximums) and then to 0.9580/70 (January maximums).
If the bulls gather their strengths and push the greenback above 0.9735, the pair will get chance to return to 0.9870 (the tops of the shoulders).
Chart. Daily USD/CHF
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BNZ: outlook for NZD/USD
Specialists at Bank of New Zealand recommend buying NZD/USD on dips towards $0.7850, because they expect the pair to edge higher by the end of 2012. In their view, the likelihood of further global policy easing, a high and rising interest rate differential, and buoyant soft commodity prices will support the kiwi.
Chart. Daily NZD/USD
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BBH: comments on AUD/USD
According to specialists at BBH, AUD/USD weekly close above $1.0550 opened the way to the $1.0640-70 area.
Analysts warn, however: investors don’t expect RBA to cut rates and buy Aussie ahead of the RBA meeting. As a result, AUD is vulnerable to "buy the rumor, sell the fact" trading after the RBA. What’s more, squeezing of short positions on EUR/AUD may also hurt the Australian currency.
Chart. Daily AUD/USD
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Macroeconomic indicators
The table below provides recent data on the main macroeconomic indicators and is an extremely valuable resource for any trader.
Table. Main macroeconomic indicators
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August 7-10: economic events
Tuesday, August 7
Australia: According to the consensus forecast, the RBA will keep rates unchanged at 3.5% after cutting the borrowing costs in May and June and staying on hold in July. Australian headline inflation was at 1.2% in June, at the lowest annual level in 13 years. The RBA’s preferred measure of inflation, which abstracts from volatile price movements, grew by 2% in June (y/y), which is at the bottom of the Reserve Bank’s inflation target of between 2-3%. Although the RBA has room to cut rates, it seems that the central bank may wait to see how the things elsewhere in the world are going. The nation’s Treasurer Wayne Swan said Australia's “rock solid economic fundamentals” were in stark contrast to conditions in Europe and elsewhere.
Switzerland: The unemployment rate fell from 3.2% in April to 2.9% in May an June. In July the figure is expected to remain unchanged. The SNB’s foreign currency reserves have been rising so far and rose to CHF 364 billion in June – now July data is due for release. Swiss CPI fell by 0.3% in June and analysts expect a sharper decline of 0.5% in July. Deflationary figures indicate a slowdown in economic activity.
Euro area: Italian GDP may have contracted by 0.7% in Q2 (q/q) after declining by 0.8% in the first 3 months of the year. This would be the forth quarterly decline in a row.
Britain: Manufacturing production may have contracted by 3.9% after adding 1.2% in May, surviving the biggest decline since March 2009. Also watch the NIESR GDP estimate which attempts to estimate the quarterly GDP release on a monthly basis. The previous reading was a weak -0.2%. The markets will be hoping for a July reading in positive territory.
US: Another speech of Bernanke. This time the Chairman will dwell on the need of financial education in the wake of the recent financial crisis. The audience will be allowed to ask questions.
Canada: Ivey PMI fell from 60.5 in May to 49.0 in June. An improvement to 51.7 is predicted in July. Building permits, on the contrary, may have dropped by 3.5% in June after rising by 7.4% in the previous month.
Japan: According to the forecasts, Japanese current account increased from 0.28T yen in May to 0.75T in June. Note however, that for 2 last times actual data came far below the predictions.
Wednesday, August 8
Switzerland: SECO consumer climate index, released every 3 months, been moving upwards in the last 3 releases. This time economists are looking forward to another gain in July to -4 points from the previous reading of -8.
Britain: The Bank of England will release Inflation report which may contain clues for the next moves of the central bank. The BoE will likely lower its current growth forecast as there were enough disappointing data since the report was last time released in May. Lower forecasts increase the likelihood of the BoE’s announcing additional asset purchases in September, though the current round of stimulus finishes only in November. The Bank is expected to predict almost zero growth for the economy in 2012, while just 3 months ago it was forecasting growth of around 0.7%.
New Zealand: The nation’s unemployment rate may have declined from 6.7% in Q1 to 6.5% in Q2.
Thursday, August 9
Australia: Australian labor market may have added 10.3K jobs in July after the unexpected contraction of 27K in June, while the unemployment rate may edge up from 5.2% to 5.3%.
China: Analysts predict CPI to continue its declining trend and even hit a 30-month low of below 2%. Low inflation is welcome news to government officials looking to enact additional stimulus measures in the face of slowing growth. The recent PMI figures have pointed to evidence that recent efforts by the Chinese authorities to reinvigorate growth have at least managed to stabilize the economy, though a return to trend growth still seems elusive. Markets expect retail data to show that sales increased by 13.6% y/y in July, down slightly from 13.7% growth in June. Industrial output likely expanded by 9.8%, up from 9.5% in June. Fixed asset investment levels – a key component of China's economic expansion over the past decade – are expected to have edged up to 20.6% growth ytd/y from 20.4% at the end of June.
Japan: The Bank of Japan is expected to keep monetary policy steady but may escalate its warnings over slowing global demand and renewed gains in yen, signaling its readiness to ease again if the economy’s recovery comes under threat. Deflation remains one of the main concerns of Japanese monetary authorities and there’s scope for future stimulus.
US: American trade deficit probably shrank in June as cheaper oil reduced the import bill and slower global growth led to reduced demand for American-made goods. According to the consensus forecast, the gap probably narrowed to $47.5 billion, the 4-month minimum, from $48.7 billion in May. Weekly jobless benefit claims are expected to edge up to 371K from 365K in the previous week.
Friday, August 10
Australia: The RBA releases its quarterly monetary policy statement. In the February the central bank reduced near-term forecasts for both economic growth and inflation. Then in May the RBA not only reduced near-term economic growth forecasts but also reduced the forecasts at the bottom of its indicative range for growth through to the end of 2013. At the same time, the RBA trimmed inflation forecasts to the end of 2012. This time, the RBA may lift the near-term economic growth estimate but it is likely to retain the medium-term view that economic growth will be around “normal” levels of 3.0-3.25%. Little change is expected in the inflation forecasts with the Reserve Bank projecting that inflation will hold in the 2.0-3.0% target band. In short, the Reserve Bank will leave the door open to further rate cuts over 2012.
China: Trade surplus may have expanded from $31.7B in June to $35.1B in July.
Britain: PPI Input index has been well below the zero line since April. However, the markets are forecasting a much stronger July reading, with an estimate of a 1.3% gain.
Canada: According to the economists, the number of employed people rose by 10.2K in July, while the unemployment rate rose last month to 7.3% from 7.2% in June.
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August 8: forex news
The MSCI Asia Pacific Index (MXAP) of stocks rose 0.9%, following a 0.7% advance in the MSCI World Index yesterday. Risk sentiment, however, remains subdued: demand for high-yielding currencies is rather weak. AUD/USD slid from yesterday’s highs below $1.0550, demonstrating a 3-day decline. According to data released today, Australian home loans increased by 1.3% (forecast: 2.1%; previous: -0.9%). NZD/USD fell to $0.8130 levels after touching $0.8218 yesterday. USD/CAD slightly strengthened, though the pair trades below the parity level. GBP/USD remains under pressure ahead of BoE inflation report.
USD/JPY rose yesterday testing the upside of its current trading range around 78.65 yen as global stocks rose and the extra yield on 2-year U.S. Treasuries over Japan’s government bonds widened to the most in one month. The pair, however, was contained by resistance and has edged lower today – investors don’t expect much of the BOJ meeting the results of which will be announced tomorrow.
EUR/USD has once again begun trading day below $1.24. On the H1 chart we see consolidation in the $1.2443/2365 continue.S&P revised the outlook on Greece’s CCC credit rating from stable to negative saying that the nation risks losing its estimate if it fails to obtain the next disbursement from the EU and IMF rescue package. Spanish 10-year yields closed yesterday at 6.86%, 12 bps up, while Italian ones – at 5.97%, 3 bps down.
The Fed’s Chairman Ben Bernanke defended yesterday the central bank’s zero rate policy claiming that it’s necessary “to help the economy recover and restore more normal levels of employment and growth.” According to Bernanke, the effects of the crisis on the US “are pretty significant.”
Events to watch today:
Euro area: Watch for German data – trade balance at 06:00 GMT and, probably most important, German industrial production at 10:00 GMT. The nation will offer up to 4 billion euro in 10 year bunds at 06:00 GMT.
Britain: The Bank of England will release Inflation report (9:30 GMT) which may contain clues for the next moves of the central bank. The BoE will likely lower its current growth forecast as there were enough disappointing data since the report was last time released in May. Lower forecasts increase the likelihood of the BoE’s announcing additional asset purchases in September, though the current round of stimulus finishes only in November. The Bank is expected to predict almost zero growth for the economy in 2012, while just 3 months ago it was forecasting growth of around 0.7%.
New Zealand: The nation’s unemployment rate (22:45 GMT) may have declined from 6.7% in Q1 to 6.5% in Q2.
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GBP/JPY: time to buy, says Nomura
Analysts at Nomura are pretty sure that risk premiums are set to fall as the odds of the great disaster in Europe diminish. As a result, the specialists claim that it’s time to sell the ultimate safe haven – Japanese yen.
Nomura recommends selling yen versus British pound. “Interest rates are so low in Britain that any more quantitative easing isn’t likely to weigh on the pound.” According to the bank, this is already the second chance in 2012 for yen crosses to trade higher. GBP/JPY rose from January minimum in the 117 area to 133 in March, when investors’ risk appetite improved in Q1. The same revival of risk appetite is happening again, with stocks rallying and both the ECB and the Fed expected to unleash a wave of bond-buying to spur economic activity.
Note, however, that Nomura warns that current levels are less than perfect for entry, so don’t open large positions, but add on sterling’s declines.
Chart. Daily GBP/JPY
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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: $1.2250, $1.2300, $1.2320, $1.2400, $1.2410, $1.2475, $1.2495;
GBP/USD: $1.5600, $1.5810;
USD/JPY: 78.50, 78.80, 79.00, 79.85;
USD/CHF: 0.9705;
AUD/USD: $1.0450, $1.0500, $1.0515;
EUR/GBP: 0.7800.
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AUD/USD: technical comments
AUD/USD slid from yesterday’s highs below $1.0550. We see that the market players are unsure: small candles formed this week indicate indecision, especially the ‘spinning top on Monday’. Such dynamics isn’t really surprising after all the way up the pair has made to the upwards so far and some cautiousness ahead of the data releases.
Medium-term (daily chart)
Aussie trades close to a 4-month high at $1.0603, tested on Tuesday, and the upper boundary of the upward channel existing since mid-June. On the daily and H4 chart the pair trades above the up-directed 200-, 100- and 50-period MAs.
In our view, the medium-term uptrend looks rather resilient. The next resistance lies at $1.0640/70 (March 19 and 7 maximums), $1.0750/60 (Sep. and Oct. 2011 maximums) and at $1.0855 (2012 maximum). Support lies at $1.0540, $1.0475 and $1.0435 (August 2 minimum). Bulls have a clear advantage above $1.0475 (April 27 maximum, beginning of a sharp May decline).
Chart. Daily AUD/USD
UBS: In an environment where the central banks are maintaining a trend of zero rates, demand for the Aussie is likely to increase, not to mention triple-A demand adding to the interest.
Near-term (H4)
On the H4 chart we can see a bullish MACD divergence. We concede a correction to $1.0450 (middle of the channel) and to $1.0280 (lower boundary and the 200-day MA). Exit from the upward channel would pave the ground for a further decline to $1.0176 (July 25 minimum) and to $1.0100 (July 12 minimum).
Chart. H4 AUD/USD
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EUR/USD: ‘inverse head and shoulders’ (RBS)
Technical analysts at RBS claim that Friday’s 200-pip advance of EUR/USD completed an ‘inverse head and shoulders’ pattern at the daily chart. In addition, the pair broke above resistance of the downtrend line that began and had held since May 1. The outlook for euro is bullish in the short-term and the single currency may rise to $1.2540. There’s now a support at $1.2341 (neckline).
RBS recommend longs on the dips to $1.2293/1.2341 targeting $1.2445 and probably $1.2539.
Chart. Daily EUR/USD
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