Comments and forex-analytics from FBS Brokerage Company - page 205
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Analysts: what supports the Aussie?
Despite the risk negative environment, the Australian currency is enjoying a big increase in net long positions. What’s the reason?
According to some economists, the Aussie is supported by policy easing expectations: the ECB is likely to launch a massive bond-buying program, while the Fed seems to be close to a third round of QE.
"As global central bank policy has diminished tail risk and crushed volatility traders are adding to risk positions," say strategists at Scotiabank.
However, strategists at RBC are less optimistic. In their view, the Aussie is to weaken after the RBA expressed concerns about the impact of a strong national currency on the economy. Specialists add that the net long positions growth was too quick (investors were short on the Aussie in early June).
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USD/CAD: technical update
Last week USD/CAD breached downtrend support line which started to act as resistance. In addition, the pair went below the uptrend support line at 0.9955 connecting 2011 low and April 2012 minimum. This too will strengthen resistance.
The greenback is now consolidating above 0.9900 (psychological level which has acted several times as support during the past 2 years). If this support fails, USD/CAD will slide to 0.9800. At the same time, daily RSI is close to the oversold area.
Chart. Daily USD/CAD
On the H4 chart we see bearish convergence on MACD – bullish signal. However, 50-, 100- and 200-day MA are sloping down providing resistance for the pair.
Chart. H4 USD/CAD
Resistance: 0.9955 (previous support line), 1.0000 (psychological level), 1.0050 (February, April maximums, December 2011 minimum), 1.0100 (200-day MA).
Support: 0.9900, 0.9860, 0.9840 (February, March minimums), 0.9800.
We think that USD/CAD will be moving lower, but think that support at 0.9800 is very strong, so one should be looking for a chance to enter longs down there.
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NZD/USD: technical comments
On Tuesday investors are indecisive on the NZD/USD, but all in all the pair demonstrates a weekly decline. The kiwi has approached a strong support (previous resistance) at $0.8065 – the pair again and again repelled from this level in 2011 and 2012.
As can be seen from the daily chart, the pair remains in a channel, created by two lines: the upper connects 2011 and 2012 highs, the lower - the bodies of these candles). Today NZD/USD trades slightly above the lower. If the pair breaks it on a downside, it will target the lower boundary of the upward channel, existing since June. Support can be seen around $0.7960 (MA’s crossing) and $0.7810 (July 25 low).
If not, the pair will fluctuate towards the upper channel-forming line. Further strong resistance lies at $0.8200, $0.8317 (April 13 maximum) and $0.8470 (February 29 maximum).
Note that on a daily chart we can see a bullish divergence.
Chart. Daily NZD/USD
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US data comes more solid than expected
Things in the US aren’t that bad after all, are they?
After mixed (more negative than positive) news from Europe, US data came better than expected.
American retail sales rose by 0.8% m/m (cons.: +0.3%; prev.: -0.7%). Core indicator increased by 0.8% (cons.: +0.4%; prev.: -0.8%). PPI added 0.3% m/m last month (cons.: +0.3%; prev.: +0.1%). Core indicator increased by 0.4% (cons.: +0.2%; prev.: +0.2%).
Wells Fargo: “Overall, foreign exchange markets continue to show a lack of conviction, although with global equity markets and European bond markets showing gains, we have a slight bias towards yen and US dollar weakness, and strength in most other foreign currencies.”
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August 15: forex news
High-yielding currencies weaken amid concerns US data will reduce the expectations for QE3. Demand for Aussie was also tempered after the Westpac consumer sentiment index fell amid prospects the RBA will keep interest rates unchanged. AUD/USD trades below $1.0500, while NZD/USD – below $0.8100. USD/CAD consolidates around 0.9920.
EUR/USD is trading below the week’s maximum ($1.2385), in the narrow range of $.1.2320/30, between 50- and 100-hour MAs. Markets in many European countries are closed due to the Assumption Day celebration. No data releases are scheduled in Europe; there even are no debt auctions.
The main attention this afternoon will be focused on the UK. At 8:30 GMT Britain will publish labor market data (jobless claims, unemployment rate) and the MPC meeting minutes. GBP/USD spiked to $1.5728 yesterday, but was contained by the 200-day MA.
USD/JPY rose yesterday above 20-day MA and reached 1-month high at 78.93 helped by positive American data.
Today the US will continue releasing important indicators: core CPI and Empire State manufacturing index at 12:30 GMT and industrial production at 13:15 GMT. The data is expected to support the greenback.
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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: $1.2200, $1.2210, $1.2225, $1.2300, $1.2350;
GBP/USD: $1.5675;
USD/JPY: 78.00, 78.10, 78.25;
EUR/JPY: 97.00;
EUR/GBP: 0.8000.
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BofA: bearish on NZD/USD
According to technical specialists at Bank of America, NZD/USD may fall after descending from the top of its year-long downward range.
The kiwi broke below the important support (previous resistance) at $0.8067, confirming the slide from the top. The pair again and again repelled from this level in 2011 and 2012. Strategists expect the pair to decline to $0.7841 and then to $0.7489.
Chart. Daily NZD/USD
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USD/JPY is up from the recent range
The technical picture improved. The pair USD/JPY rose yesterday above 20-day MA and reached 1-month high at 78.93 helped by positive American data. Today the bulls pushed the pair through the resistance line at 78.75 connecting March, June and July maximums.
Commerzbank: The greenback will rise to 79.01 (55-day MA) and 79.19 (200-day MA). The pair should close above 79.19 to get chance to rise to 80.63 (June maximum) in the coming weeks. If USD/JPY fails to overcome this obstacle, it will be vulnerable for a slide to 78.03/77.90. The resistance at 200-day MA is traditionally strong.
Chart. Daily USD/JPY
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Olli Rehn: Spain may ask for sovereign bailout
European Economic and Monetary Affairs Commissioner Olli Rehn signaled yesterday that Spain’s government is considering a request for a sovereign bailout after earlier accepting 100 billion euro of aid to help the nation’s banks, reports Bloomberg.
“The Spanish government has an open mind on this issue, but no decision has been made. We stand ready to act if there is a request,” said Rehn.
Spanish 10-year bond yields reached record maximum of 7.62% on July 24. Yesterday yields eased to 6.72%. Another euro zone’s nation, Belgium, on the contrary, sold 3-month bills at negative yield. In other words, investors paid to lend Belgium money. Rehn underlined that this is “not a healthy phenomenon”, but a “sign that the euro-zone economy is not doing well”.
Olli Rehn, EU Commissioner for Economic & Financial Affairs
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JPY: contrary prospects
The yen issue doesn’t leave us. The views, as always, differ.
Nomura says that global risk-on environment suggests a higher possibility of JPY weakness in the near future. The specialists have already proposed to buy GBP/JPY. “US yields are always one of the most important determinants for USD/JPY and yield movements ahead of the next FOMC meeting in September may increase volatility.” Tuesday’s strong retail trade figures “could also be seen as an encouraging sign of a risk rally in the near future.”
RBC reminds yen tends to strengthen in August. The specialists say that although this hasn’t happened yet, things may change. “With a heavy concentration of US Treasuries coupon payments this week repatriation flow is likely to pick up against a background of depressed liquidity, particularly so given the Obon holidays (August 11-19) in the early part of the week.” According to the analysts, USD/JPY declined by an average of 137 pips every August through 2005.
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