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August 24: forex news
As it has become usual during the recent days EUR/USD was in a very narrow range during the Asian session. Yesterday EUR renewed 6-week maximum at $1.2589. Greek Prime Minister Samaras visits German Chancellor Angela Merkel in Berlin. On Thursday Merkel said that her country and France will coordinate on their approach to keep pressure on Greece to overhaul its economy.
JPY strengthened versus the majority of its counterparts this week as demand for safe havens increased due to declines in Asian stocks and weakening global economic data. The MSCI Asia Pacific Index of shares is down by 1.1%. S&P 500 slid by 0.8% in New York yesterday, while the Stoxx Europe 600 Index fell by 0.6%. USD/JPY is back down from Monday’s high of 79.65 to the levels below 78.60. BOJ Gov Shirakawa speaks today at 7:45 GMT.
AUD depreciated this week as RBA’s Stevens said today that he did not intervene to the currency market, but pointed out that Aussie was higher than he expected. Stevens also claimed that Australian mining boom has another year or 2 left before it peaks. AUD/USD is testing support at $1.0420.
UK Q2 revised GDP is due at 8:30 today. Analysts expect an upward revision from -0.7% to -0.5% q/q. GBP/USD is down from 3-month high of $1.5912 reached yesterday. Also pay attention to US core durable goods orders (12:30 GMT).
Have a nice Friday!
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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: $1.2450, $1.2500, $1.2510, $1.2550;
GBP/USD: $1.5700;
USD/JPY: 78.50, 79.55. 79.75'
AUD/USD: $1.0290, $1.0300.
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EUR/USD: news from the battlefield
EUR/USD is trading about 50 pips below 6-week maximum at $1.2589 reached yesterday.
Sumitomo Mitsui: “Various potential pitfalls for the euro are coming up, so people want to sell when it rises. They sell and then buy back, sell and then buy back. There has been a continuation of that. The moves that have taken place are nothing more than position unwinding. Such unwinding may persist in the near term given a recent accumulation of short euro positions.”
Commerzbank: EUR/USD has already practically reached the targets $1.2597 (78.6% Fib) and $1.2600 by printing a daily maximum around $1.2590. The medium term downtrend will eventually resume. We’ll understand that this is happening when euro drops below $1.2342 (Tuesday’s minimum). We’ll stop speaking about correction and will admit euro’s strengthening when the single currency overcomes resistance of $1.2705/48.
Rise above $1.2590 may trigger further advance of EUR/USD to $1.2626 (June 7 maximum) and $1.2668 (June 11 maximum). Decline below yesterday’s minimums at $1.2523 would confirm continuation of the bearish trend, towards next downward target at $1.2410.
Watch USA durable goods at 12:30 GMT.
Chart. H4 EUR/USD
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NZD: technical picture
NZD/USD tested yesterday an important resistance of 0.8200 (2008 maximums, resistance line connecting 2011 and 2012 maximums). Yesterday’s daily candle looks very bearish.
NZD has support at 0.8100 (late June maximums), 0.8040 (August minimums) and 0.8000 (around here daily MAs intersect).
New Zealand released trade balance data: the nation’s trade surplus narrowed from 287M revised in June to 15M in July. Note, however, that with all the talk about potential easing from the major central banks, so it will very difficult for the bears to push the pair lower.
Analysts at NAB say: “As speculation regarding further quantitative easing from the Fed is renewed we see the NZD/USD finding eventual support and backing. Despite the volatility associate with the currency and the upcoming events, over the medium term we see the NZD/USD supported by relative growth and interest rate differentials, and maintain a year-end target of 0.8200.”
Commerzbank keeps insisting on the close coming downward reversal underlining that there’s resistance at 0.8223 (recent maximum) and 0.8260 (March resistance).
Chart. Daily NZD/USD
There’s the scope for some consolidation in the short term. The situation at H4 doesn’t look bad, kiwi isn’t overbought.
Chart. H4 NZD/USD
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MIG Bank: trading GBP/USD
GBP/USD is experiencing a correction after a rally to 3-month maximum of $1.5912 (61.8% Fibo retracement from May decline).
Analysts at MIG Bank are bullish on British currency. The specialists say that sterling is likely to retreat to previous high at $1.5800, but then it will resume growth as it managed to break to the upside its 2-month consolidation. The bank recommends placing buy limit at $1.5810 targeting 1.5912/1.6190/1.6302 at stopping at $1.5708.
On a downside, support lies at $1.5785 (50% retracement), $1.5750 (50-day MA), $1.5715 (200-day MA), $1.5660 and $1.5620. Resistance for GBP/USD lies at $1.5930 (February 8, April 10 maximum), $1.6000 (March 27 maximum, psychological level).
Chart. Daily GBP/USD
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USD/JPY: dollar may still recover
USD/JPY has been declining since Monday. The pair recoiled down from the 100-day MA and the top of the daily Ichimoku Cloud and returned to the previous sideways range within which it was trading in the first half of August. On the downside US dollar is supported by the risk of Japan’s interventions, on the upside – limited by the MAs and the recent highs.
USD may once again try to reach 80.00 yen, but we don’t this will happen last now. The final week of August will be highlighted with the expectations of more QE and this has to be a restraining factor for US currency.
Next week watch for US preliminary Q2 GDP and pending home sales. Both indicators are expected to improve. Standard Chartered believe that Japanese CPI data due next week will likely intensify concerns about deflationary pressure.
Analysts at Commerzbank stick to medium-term bullish view saying that USD/JPY will be targeting 80.00 as long as it trades above 77.90 (August minimum). Barclays sees see little downside risk from these levels, given Japanese policymakers' focus on the level of USD/JPY, while relative monetary policy and the risk of a sovereign downgrade suggest significant USD/JPY upside.
Chart. Daily USD/JPY
August 27: forex news
After its descent from maximums around $1.2590 EUR/USD manage to hold above $1.2500. The pair passed Asian session flat above this level. Watch for German Ifo business climate at 08:00 GMT – the report may show that the indicator fell to a 2-year low (Cons.: 102.7; prev.: 103.3). German Finance Minister Wolfgang Schaeuble meets his French counterpart Pierre Moscovici today to discuss Greek budget targets.
Today we’ll hear from the FOMC officials: Chicago FRB President Evans speaks at 10:00 GMT, while Cleveland FRB President Sandra Pianalto – at 16:15 GMT. France and Germany will sell short-term treasury bills.
UK Markets are closed for the bank holiday. GBP/USD went down from last week’s maximum at $1.5912 to trade above $1.5800. The People’s Bank of China lowered yuan’s fixing by the most in 3 weeks and the government urged greater support for exporters. AUD/USD touched $1.0370 and then consolidated above 15 pips from this point. USD/JPY rose from last week’s lows in the 78.30 area, but remained below resistance at 78.80.
Asian stocks show mixed results, with Nikkei +0.54% and Shanghai -0.84%, and all the rest in the middle. Gold reached today 4-month maximum of $1677.
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CFTC traders positioning data
The latest Commitments of Traders (COT) report for week ended on August 21 was released on Friday, August 24, by the Commodity Futures Trading Commission (CFTC).
Large currency speculators continued to decrease their overall USD long positions which declined during a week from $8.92 to $4.57 billion. The market’s sentiment for EUR improved after dipping the previous week. GBP positions switched from short to long ones. CAD longs rose a fourth consecutive week and surged to their best level since May 15. AUD long positions climbed to the highest level since April 12, 2011. NZD longs increased for an 11th straight week and continued to be at the highest level since the beginning of March.
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.
In the COT report all the market players are divided into three categories: hedgers (commercials), big speculators (non-commercials) and small traders (non-reportable positions). We analyze only non-commercial positions (mainly, these are banks and investment funds).
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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 24.
Source: FX Week
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EUR/USD: range trading is expected this week
EUR/USD is taking a pause after reaching last week the 7-week high at $1.2590.
On the one hand, the single currency may find support ahead of Ben Bernanke’s speech in Jackson Hole on Friday, August 31. On the other hand, many analysts think it would be quite difficult for euro to overcome the recent maximum in the near term.
Credit Agricole: “There's a lot of event risk, and I think this event risk will keep the euro capped. The currency will struggle to get above $1.26 this week.”
Mizuho Securities: “We can see fundamentals deteriorating in the euro region. The euro is in a long-term downtrend.”
Saxo Capital Markets: “We're having the same old issues coming out on the headlines about Greece. That's a capping point for the euro. This week EUR/USD is going to stay in range roughly between $1.2650 and $1.2400, not really breaking out of the highs that we saw last week.”
Chart. H4 EUR/USD
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