FOREXYARD: Forex News Blog | |
- Merkel-Sarkozy Meeting in Paris
- Domestic Prices Falling Across Japan
- US Investment and Manufacturing in Steep Decline
- Australian New Motor Vehicle Sales Up in July
- Living with a Strong Japanese Yen
- Weekly Technical FX Preview – How High can the USD/CHF Go?
| Merkel-Sarkozy Meeting in Paris Posted: 15 Aug 2011 07:30 AM PDT
Speculation in the media and comments from the Italian Economy Minister fueled speculation for a potential Eurobond discussion but the idea was quickly shot down as Schaeuble told Der Spiegel weekly “I rule out euro bonds for as long as member states conduct their own financial policies, and we need differing interest rates so that there are possibilities of incentives and sanctions to force fiscal solidity." Most likely we will see statement of solidarity between the two nations supporting the previously agreed upon terms from the July 21st meeting. The two leaders will likely address Italy and Spain as the nation's sovereign bonds have come under pressure the last two weeks with yields on the 10-year bonds rising above 6% before the ECB stepped in with its bond purchases. ECB bond purchases were expected to range between EUR 10-15 bn though the ECB looks to have come in right on target at EUR 15.22 bn (USD 22 bn). This shows the market the ECB was serious when entering the sovereign bond market to support Italian and Spanish debt. Tomorrow euro zone flash GDP will be released with estimates of 0.3% growth for Q2 in contrast to the 0.8% Q1 data. According to the most recent PMI surveys growth is expected to slow both in peripheral Europe and in Germany. French Q2 GDP released on Friday was flat. Given market positioning from the most recent IMM Commitment of Traders Report the EUR seems ill positioned for a rally with speculators relatively flat and open interest continuing to fall. Though as this is being penned the EUR/USD has rallied sharply past the initial 1.4450 resistance level and is testing the consolidation pattern from the May high. The next resistance is found 1.4535 and 1.4580 with support back at 1.4450 and 1.4130.
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| Domestic Prices Falling Across Japan Posted: 15 Aug 2011 07:07 AM PDT
Although Japan's preliminary gross domestic product (GDP) data for the second quarter of 2011 revealed mild contraction, its GDP Price Index underscored sharp declines in prices across the island economy. The data, presented in an annualized format, revealed a 2.2% reduction in prices from this time last year. Used as a primary measure of inflation by the Bank of Japan (BOJ) the GDP Price Index is one of the broadest measures of the nation's inflationary growth or contraction. This month's report revealed significant contraction in inflationary growth, which may lead to a deflationary trap if measures are not taken. Traders will want to watch the BOJ in the coming days as strong moves should be expected. Read more forex trading news on our forex blog. |
| US Investment and Manufacturing in Steep Decline Posted: 15 Aug 2011 07:03 AM PDT
The balance between foreign investment in American assets and American investment in foreign assets was seen to be approaching parity in July according to the publication of the TIC Long-Term Purchases report this afternoon. Additionally, New York's manufacturing index revealed sudden and sharp contraction throughout the previous month. These two reports in tandem paint a dire picture for an American economy recently struck by a ratings downgrade from Standard & Poor's. The inability to attract foreign investment will likely result in sharp downturns in the value of the US dollar (USD) this week as speculators price in reduced currency demand. Sluggish manufacturing growth will also begin to gouge currency values as limited growth pulls down on the appeal of US assets. Read more forex trading news on our forex blog. |
| Australian New Motor Vehicle Sales Up in July Posted: 15 Aug 2011 06:58 AM PDT
A report by the Australian Bureau of Statistics this morning revealed solid growth in the purchase of new motor vehicles. Last month's adjusted value of this same report showed mild growth in such spending by approximately 1.9%. But this month's report surprised even skeptics. The indicator, published at 2:30 GMT Monday, highlighted a strong surge in consumer purchases of new motor vehicles by approximately 8.6% in July. Released 20 days after the end of the month means this report carries less impact than others of its kind, but it does carry a direct correlation to consumer confidence and outlook. The Australian dollar (AUD) may see some upward growth this week, but its gains will likely be limited and strongly affected by global events. Read more forex trading news on our forex blog. |
| Living with a Strong Japanese Yen Posted: 15 Aug 2011 04:48 AM PDT
The Japanese economy continues to improve following better than expected Q2 GDP. The data had little impact on the yen but Asian equities finished broadly higher in a quiet much less volatile European trading session. Japan will likely continue to struggle with JPY strength given the actions taken by the SNB to weaken the Swiss franc and the commitment by the Fed to keep US interest rates at ultra-low levels. This will either require further intervention from the Ministry of Finance or a compromise by Japanese Industry to thrive in an environment of a strong JPY. Q2 Japanese GDP fell -0.3% but the outcome was rosier than the headline portrays. Consensus expectations were for a decline of -0.6%. On an annualized basis GDP dropped -1.3% on expectations of -2.5%. Exports accounted for a majority of the weak GDP numbers but stronger than expected consumption, higher business inventories, and a bump up in construction spending after the earthquake/tsunami were enough to close the gap with markets' expectations. The data is encouraging given last week's better Tertiary Industry Activity (1.9% on expectations of 1.1%) and stronger core machinery orders (7.7% on expectations of 1.9%). The better than expected GDP data comes at a time when the Japanese government could use the increased tax revenues that follow higher growth. The current administration is teetering on the edge of losing its AAA rating. Analysts from Rating & Investment Information, one of Japan's two major rating agencies says the nation could lose its top rating unless the government reigns in its budget deficit and addresses the political instability of a revolving door at the Prime Minister's office. External forces are currently in favor of an appreciating Japanese yen. The Swiss National Bank looks to be taking further action to stem the tide of a strengthening Swiss franc. The SNB is in discussions to set a lower limit for the EUR/CHF above 1.10. This follows previous attempts to weaken the CHF via increased swap agreements with other European central banks, additional sight deposits, and negative interest rates. The moves by the SNB make the JPY the most likely candidate for real money safe haven flows. Although Fed Funds futures showed the market's expectations for a US rate hike were in not until winter of 2012, last week's announcement by the Fed to keep interest rates near zero until mid-2013 might offer further USD weakness in the near term. Given the additional easing of US monetary policy put in place by Bernanke and the Fed, it will be a long uphill battle to book any gains in the USD/JPY. The question is now how will Japan respond? After embarking on an estimated $50bn FX market intervention to stem the tide of a rising yen the MoF has only responded with tough talk and no follow up action. Japanese finance minister Yoshihiko Noda was quoted as saying, "As foreign exchange market matters are my prerogative, I will continue to closely watch the markets and take bold action if it becomes necessary." This lends to the idea that further intervention in the forex market may be on the way. Read more forex trading news on our forex blog. |
| Weekly Technical FX Preview – How High can the USD/CHF Go? Posted: 15 Aug 2011 01:30 AM PDT
EUR/USD Despite the increased volatility the EUR/USD continues to trade in a defined range between 1.4400 and 1.4050. Falling monthly stochastics suggest any approaches to the 1.4400-1.4500 levels may be sold into. Initial resistance comes in at last week's high of 1.4400 followed by the falling resistance line from the May high at 1.4450. A close above 1.4700 would signal an end to the range trading environment. To the downside support is found at 1.4050 followed by the 200-day moving average at 1.3945 and the rising trend line from June 2010 at 1.3875.
GBP/USD Last week's declines found support near the previously broken trend line from the April high and the pair looks to move higher. Resistance comes in at 1.6475 a level sterling has failed to breach three times. A move above here and the technical picture would likely turn bullish with further resistance at 1.6550 and 1.6745. The 200-day moving average at 1.6090 could keep any declines in check with further support at 1.6000 and 1.5935.
USD/JPY The yen has made two attempts to break through the all-time low that was set in mid-March near 76.25. Rising stochastics on the daily and weekly charts point to potential gains in the pair but short term momentum studies look to have more room to fall before the pressure is relieved. Therefore, a break of 76.25 is favored. After this level there is a lack of support on the monthly chart. To the upside initial resistance is found at last week's high of 78.50 followed by the post intervention high of 80.20.
USD/CHF In an amazing run the USD/CHF has gone from a complete free-fall to trade above its 20-day moving average, a level the pair has not seen since early July. After gapping above its initial resistance at 0.7800 the pair could run into resistance at 0.8080 which is also near the 38% retracement from the February high, followed by the trend line that falls off of the February high at 0.8200. This may provide traders better reentry levels into the long term downtrend of the pair. A further resistance level is found out at 0.8550.
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