Talking Points:
Dollar Slips But Yet to Break Ahead of Key Inflation Data, Next Week’s NFPs
Euro: Speculation for ECB Stimulus Faces Definitive Data
British Pound Unable to Leverage Recovery on Mixed Economic Update
Dollar Slips But Yet to Break Ahead of Key Inflation Data, Next Week’s NFPs
The Dow Jones FXCM Dollar (ticker = USDollar) slipped a second day Thursday, but bears struggled to mount a meaningful offensive. Where it is difficult to pursue a trend when market participation is draining, it is significantly harder to source momentum for a major reversal. Both greenback and equities are left exposed as the tide of liquidity recedes after their fundamentally-light rallies. However, that same nuance on participation can also paradoxically help to stabilize. In the final trading session of the week, the focus will turn back onto Fed rate expectations. Where the dollar seems to be riding a wave of hawkish sentiment, yields and rates have trailed the swell in conviction. The PCE (personal consumption expenditure) inflation reading for July is due at 12:30 GMT. The Fed’s favored inflation reading, this series’ shortfall of the same 2.0 percent figure the CPI has seen recently is key reason the Chairwoman Yellen and crew have not raised their threat assessments. If this shifts against a consensus of no change, we may have something to work with. Otherwise, the onus for volatility will either rest with a major risk-based shift into the end of the week (highly unlikely) or the pickup in data next week (including NFPs) alongside a return in liquidity.
Euro: Speculation for ECB Stimulus Faces Definitive Data
The Euro’s docket was active this past session, but the data’s influence rises materially in the final trading day of the week. The currency slipped against most counterparts Thursday between the retreat in Euro-area sentiment surveys and the fading Germany figures. Labor data (an increase in the unemployment rate) and inflation statistics (a hold of an anemic 0.8 percent CPI) set the stage for similar region-wide figures ahead. The Eurozone jobless rate and August CPI readings are due at 9:00 GMT, and neither is expected to change from their already-troubled levels. Whether ‘in-line’ or a change from consensus, this data is important as it will help shape speculation over whether the ECB will consider an asset purchase program next week or at all.
British Pound Unable to Leverage Recovery on Mixed Economic Update
While the data out of the UK was notably mixed this past session, perhaps the currency is also seeing its sensitivity to economic data (as a guidance for altering BoE rate expectations) diminish after the Cable’s near-700 pip reversal from July highs. Among the readings, the GfK’s consumer sentiment report for August was the bull’s life preserver with an unexpected positive reading that pushed it back towards decade highs. Meanwhile, the Hometrack’s housing sector data, CBI retail activity and Lloyd’s Business sentiment measures all eased. We have another housing price report ahead, but next week’s data will likely carry more weight – particularly the BoE’s 12-month inflation forecast survey.
Yen Crosses Slide, But Not on Data
There was a near uniform slide for the Yen crosses this past session, but it wasn’t really a move founded on the data read this morning. The figures were unflattering between an uptick in the jobless rate, a sharper drop in household spending, a drop in retail sales and weaker industrial production figure. The CPI figures are not so easily judged as they are above the BoJ’s target, but wages are certainly not keeping pace with ‘costs’. Risk is still the primary motivator here. If traders don’t lead a big shift in speculative positioning to end the week, the Yen will hold.
Canadian Dollar and Australian Dollars Face Important Rate Speculation Ahead
In the final 24 hours of the trading week, the Canadian dollar will prove one of the most fundamentally burdened amongst the majors. The docket offers up GDP figures for June and the annualized reading for 2Q. Thesecan be market movers – particularly given the hefty upgrade expected in the latter report – but the real influence here is what this data could hold in store for next week. The BoC rate decision next week is generating more interest amongst the loonie traders who believe the central bank will have to drop its dovish tone (at least that is the justification often used for the currency’s recent gains). Another major that will be monitored closely for its backdrop monetary policy bearings in the week ahead if the Australian dollar. Wavering on its neutral standing, the RBA meets amid ahead of 2Q GDP figures.
Emerging Markets: 2Q GDP Figures on Tap, Ukraine Concerns Spread
After a consistent climb through the week, the Emerging Markets took a serious blow Thursday. Capping a three-day advance, the MSCI ETF suffered a 1.0 percent drop – the biggest in three weeks. This move had its roots in the moderation of the broader financial markets (taking cues from the developed world’s equity indexes), but it would also find particular motivation from one of its more geopolitically-taxed members. International debate over whether Russia has ‘invaded’ Ukraine or not has unsettled investors. From the Ruble, this concern was manifested in a 1.5 percent plunge versus the greenback – the biggest since July 17. Traders should keep a close eye on this region of the world, but the calendar will also offer scheduled disruptions in the form of Brazilian and Indian 2Q GDP figures at 12:00 GMT.
Gold Gains on Dollar’s Slip, Eurozone Stimulus Views Could Deliver Bigger Move
Gold’s record continues to improve. The metal advanced another 0.6 percent this past session for a third consecutive gain. And yet, it has done little to change conviction in its broader trend. Not only is the market slow in its recovery – repeatedly retracing morning gains with afternoon corrections – but participation figures continue to flounder. In the futures, aggregate open interest is dallying at multi-year lows. For ETF interest, total exposure to the commodity (55.52 million ounces) is just off its lowest level in five years. Bulls need hope, bears need motivation. The dollar’s recent slip has been enough to nudge gold higher, but there is little momentum behind this driver. Ahead, we will see if the US inflation data can change that. If the Euro-area data and US data offer a similar outcome (hawkish/dovish), it could leverage the metal impact.
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ECONOMIC DATA
GMT
Currency
Release
Survey
Previous
Comments
01:00
NZD
ANZ Activity Outlook (AUG)
45.1
Business Conf. in NZ has sharply dipped after a high of 70.8 in Feb
01:00
NZD
ANZ Business Confidence (AUG)
39.7
01:30
AUD
Private Sector Credit (MoM) (JUL)
0.5%
0.7%
Gradual increase in credit since mid-2013 has been seen
01:30
AUD
Private Sector Credit (YoY) (JUL)
5.1%
5.1%
03:00
NZD
Money Supply M3 (YoY) (JUL)
5.4%
Increasing since November 2010
04:00
JPY
Vehicle Production (YoY) (JUL)
6.6%
Rising since September 2013
05:00
JPY
Housing Starts (YoY) (JUL)
-10.5%
-9.5%
Japan has seen a consistent fall in Housing starts in the last 4 months compared to the same period last year
05:00
JPY
Annualized Housing Starts (JUL)
0.871M
0.883M
05:00
JPY
Construction Orders (YoY) (JUL)
9.3%
06:00
GBP
Nationwide House PX MoM (AUG)
0.1%
0.1%
Housing prices have caused speculation of rate hikes from the BoE in recent months
06:00
GBP
Nationwide House Px NSA YoY (AUG)
10.2%
10.6%
07:00
CHF
KOF Leading Indicator(AUG)
97.80
98.10
Downtrend from 107.13 in Jan 2014
08:00
EUR
Italian Unemployment Rate(JUL P)
12.3%
12.3%
Unemployment in the Eurozone has dipped slightly from 12% this time last year. Italy saw a drop as well last month by 0.3%
08:00
EUR
Italian Unemployment Rate s.a. (2Q)
12.5%
12.7%
09:00
EUR
Euro-Zone Unemployment Rate (JUL)
11.5%
11.5%
09:00
EUR
Euro-Zone CPI Estimate (YoY) (AUG)
0.3%
0.4%
CPI Data from the Eurozone will be in focus as speculation rises over added stimulus from the ECB. Lower than expected inflation may consequently weigh on the Euro
09:00
EUR
Euro-Zone CPI – Core (YoY) (AUG A)
0.8%
0.8%
09:00
EUR
Italian CPI NIC incl. tobacco MoM (AUG P)
0.1%
–0.1%
09:00
EUR
Italian CPI NIC incl. tobacco YoY (AUG P)
-0.1%
0.1%
12:30
CAD
Quarterly Gross Domestic Product Annualized (2Q)
2.7%
1.2%
Strong GDP data might add to the Canadian Dollar’s rally this week on higher rate expectations
12:30
CAD
Gross Domestic Product (MoM) (JUN)
0.2%
0.4%
12:30
CAD
Gross Domestic Product (YoY) (JUN)
3.0%
2.3%
12:30
CAD
Industrial Product Price (MoM) (JUL)
-0.2%
-0.1%
Industrial Product Prices in Canada have continued to dip in the last 3 months
12:30
CAD
Raw Materials Price Index (MoM) (JUL)
-1.5%
1.1%
12:30
USD
Personal Income (JUL)
0.4%
Personal Consumption is a great reflector of consumer sentiment and will be in focus as higher than expected inflation figures might add fears of inflation and force the fed to raise rates further. Spending has seen consistent growth this year after falling 0.2% in January
12:30
USD
Personal Spending (JUL)
0.4%
12:30
USD
Personal Consumption Expenditure Deflator (MoM) (JUL)
0.1%
0.2%
12:30
USD
PCE Deflator (YoY) (JUL)
1.6%
1.6%
12:30
USD
Personal Consumption Expenditure Core (MoM) (JUL)
0.1%
0.1%
12:30
USD
Personal Consumption Expenditure Core (YoY) (JUL)
1.5%
1.5%
13:00
USD
NAPM-Milwaukee (AUG)
63.87
Strong expansion in last 3 months
13:45
USD
Chicago Purchasing Manager (AUG)
52.60
PMI sentiment saw a sharp drop last month from 62.6 in April
13:55
USD
U. of Michigan Confidence (AUG F)
80.0
79.2
Has seen a slight drop from a YTD high of 84 in April
GMT
Currency
Upcoming Events & Speeches
06:00
EUR
Russia’s Novak, EU’s Oettinger to Meet on Gas in Moscow
10:00
EUR
ECB Announces 3-Year LTRO Payment
10:30
EUR
EU Foreign Ministers Meet About Ukraine, Iraq, Gaza in Milan
SUPPORT AND RESISTANCE LEVELS
To see updated SUPPORT AND RESISTANCE LEVELS for the Majors, visit Technical Analysis Portal
To see updated PIVOT POINT LEVELS for the Majors and Crosses, visit our Pivot Point Table
CLASSIC SUPPORT AND RESISTANCE
EMERGING MARKETS 18:00 GMT
SCANDIES CURRENCIES 18:00 GMT
Currency
USD/MXN
USD/TRY
USD/ZAR
USD/HKD
USD/SGD
Currency
USD/SEK
USD/DKK
USD/NOK
Resist 2
13.5800
2.3800
12.7000
7.8165
1.3650
Resist 2
7.5800
5.8950
6.5135
Resist 1
13.3250
2.3000
11.8750
7.8075
1.3250
Resist 1
7.3285
5.8475
6.3145
Spot
13.0707
2.1529
10.5535
7.7507
1.2463
Spot
6.8573
5.5796
6.1569
Support 1
12.8350
2.0700
10.2500
7.7490
1.2000
Support 1
6.7750
5.3350
5.7450
Support 2
12.6000
1.7500
9.3700
7.7450
1.1800
Support 2
6.0800
5.2715
5.5655
INTRA-DAY PROBABILITY BANDS 18:00 GMT
CCY
EUR/USD
GBP/USD
USD/JPY
USD/CHF
USD/CAD
AUD/USD
NZD/USD
EUR/JPY
Gold
Res 3
1.3435
1.6781
103.17
0.9123
1.0969
0.9386
0.8543
137.87
1329.49
Res 2
1.3417
1.6757
103.00
0.9110
1.0953
0.9369
0.8527
137.64
1325.18
Res 1
1.3399
1.6733
102.83
0.9096
1.0936
0.9352
0.8510
137.41
1320.87
Spot
1.3362
1.6684
102.49
0.9069
1.0904
0.9319
0.8476
136.95
1312.25
Supp 1
1.3325
1.6635
102.15
0.9042
1.0872
0.9286
0.8442
136.49
1303.63
Supp 2
1.3307
1.6611
101.98
0.9028
1.0855
0.9269
0.8425
136.26
1299.32
Supp 3
1.3289
1.6587
101.81
0.9015
1.0839
0.9252
0.8409
136.03
1295.01
v
— Written by: John Kicklighter, Chief Strategist for DailyFX.com
To contact John, email jkicklighter@dailyfx.com. Follow me on twitter at http://www.twitter.com/JohnKicklighter
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