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Current Account Deficit Not A Threat To Growth, BOE’s Broadbent
For the 24 hours to 23:00 GMT, the GBP fell 0.22% against the USD and closed at 1.6944. However, data revealed that the number of mortgage approvals for house purchases in the UK rose to 67.2K in June, compared to 62.0K approvals reported in the previous month and the markets expected mortgage approvals to rise to 63.0K in June.
Separately, the Bank of England reported that net consumer credit registered a rise of £0.4 billion in the UK, in June, lesser than market expectations for an advance of £0.8 billion. In the previous month, net consumer credit had climbed by £0.7 billion. Simultaneously, net lending to individuals climbed by £2.5 billion in June, lower than market expectations for an advance of £2.6 billion, compared to £3.0 billion in the prior month. On the other hand, M4 money supply unexpectedly advanced 0.1% in June, on a monthly basis, higher than market expectations for a steady reading. It had dropped 0.1% a month ago.
Yesterday, the Bank of England (BoE) Deputy Governor, Ben Broadbent, stated that though the Pound is overvalued by 5% to 10%, but the large current account deficit did not pose any major threat to the nation’s economic growth. However, he further added that if the global economy remains sluggish, it would be harder for the British economy to achieve strong and balanced growth.
In the Asian session, at GMT0300, the pair is trading at 1.6950, with the GBP trading marginally higher from yesterday’s close.
The pair is expected to find support at 1.6923, and a fall through could take it to the next support level of 1.6897. The pair is expected to find its first resistance at 1.6986, and a rise through could take it to the next resistance level of 1.7023.
Trading trends in the pair today are expected to be determined by the release of Gfk consumer confidence scheduled to be out later during the day.
The currency pair is showing convergence with its 20 Hr moving average and is trading below its 50 Hr moving average.
EUR/USD To Proceed Short Below Barrier Levels 1.34328 And 1.34030
We seem to have had a moderate forecast for yesterday with 4 out of the 7 pairs behaving as predicted. This was due to US Dollar strengthening slightly instead of weakening as we had thought. Also Japanese yen gained a bit of strength instead of weakening. The euro, US dollar and Austrialian pairs are on our watchlist for today due to our fundamental watch. Both the US dollar and yen could be on the weak site today. Adding two hedged pairs to offset the trading risk.
Forecasts Outlook
US Dollar: Weak
Today we're expecting the EURUSD to proceed Short below the barrier levels of 1.34328 and 1.34030.
Fundamental Watch
- German Prelim CPI m/m
- ADP Non-Farm Employment Change
- Advance GDP q/q
- FOMC Statement
- Building Approvals m/m
5 Strategies To Play The FX Markets Right Now
In a month some might label dull given tepid volumes , the dollar index is doing something somewhat interesting, says JP Morgan.
"It is posting four consecutive weekly advances and its largest monthly gain since January. FX volatility has failed to decline on the month for only the second time this year," JPM notes.
"Whether the dollar is threatening new highs or just nestling back into its 2014 range depends on which dollar index one references: DXY seems to be doing the former while JPM’s broader trade-weighted index including emerging market currencies is doing the latter. We still think advances in either index require higher US rates since there isn’t enough policy or data drama outside the US to push many non-dollar currencies lower," JPM argues.
Thus with full recognition of the complacency risk, and that ranges could persist for a few weeks longer, JPM reviews five strategies to play the FX markets in this low-vol environment.
1- The obvious strategy is to reject the summer range and position for Q4 USD breakout. That is fine against currencies like EUR, JPY and CHF which do not cost to carry.
2- Alternatively, focus on USD longs versus currencies with idiosyncratic risk, like NOK due to Norges Bank dovishness or GBP due to the Scotland referendum.
3- The third strategy is to earn carry in cash markets. We only do this in emerging markets, since both absolute and risk-adjusted carry are much higher than in G10. CNY is our preferred trade. For vol carry, BRL and MXN are the top pairs.
4- Another strategy is to trade short-term mean reversion where positions look stretched. Selling GBP is preferred, though BRL positions are also large (carry is too punitive, however).
5- Finally, investors could consider removing the USD element and focus on cross-rates. We think there is enough inflation divergence within Europe to make this a rich source of trades, but we are mostly sidelined here for the moment except for a short in EUR/CHF. Instead, we like short CAD/MXN and long MXN/CLP as two cross-rate trades in our Technical Analysis portfolio.
Cable Clings On To Trendline, USD In The Driving Seat
We quietly await data from US tonight, whilst technically there is a clear line in the sand for the bulls and the bears.
Below you may find the video
USD May Have Already Seen The 6.4 Year Cycle Low
USD: Previously I had been seeking a major cycle low around Aug-Sep but now reconsidering the fact we may have seen this in April.
Below you may find the video
Greenback Dominates G10 Currencies
A snapshot view of yesterday’s New York - London session with technical notes.
US consumer confidence at its highest since Oct 2007, coming in well above expectations of 85.5 at 90.9
S&P House Price Index continues to grow but at a marginally slower rate of 9.3% vs 9.8% expected. This is the 6th consecutive decline of the rate of growth since the highs of Jan to suggest a cycle high is firmly in place.
UK Net lending edges lower by 0.1bn to 2.5bn but still around the highest levels since Q4 2008
FOREX:
DXY
AUD/USD Back below 94c (again) and not within a trend on D1; Intraday support at 0.936 and resistance at 0.94 and 0.941
EUR/USD Stalls just above 1.34 target and meanders around the 200 week MA;
GBP/USD Hovers above Feb trendline; Intraday bullish above 0.905
USD/CAD D1 Bullish trend very much in place, breaks to new highs and above 200 day MA; Find interim resistance at MR1; Intraday bullish above 1.084
USD/CHF Closes to a 6-month high
USD/JPY Breaks to 3-week highs and above 200 day MA; Support at 101.96 and 102
NZD/USD Clearly bearish; Intraday resistance at 0.8517 and 0.8524
COMMODITIES:
Gold Back below $1300 but remains above 50 and 200 MA; Still potential for base to build above $1287
Silver Still within a correction but we suspect that $20.30 will hold as support
Australia 200 Taking Advantage Of Support At 5550
The Australia 200 Index will be looking to see if it can maintain the break above 5550 after reaching a six year high in the middle of last week and a new high again today. In recent weeks it has discovered a new key level to deal with after running into a short term resistance level at 5550, which in the last few days has provided some solid support. It reversed strongly a few weeks ago bringing it back down to almost touch the 5400 level before rallying back higher again. At the beginning of June the Australian 200 Index fell and broke back down through the key 5500 level towards a four week low around 5400 before consolidating and resting on support there for an extended period. These two levels have firmly established themselves as significant and any substantial break to either side will most likely be a significant move and be closely monitored. It is quite likely many are sitting on the sidelines waiting for the break before committing as they continue to watch the index move between these two levels.
Back at the end of May, it moved back and forth between the two key levels of 5500 and 5550 before the recent fall. Over the last couple of months the Australia 200 Index has formed an amazing attraction to the key 5500 level as it spent a considerable amount of time trading around it. A couple of weeks ago, the index fell away heavily back down to support around 5400 before returning to the key 5500 level just as quickly, as if gravity had pulled it back. Throughout the last couple of months it has been placing ongoing pressure on the resistance level at 5500 and a few weeks ago it was finally able to move through to a three week high before easing back again to this key level. Several weeks ago it slowly but surely eased away from its multi-year high achieved near 5560 however the following week it fell reasonably sharply and started looking towards the 5400 level which is near where it currently sits. In doing so it returned to back under the key 5500 level which has provided some reasonable resistance over the last few months.
For the bulk of the last few months, the Australia 200 Index has traded roughly between 5300 and 5500 therefore its return to back under 5500 was not surprising. The index has done well over the last couple of months to move steadily higher from support around 5300 up to beyond 5500, forming higher peaks and higher troughs along the way. The support level at 5300 may also be called upon should the index fall lower and will also likely play a role in providing some buffer from any decline. Since February, most of the trading activity has occurred between 5400 and 5500 therefore the former level may also be called upon to prop up prices. The index has done very well over the last couple of years moving from below 4000 to its present trading levels around 5500.
Consumers have got their groove back, having shaken off their woes about the federal government's planned budget cuts. The latest weekly ANZ-Roy Morgan survey shows consumer confidence levels at a seven-month high, rebounding from a slump in April and May sparked by news of spending cuts. Confidence levels rose 2.4 per cent in the past week, adding to recent gains and giving more weight to the theory that the recent falls were related to temporary shock from the budget. ANZ chief economist Warren Hogan said confidence levels were now back in line with business confidence. "Consumer confidence is now back to pre-budget levels and consistent with moderate growth in consumption and economic activity," he said in a statement on Tuesday. "The good news is that the headline impact of the budget appears to be temporary and the more enduring features of the economy, such as rising share and house prices, job creation and a stable world economy are now driving consumer attitudes to spending and finances." Economists believe that with consumers feeling more confident, retail sales should pick up. Meanwhile, a separate survey found that business confidence also appeared to be improving, with the number of new company start ups rising more than a fifth in the June quarter. The Dun and Bradstreet survey also found that nearly two thirds of respondents were more positive about the economy than a year ago.
Australia 200 July 30 at 02:05 GMT 5585 H: 5589 L: 5565
Australia 200 Technical
During the hours of the Asian trading session on Wednesday, the Australia 200 Index is moving strongly off the new key 5550 level which has seen it move to another six year high. It is presently trading above the key levels of 5500 and 5550 and will be looking to see if it can maintain the break and stay above. For most of this year the Australia 200 Index has moved well from the lower support level at 5000 up to the multi-year highs above 5500 in the last month or so.
Further levels in both directions:
• Below: 5400, 5300 and 5000.
• Above: 5550.
Economic Releases
EUR/USD: down-trend extending to S3 monthly pivot
The EUR/USD has now decisively broken below the S2 monthly pivot and is continuing its short-term down-trend lower. It will probably fall to the next level of support at 1.3370, where S3 is situated, although the month ends tomorrow and pivots will recalculate on Friday so it is only a temporary level of support.
For those seeking confirmation, a break below the current day lows at 1.3394 , or possibly 1.3390 could provide necessary confirmation that the next leg lower was unfolding.
Today is FOMC day and there is also 2nd quarter GDP data from the U.S so there could be a lot of volatility. With this in mind, a further break below 1.3350 could signal a stronger move to the next target at 1.3300, or eventually 1.3210 - the end target for the C leg of a possible measured move down from the highs.
Daily Market Outlook: July 30, 2014
EUR/USD
The Euro cracked psychological 1.34 support after full reversal of 1.3475/1.3992 bull-leg and break below main bull-trendline, drawn off 1.2042, July 2012 low, commenced fresh phase lower, as an extension of pullback from 1.3992, 04 May peak. Higher low of 03 Nov 2013 at 1.3294 is the next significant level, with 1.3247, Fibonacci 38.2% of 1.2042/1.3992 ascend, seen in extension. Bearish studies favor further bearish action in the near-term, however, overextended daily technicals warn of possible bounce. The pair currently consolidates above fresh low at 1.3399, with hourly 20SMA limiting the upside. Stronger rally through lower platform at 1.3443, would delay immediate bears.
Res: 1.3420; 1.3443; 1.3474; 1.3483
Sup: 1.3399; 1.3350; 1.3294; 1.3247
EUR/JPYThe pair trades within the narrow range of near-term consolidative phase, above 24 July fresh low at 136.35. Overall negative structure favors further downside and eventual completion of multi-month 136.21/143.78 ascend, as the price came ticks away from key support. Break lower to resume pullback from 145.67, 27 Dec 2013 peak, which was congested within short-term rally from 136.21 to 143.78. Near-term corrective rally from 136.62, 28 July higher low, stalled after unsuccessful break above 137 barrier, which was required to open key near-term barriers and breakpoints at 137.23/32, 22/25 July highs and resume recovery rally off 136.35. Subsequent easing from 137.09, today’s high, weakens hourly structure for possible attempt below 136.62 higher low and subsequent return to 136.35, which will confirm an end of near-term consolidative phase. Conversely, holding above 136.62, would signal prolonged near-term consolidation, while the price stays under pivotal 136.23/32 barriers.
Res: 137.00; 137.23; 137.32; 137.48
Sup: 136.74; 136.62; 136.37; 136.21
GBP/USDCable maintains negative structure and posts fresh low at 1.6931, meeting its initial target of 50% retracement of 1.6697/1.7189 upleg, after ending 1.6959/1.7000 consolidative phase. Further bears are expected to test 1.6900, round-figure support and 1.6885, Fibonacci 61.8% retracement. Consolidative actions should stay under 1.7000 barrier, to keep bears intact, while penetration of 1.7000 level would signal near-term corrective action and put bears on hold.
Res: 1.6959; 1.7000; 1.7025; 1.7050
Sup: 1.6931; 1.6900; 1.6885; 1.6850
USD/JPY
The pair remains supported with near-term price action establishing above psychological 102 barrier. Sustained break above higher, with barrier being reinforced by 200SMA, is required to confirm bullish resumption and expose next pivotal barriers at 102.25/35, 03 July / 18 June lower tops. Positive near-term studies support the notion, with daily conditions improving, as indicators broke in the positive territory. Hesitation ahead of 102.25/35 hurdles could be expected, as near-term studies approach overbought territory.
Res: 102.25; 102.35; 102.78; 103.00
Sup: 102.00; 101.71; 101.60; 101.30
AUD/USDThe pair’s near-term price action remains under pressure, as fresh extension of descend from recovery rejection at 0.9468, establishes below 0.94 barrier. Weak near-term structure supports further weakness for test of daily cloud top at 0.9350 and lower boundaries of short-term range, where strong support lies at 0.9320 higher base. Loss of the latter is expected to accelerate towards larger range floor and platform at 0.92 zone. However, near-term range-trading is expected to remain in play while 0.9320 holds.
Res: 0.9414; 0.9454; 0.9468; 0.9503
Sup: 0.9358; 0.9327; 0.9320; 0.9300
AUD/NZD
The pair holds bullish tone and establishes above key 1.1030 barrier, after completing near-term 1.1012/1.0959 consolidation. Positive near-term studies remain supportive further extension higher on sustained break through 1.1030, which will signal an end of multi-month congestion between 1.0488 and 1.1030 and open fresh bull-leg and retracement of 1.1576/1.0488 descend. Consolidation low at 1.0959, offers solid support, ahead of psychological 1.0900 support and should keep the downside protected. Otherwise, stronger pullback should be anticipated, in case the price slides below 1.09 and 1.0880 Fibonacci 38.2% of 1.0619/1.1045 ascend, with notion being supported by overextended daily studies.
Res: 1.1050; 1.1100; 1.1160; 1.1200
Sup: 1.1000; 1.0959; 1.0920; 1.0900
XAU/USDSpot Gold consolidates around 1300 handle and 61.8% retracement of the rally from 1287, which stalled at 1312, failing to regain pivotal 1315/18 barriers at the first attempt. Increased downside risk would be expected in case of sustained break below 1300 area, as weak hourly studies favor further downside. Also, larger picture’s studies are soft that sees additional pressure at the yellow metal’s near-term price action. Bearish resumption requires renewed attack at recent low / 200SMA at 1286, to confirm lower top and trigger further weakness. Conversely, lift above 1300 support would keep alive fresh attempts at 1312 and 1315/18 barriers.
Res: 1301; 1312; 1315; 1318
Sup: 1296; 1292; 1286; 1280
AUD/USD Consolidates Below 0.9400
The Aussie has spent the last few days easing back below both the 0.9425 and 0.9400 levels with the former providing some resistance, which has now resulted in some consolidation in a small range around 0.9385. The Australian dollar reached a three week high just shy of 0.9480 towards the end of last week after it enjoyed a solid period which saw it surge higher through the resistance level at 0.9425 to the three week around 0.9480, before easing back towards that level. It started last week by slowly easing away from the resistance level around 0.9425 which continues to stand tall and play havoc with buyers. The Australian dollar enjoyed a solid surge higher reaching a new eight month high above 0.95 a few weeks ago, only to return most of its gains in very quick time to finish out that week. Since the middle of June the Australian dollar has made repeated attempts to break through the resistance level around 0.9425, however despite its best efforts it was rejected every time as the key level continued to stand tall, even though it has allowed the small excursion to above 0.95.
After the Australian dollar had enjoyed a solid surge in the first couple of weeks of June which returned it to the resistance level around 0.9425, it then fell sharply away from this level back to a one week low around 0.9330 before rallying higher yet again. Its recent surge higher to the resistance level around 0.9425 was after spending a couple of weeks at the end of May trading near and finding support at 0.9220. The 0.9220 level has repeatedly reinforced its significance as it is again likely to support price should the Australia dollar retreat further. Throughout April and into May the Australian dollar drifted lower from resistance just below 0.95 after reaching a six month high in that area and down to the recent key level at 0.93 before falling lower. During this similar period the 0.93 level has become very significant as it has provided stiff resistance for some time.
The Australian dollar appeared to be well settled around 0.93 which has illustrated the strong resurgence it has experienced throughout this year. For the best part of February and March the Australian dollar did very little other than continue to trade around the 0.90 level, although at the beginning of March it crept a little lower down to a three week low below 0.89. Towards the end of March however, the Australian dollar surged higher strongly moving to the resistance level at 0.93 before consolidating for a week or so.
Consumers have got their groove back, having shaken off their woes about the federal government's planned budget cuts. The latest weekly ANZ-Roy Morgan survey shows consumer confidence levels at a seven-month high, rebounding from a slump in April and May sparked by news of spending cuts. Confidence levels rose 2.4 per cent in the past week, adding to recent gains and giving more weight to the theory that the recent falls were related to temporary shock from the budget. ANZ chief economist Warren Hogan said confidence levels were now back in line with business confidence. "Consumer confidence is now back to pre-budget levels and consistent with moderate growth in consumption and economic activity," he said in a statement on Tuesday. "The good news is that the headline impact of the budget appears to be temporary and the more enduring features of the economy, such as rising share and house prices, job creation and a stable world economy are now driving consumer attitudes to spending and finances." Economists believe that with consumers feeling more confident, retail sales should pick up. Meanwhile, a separate survey found that business confidence also appeared to be improving, with the number of new company startups rising more than a fifth in the June quarter. The Dun and Bradstreet survey also found that nearly two thirds of respondents were more positive about the economy than a year ago.
AUD/USD Technical
During the early hours of the Asian trading session on Wednesday, the AUD/USD is continuing to ease a little lower under the 0.9400 level after meeting resistance at the 0.9425 level over the last few days. The Australian dollar was in a free-fall for a lot of last year falling close to 20 cents and it has done very well to recover slightly to well above 0.95 again. Current range: trading below 0.9400 around 0.9380.
Further levels in both directions:
• Below: 0.9220 and 0.9100.
• Above: 0.9425 and 0.9500.