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USD/JPY: technical update
USD/JPY managed to rise from last week minimums around 78.30 and tested 78.80 (38.7% of the recent 130-pip decline, daily Kijun-sen). For now, this resistance remains unbroken. Today the market players seem uncertain: the greenback swayed up and down and is now once again close to the opening level around 78.70.
The next resistance for the pair lies at 79.00 (psychological level, 50-day MA), 79.25 (200-day MA), 79.45 (100-day MA) and 79.65 (August 20 maximum). Support for US dollar lies at 78.60, 48.45 (today’s minimum, June 4 maximum), 78.30, 78.15, 78.00 and 77.90 (August 1 minimum).
If the prices manage to break above 78.80/90, the bulls will likely test 79.25. Otherwise, USD/JPY will keep moving sideways above 78.00 as it did in the second half of July and in the first half of August.
Chart. Daily USD/JPY
AUD/CAD: selling opportunity
Analysts at Barclays Capital claim that although Canadian data have been rather weak so far due to external factors, domestic factors remain solid, so one may expect Canada’s modest economic growth for in the coming months. Among the positive factors the specialists mention pick-up in the US economy and the rebound in oil prices. “While disappointing retail sales and trade balance data suggest downside risks to our forecast, job growth and manufacturing shipments remained solid,” says Barclays.
Barclays proposes buying loonie versus its Australian counterpart as Canada’s economic prospects seem brighter than those of Australia. Aussie will stay under the negative impact of soft Chinese HSBC PMI data.
From the technical point of view we see that a close below the 100-day MA at 1.0290 and 1.0270 (50% retracement of the advance from May low to August highs) would make AUD/CAD vulnerable for a slide to 1.0200 and then to 1.0100.
Chart. Daily AUD/CAD
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Macroeconomic indicators
The table below provides recent data on the main macroeconomic indicators and is an extremely valuable resource for any trader.
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AUD/USD: technical update
AUD/USD is testing the levels below $1.0400 for the second trading day in a row. The uptrend channel within which Aussie traded since mid-June has been broken to the downside.
If the pair declines below $1.0370 (23.6% Fibo retracement of the pair’s advance from June minimum to August maximum; today’s low), it may slide to $.0220 (38.3% retracement). Support levels for Aussie lie at $1.0340 (50-day MA), $1.0300 (200-day MA).
Also watch if the pair closes below $1.0440 (former trend line support, July 19 maximum, August 21 minimum) or not. This level will play the role of the near-term resistance. In addition, there are more support/resistance levels to watch taking into account new declining channel since August 9. There’s more of the resistance at $1.0475 (April 27 maximum), $1.0500, $1.0535 and $1.0600.
Westpac: Aussie’s affected by the declined iron ore prices and lower mining investment plans. However, the Fed QE3 hopes should limit losses to $1.0350/75.
Chart. Daily AUD/USD
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Jackson Hole may disappoint
Dovish FOMC meeting minutes released last week did move the markets. However, many analysts doubt that the Fed’s Chairman will use his Jackson Hole speech to suggest QE3.
JPMorgan Chase: “We don’t think Bernanke wants to make Jackson Hole into a policy-signaling event. That may be reserved for the FOMC meetings on September 12-13”.
High Frequency Economics: “The Fed Chairman’s Jackson Hole address has traditionally been used more for laying out broad themes than for sending specific policy signals. Nor do we expect Mr. Bernanke to send a definitive signal this year.”
Barclays: “It would be odd” for Bernanke to “take a strong position in advance of receiving the August jobs numbers a week later. We’re not looking for QE3 in September or beyond because we do expect stronger data in the second half of the year.”
BNZ: “Some of the market impact of Bernanke’s speech has been nullified by last week’s dovish Fed minutes. The speech is expected to be used to map out the policy (easing) options facing the Fed. If this has the effect of hardening Fed easing expectations then the USD should continue to suffer.”
Jackson Hole, Wyoming
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August 28: forex news
Demand for risk has decreased due to continued talk of China’s slowing economy, commodity price declines and low expectations coming out of Jackson Hole. Japan’s government downgraded its assessment of the national economy for the first time in 10 months. Moreover, investors expect sour data from Germany today.
Australian new home sales fell by 5.6 % in July reminding that housing construction remains one of the weakest sectors of the economy. AUD/USD fell to $1.0350. NZD weakened versus the majority of its counterparts as the world’s largest dairy exporter Fonterra cut its forecast payout to farmer suppliers. USD/JPY slid to 78.50, closer to the lower border of its range. USD/CAD is consolidating right above 0.9900.
EUR/USD is trading below $1.2500. In Europe watch for the release of German Gfk consumer sentiment at 06:00 GMT, Spanish final Q2 GDP at 07:00 GMT and EU M3 money supply at 08:00 GMT. Herman Van Rompuy, the president of the European Council, meets Spanish PM Rajoy at 11:00 GMT. Spain and Italy will try to sell short-term debt.
Later today in the US watch for S&P/CS Composite-20 HPI at 13;00 GMT and CB Consumer Confidence at 14:00 GMT.
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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: $1.2305, $1.2500 (large), $1.2505, $1.2550 (large);
GBP/USD: $1.5750, $1.5775, $1.5780, $1.5800;
USD/JPY: 79.00;
AUD/USD: 1$.0375, $1.0400, $1.0450;
EUR/JPY: 96.50, 97.35, 99.25 (large);
AUD/JPY: 83.65.
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AUD/USD is under pressure
AUD/USD hit 5-week minimum today at $1.0345 due to the worries about China’s economic slowdown. Shanghai Composite fell to 3 1/2-year minimums on Monday.
Bank of Tokyo-Mitsubishi UFJ: “Given that the Aussie's fair value based on purchasing power parity is around $0.70, a level above $1.05 would be difficult to maintain. On the other hand, the Australian central bank is not as inclined to ease as the Fed and the ECB. There’s buying in the Aussie by central banks which want to increase the Aussie in their foreign reserves. So we do not expect it to fall below parity against the dollar.”
Skandinaviska Enskilda Banken AB: “If AUD/USD goes below $1.0342, it may decline to $1.0170. Since Friday’s low point, a three wave upside correction has been completed and the market made a second attempt to extend the break lower.”
Commerzbank: “There will be direct bearish bias while the pair trades below $1.0545 (last week’s high).”
On the daily chart we see AUD/USD struggling between the support of the 50-day MA ($1.0345) and the 23.6% Fibo retracement of the advance from June minimums to August highs ($1.0370).
Chart. Daily AUD/USD
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IG: USD/JPY is rangebound this week
Analysts at IG Markets Securities claim that USD/JPY has traded this month above a support level of about 78.15 yen and below 79.14 yen, the upper end of its daily Ichimoku Cloud.
“Before the Fed event, the dollar doesn’t have enough power to break the range. You may have to wait until September to see moves to the upside or downside.”
Chart. Daily USD/JPY
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Scotiabank: brace for September turmoil
Analysts at Scotiabank claim that relatively quite August will soon change into rather violent September. “September is littered with event risk,” underline the specialists saying that key events will likely sway both euro and US dollar at different times.
The Fed’s Chairman will speak in Jackson Hole on Friday August 31; the ECB President Mario Draghi will give a speech on September 1, while China will release manufacturing PMI. Then there will be the ECB’s meeting on September 6, Germany’s top court decision on the constitutionality of providing aid to troubled euro zone countries and the September 13 Fed’s gathering when then central bank could announce QE3. Moreover, it’s not clear when or whether Spain will request sovereign bailout. In addition, though the while “commentaries following the meetings between Chancellor Merkel, President Hollande and Prime Minister Samaras appear to support the view that Greece will receive its next tranche of 31 billion euro, a negative report would push Grexit back into the headlines.”
Image from chatswood.co.nz