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Wells Fargo: GBP/USD growth is limited
On Monday GBP/USD extends the downside for a second consecutive day, but trades within the August uptrend. The pair trades below the 200-day MA ($1.5715).
Strong resistance for the pair lies at $1.5768/80 (June and July maximums – a two-month resistance, 50% Fib. retracement of a May drop) and at $1.6302 (2012 maximum). Support is seen at $1.5392 (July minimum), $1.5267 (June minimum) and at $1.5233 (2012 minimum).
According to specialists at Wells Fargo, in a near-term a brighter European and global market outlook could keep supporting the pair, but the medium-term prospects for the upside are limited.
Chart. Daily GBP/USD
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RBS: trading GBP
Analysts at RBS claim British pound has switched to buy signal versus most of the rest of the G10 currencies, except USD (GBP/USD keeps testing 200-day MA) NOK, SEK and CAD based on a simple 5- vs. 20-day MA momentum trading strategy. The biggest potential gains may be achieved in GBP/JPY and GBP/AUD.
The specialists note that although GBP/JPY may be over one standard deviation expensive, it’s difficult for the pair to move back towards fair value as the UK/JP 2-year rate spread has moved in favor of GBP since the BoE inflation report (the reduction in the BoE easing expectations) and the risk tone is positive.
If forex markets can play catch up to moves in other asset classes, AUD and NZD will be best placed to benefit vs. GBP.
Chart. Daily GBP/JPY
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Morgan Stanley: buy EUR/JPY
Morgan Stanley recommends buying EUR/JPY at 97.00 with stop at 95.70 and target at 101.60 yen.
Chart. Daily EUR/JPY
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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.
Table. Main macroeconomic indicators
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August 21-24: economic events
Tuesday, August 21
Australia: The RBA will release monetary policy meeting minutes (1:30 GMT). The central bank may warn about the high level of Australian dollar which is close to 30-year highs. Few economists expect the RBA to intervene in order to contain Aussie’s advance. The central bank is more likely to cut interest rates if it finds the strong national currency is actively damaging Australian economy. For the moment, the RBA is signaling that it’s happy with interest rates where they are. Analysts at CMC Markets think that “traders will be looking for clues that the rate easing cycle is already over.”
New Zealand: The RBNZ’s inflation expectations survey (3:00 GMT). Westpac says that “often an interest rate market mover, the 2-year number may fall from 2.4% to 2.2%, a headwind for swap rates and the New Zealand dollar.”
Britain: Public sector net borrowing (8:30 GMT). After a large deficit in the June reading, the markets are predicting a surplus in July. This would be bullish for the pound.
Japan: Trade balance (23:50 GMT). Trade deficit is expected to widen in July to 460 billion yen from 300 billion yen in June.
Wednesday, August 22
Euro area: Luxembourg’s Prime Minister and the head of Euro Group Jean-Claude Juncker will will meet with Greece’s Prime Minister Antonis Samaras to discuss a 2-year extension of the indebted nation’s fiscal adjustment program.
Canada: Retail sales (12:30 GMT) increased by 0.3% in May after 0.5% drop in April, while the core reading added 0.5% after sliding by 0.4%. According to the forecasts, retail sales may have gained 0.2% in June, while core sales – added 0.4%.
US: Existing home sales (14:00 GMT). The annual adjusted reading fell from a revised 4.62 million in May to 4.37 million in June. An increase to 4.52 million is expected this time (July). The FOMC meeting minutes (18:00 GMT). Societe Generale claims that “the minutes will give additional hints on the FOMC stance”. Credit Suisse says that the possibility of the Fed announcing QE3 next month has declined to 50%.
Thursday, August 23
China: HSBC flash manufacturing PMI (2:30 GMT). The index rose from 48.2 in June to 49.3 in July. This time August reading is released. A reading below 50.0 indicates industry’s contraction.
Euro area: French, German and euro area’s PMIs. Rabobank underlines that “confidence indicators from the euro zone likely to receive the most attention this week as they provide a timely snapshot of sentiment across a range of sectors.” Saxo Bank expects that readings will be weak and the pressure on ECB President Mario Draghi to act will strengthen. Societe Generale, on the contrary, claims that “the euro area manufacturing PMI will post the first rise in 6 months, increasing to 45.0 in August, while the service sector index should increase to 48.6. Despite the improvement both indices remain well below the critical 50 level, which in turn should be consistent with another contraction in euro area GDP in Q3 in line with our current forecast.”
German Chancellor Angela Merkel is due to meet French President Francois Hollande.
US: Unemployment claims (12:30 GMT) will likely come little changed around 365K. New home sales (14:00 GMT) may have risen from the lowest level in more than a year of 350K in June to 362K last month.
Australia: The RBA Governor Stevens speaks (23:30 GMT). Deutsche Bank says that “the rhetoric from the RBA indicates a very high hurdle to moving policy from here. For now they appear quite comfortably on hold and this week’s communication will likely reinforce that.”
Friday, August 24
Euro area: Greece’s Prime Minister Samaras meets Merkel in Berlin ahead of the return of the Troika (EU, IMF and ECB) to Athens in September. On Saturday Samaras will meet Francois Hollande.
Britain: Revised GDP (8:30 GMT). The first revision of GDP is likely to show a better outcome than the preliminary pessimistic reading of a 0.7% contraction. Economic growth in Q2 is predicted to shrink by only 0.5% due to a smaller than estimated drop in construction activity and industrial production.
US: Core durable goods orders (12:30 GMT). The indicator may have climbed by 0.5% after losing 1.4% in June.
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August 21: forex news
It’s another typical summer holiday trading day.
EUR/USD is moving gradually up today trading in the $1.2360 area. There are no major EUR-related data releases. Spain will offer 4.5 billion euro in 12-18 month bills. Spanish 10-year yields hit yesterday 7-week minimum at 6.16%. The series of important meetings begins in the euro area; follow our updates.
GBP/USD has risen above 200-day MA ($1.5713) and is moving up towards the 100-day one. Let’s see if sterling manages to hold its grounds today. Public sector net borrowing figures are released today in the UK at 8:30 GMT.
USD/JPY recoiled down from the 100-day MA returning to the 200-day one (79.22), the key near-term support.
Risk sentiment remains high. AUD/USD rose to $1.0480 levels after the RBA minutes showed the regulator think domestic economic growth will offset the global outlook. The central bank didn’t signal any intervention is needed to curb the Aussie’s strength. The Australian and New Zealand dollars were also supported by expectations talks among European leaders this week will lead to stronger measures to counter the region’s debt crisis, boosting risk demand. NZD/USD trades above $0.8100. USD/CAD trades below parity and close to a four-month low on the back of the improved economic growth prospects.
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What’s new in the euro zone?
Here we try to systematize the latest events
1. On Monday the ECB finally voiced its displeasure at the weekend report by Der Spiegel on capping periphery EU bond yields to bring down borrowing costs for troubled governments, saying it was misleading to report on decisions that hadn’t been made.
2. Also yesterday the Bundesbank criticized the ECB’s potentially unlimited bond purchasing program, saying that such decisions should be made by national governments or parliaments, not by central banks.
3. Luxembourg Prime Minister Jean-Claude Juncker visits Greece on Wednesday to discuss with Prime Minister Antonis Samaras the country’s request for a 2-year extension to its fiscal adjustment program. Then Samaras will go to Berlin to see Angela Merkel on Friday and to Paris on Saturday for a rendez-vous with Francois Hollande.
Antonis Samaras. Photo by Chris Ratcliffe/Bloomberg
4. Greece is still considering 11.5 billion euro ($14.2 billion) of spending cuts for the next 2 years, according to the nation’s Finance Minister. The package will be ready by the time the Troika (ECB. EU, IMF) returns to Athens at the beginning of September.
Photo: Bloomberg
5. The leaders of Germany and France will meet on Thursday trying to reconcile their different views on how to get on in combating the region’s debt crisis. Merkel is expected to underline that Greece has to fulfil its obligations under the most recent 130-billion euro rescue program and shouldn’t expect Germany to approve another bailout.
Photo from marketnightshift.wordpress.com
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AUD/USD extends the upside
AUD/USD rocketed t0 $1.0510 on RBA meeting minutes and risk-on market sentiment. The pair, therefore, managed to bounce back from the lower boundary of an upward channel, existing since June.
If AUD/USD manages to close the day above the $1.0500 level, in a near-term further growth towards $1.0600 will become likely. On the upside the pair is limited by the resistance line, connecting 2011 and 2012 maximums. On a downside support lies at $1.0475 (beginning of the May downtrend) and $1.0290 (200-day MA).
Chart. Daily AUD/USD
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EUR/USD jumped above $1.2400
EUR/USD jumped to the levels above $1.2400 getting above the 55-day MA to the downtrend resistance line from May maximums. EUR/JPY reached 6-week maximum at 98.60 yen.
Euro is supported as the meetings of the euro zone’s leaders which will meet later this week ignited hopes will agree to extend Greece’s fiscal adjustment program. Nomura is optimistic: “They will get there. The euro could move higher. Riskier assets are doing OK.”
In addition, Fitch’s Managing Director Riley said that the ECB might act even without the Bundesbank and showed an optimistic outlook regarding Europe adding that Italy doesn’t need more austerity.
The key resistance for EUR/USD lies at $1.2450. Commerzbank recommend watching whether the pair will be able to close above the 55-day MA today in New York. There are many sell orders in the $1.2430/50 area, and above it one finds more buy stops.
At the same time, it seems that the gloom will never leave the region’s horizon. Standard Chartered warns that “this is a period of calm before a resumption of the bear trend for euro.” The bank predicts EUR to slide to $1.18 by the end of September.
Chart. Daily EUR/USD
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NZD/USD: technical comments
On Tuesday NZD/USD reached $0.8130, moving up for a second consecutive day. The pair, therefore, once again bounced from the upper boundary of the July sideways channel ($0.8067).
However, on the upside NZD/USD is limited by a strong resistance line, connecting July 2011 and Feb. 2012 maximums. Further there is a strong resistance around $0.8200. Support lies at $0.8067, $0.7975 (200-day MA) and $0.7840 (July minimums).
Chart. Daily NZD/USD
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