European markets brace for a bundle of PMIs and an update on euro-area unemployment rate for September on Tuesday, in a very heavy calendar ahead of the European Central Bank`s policy meeting due on Wednesday.
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Monday, September 30, 2013
The Daily Forecaster: USDJPY
No deeper correction but direct losses but which only managed to reach the upper end of the next support area at 97.45-50. The correction from there has been firm and we may have seen the corrective high at 98.45. However, we should allow for 98.58-74. Either directly or from the
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AUD/USD Daily Outlook
Another fall is still mildly in favor in AUD/USD with 0.9401 minor resistance intact. Below 0.9280 will target 0.9232 support. Break will confirm that rebound from 0.8447 has finished at 0.9528 after hitting 38.2% retracement of 1.0581 to 0.8847 at 0.9509. On the upside, though, above 0.9401 minor resistance will
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The RBA Elects Not To Move Interest Rates
The Reserve Bank of Australia (RBA) left the official cash rate at 2.5% as expected. Governor Stevens didn't reveal much in his post-decision media release. In fact, the statement was largely unchanged from last month's statement. It could be argued that this statement was even more neutral than the last
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USD/CAD Daily Outlook
Intraday bias in USD/CAD remains neutral for the moment. Break of 1.0268 will suggest that recovery from1.0181 has completed and will turn bias back to the downside for 1.0181 support. Below 1.0181 will target 1.0013 cluster support (61.8% retracement of 0.9633 to 1.0608 at 1.0005). Above 1.0339 will turn bias
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Daily Technical Analysis
The EURUSD had another insignificant movement yesterday and still trapped between 1.3450 – 1.3560. There are no changes in my technical outlook. The bias remains neutral in nearest term. Overall I still prefer a bullish scenario at this phase with nearest target seen around 1.3600 – 1.3700. On the downside,
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AUD/USD: RBA Keeps Its Benchmark Interest Rate Unchanged At 2.5%
The pair is expected to find support at 0.9296, and a fall through could take it to the next support level of 0.9258. The pair is expected to find its first resistance at 0.9365, and a rise through could take it to the next resistance level of 0.9396.
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EUR/USD: Euro Trading Higher Ahead Of Key Manufacturing And Employment Data
The pair is expected to find support at 1.3487, and a fall through could take it to the next support level of 1.3442. The pair is expected to find its first resistance at 1.3567, and a rise through could take it to the next resistance level of 1.3602.
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GBP/USD: Pound Soars On Upbeat Domestic Economic Data And Concerns Over US Budget Talks
The pair is expected to find support at 1.6161, and a fall through could take it to the next support level of 1.6085. The pair is expected to find its first resistance at 1.6279, and a rise through could take it to the next resistance level of 1.6321.
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USD/JPY: Expectations Rises That Shinzo Abe Will Increase Sales Tax, Cushion With More Stimulus
The pair is expected to find support at 97.60, and a fall through could take it to the next support level of 96.92. The pair is expected to find its first resistance at 98.85, and a rise through could take it to the next resistance level of 99.42.
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USD/CAD: Canada's GDP Surpasses Market Expectations For July
The pair is expected to find support at 1.0284, and a fall through could take it to the next support level of 1.0249. The pair is expected to find its first resistance at 1.0342, and a rise through could take it to the next resistance level of 1.0365.
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USD/CHF: Swiss Franc Trading Higher Ahead Of SVME PMI Data
The pair is expected to find support at 0.9021, and a fall through could take it to the next support level of 0.8999. The pair is expected to find its first resistance at 0.9067, and a rise through could take it to the next resistance level of 0.9091.
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Asian Market Update
US Congress remained in gridlock after 11th hour votes failed to provide a resolution between the Republican-controlled House legislation to include Obamacare implementation delays and Democrat-controlled Senate refusing to pass anything but a clean CR. Pres Obama spoke after market close, warning lawmakers the shutdown would have a serious economic
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EURGBP: Getting Close To Buy Zone
Pair formed a mid-term peak on 2.25.2013 (0.8814) and since then has gone into sideways consolidation. Best reading of cycles suggests pair has completed a cycle from 7.23.2013 (0.7750) and is now correcting the entire rally from here. Initial decline from the high was in 3 waves and found support
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Daily FX Report
The U.S. Congress was on the verge of shutting down as lawmakers lobbed dead-end proposals across the Capitol and Obama made last-minute phone calls to the top four congressional leaders. Republicans in the U.S. House of Representatives were still insisting that any temporary measure to fund the government include a
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EUR/USD Rises On U.S. Government Deadline
On Monday Euro/Dollar increased with 80 pips. The European currency appreciated from 1.3473 to 1.3557 yesterday, matching the positive money flow sentiment at above +19%, closing the day at 1.3522. This morning the Euro is trading quietly, with movements at the upper end of yesterday's range for now.
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RBA Keeps Monetary Policy Unchanged For Another Term
The Reserve Bank of Australia decided to keep its monetary policy unchanged for a new term, hoping to give more support for the economy. The bank is also waiting for the new Prime Minister Tony Abott`s decisions, to see to extent it is inline with the adopted policy.
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Politics To Down EUR and Dollar Further?
Just when you thought it was safe to get back into the water, a political standoff in Washington and a political fiasco in Europe's third largest economy have new "event risk" driving capital markets. Global political risk has eroded positive investor sentiment, last seen after the Fed's "no" taper move
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Italy's Political Turmoil On Bonds And Cost Of ECB Funding
Political uncertainty in Italy again raised market concerns. Volatility is expected at least in the near-term as Prime Minister Letta might need to find sufficient support to remain in the government. An early election of the government cannot be ruled out although the likelihood is not high. Bond investors are
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Goldman Closes Italian 10-Year Bond Long Recommendation
Trust Goldman to have keen, cutting-edge advice after the fact. Like now, a day after the collapse of the Italian government, when in a note, Goldman's Francesco Garzarelli who had been quite bullish on Italy, both in absolute and relative terms, flip-flops, and is now saying to no longer buy (i.e., sell) Italian bonds. To wit: 'The resignation of the PdL ministers will clearly increase volatility in the government bond market, similar to what happened between February and April, before the current government was formed. The spread between 10-year BTPs and German Bunds closed at around 260bp on Friday. At the end of April, we recommended going long Italian 10-yr BTPs against their French counterparts at spread of 221bp. We would be looking to close this position at Monday's levels."
From Goldman: Italy - Heightened Political Risk Weighs on Domestic Assets
Political instability in Italy has risen to a new level. All four ministers belonging to the centre-right PdL party in the coalition government of Prime Minister Enrico Letta have announced their resignations yesterday. Their immediate decision was motivated by disagreement over how to avoid, through the introduction of alternative measures, an automatic 1% increase in VAT this October designed to safeguard the deficit target. The backdrop to this unexpected twist of events is a rapid deterioration of the political climate after former PM Berlusconi was convicted of tax evasion by a High Court. As a result, Mr. Berlusconi will have to serve house arrest and no longer be able to run for public office (a Milan court still has to decide for how long). In the meantime, the Senate is due to vote on whether to remove him from Parliament, de facto putting him outside active political life. The Ministers' decision to pull out of Italy's cabinet came at the request of Mr Berlusconi himself.
The political turmoil comes at an unfortunate time for Italy, as next year's budget law is under negotiation and 'draft budgetary plans' under the new Two Pack legislation need to be presented to European partners by mid-October. To be sure, Italy's structural fiscal balance is relatively stable, better than in its peripheral peers and, arguably, France's. Italy came out on excessive deficit procedure in the Spring of this year, and its slippage from the 3% threshold is likely to be small (an official public finance update points to an overshoot of a few decimal places - hardly the case for significant market apprehension). But with a very high level of public debt (estimated to be just above 130% of GDP this year) and the highest rate of unemployment since the 1993 recession, the lack of progress in structural and institutional reforms due to a political paralysis may damage an already low level of market confidence and hold back the economic recovery further.
As is often the case in Italy, the near-term political outlook is highly convoluted. Moderate members of PdL have already expressed public dissent of Mr Berlusconi's hard line views, and may be exploring alternative alliances with centrist forces. Prime Minister Letta will ask for a vote of confidence in Parliament this coming week (media reports say on Wednesday, but no date has been formalized) to see whether there is an alternative majority supporting a reshuffled Cabinet. If there isn't, President Napolitano may decide to appoint a caretaker government that would be in charge of passing the 2014 Budget and possibly modify the current electoral law, which many observers say could increase the odds of another 'hung' Parliament.
Since the formation of Mr Letta's coalition government, our baseline case has been that fresh general elections would not take place in 2013 before the end of 2013, as many at the time had feared, but rather in the Spring of 2014. The 45 days from when Parliament is dissolved that is required before a ballot can take place means that an electoral campaign held now would clash with the budgetary session, and put the vote too far into the Winter. President Napolitano, who makes the decision on this matter, has already stated he will explore alternative solutions with political forces. From what we understand, this is increasingly the consensus view.
The resignation of the PdL ministers will clearly increase volatility in the government bond market, similar to what happened between February and April, before the current government was formed. The spread between 10-year BTPs and German Bunds closed at around 260bp on Friday. Some further widening could be justified in response to uncertainty on the composition of the new government, and whether its parliamentary support will come at the expense of the few reforms that Mr Letta's coalition was trying to see through. At the end of April, we recommended going long Italian 10-yr BTPs against their French counterparts at spread of 221bp. We would be looking to close this position at Monday's levels.
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Admittedly, the downside risks to our view of a contained negative impact from political instability have increased. A prolonged institutional crisis could decouple Italy from the recovery timidly visible in the rest of Europe. A downgrade of the sovereign (and domestic banks) to sub-investment grade would further undermine foreign demand. Related to this, on July 18, the ECB increased its haircuts on sovereign bonds falling in the BBB- to BBB+ category. Italy would already fall into this bracket, if it weren’t for the higher rating provided by the DBRS, the Canadian CRA. A credit rating downgrade by DBRS would expose Italy to a ‘jump’ into a higher haircut level (from a flat 5% to 5.5-8.5% depending on the maturity), raising the cost of funds for Italian banks at ECB's repo operations.
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Forex Technical Analysis
Although the pair couldn't break trough 1.3568 high, the consolidation here is close to its end and I favor and upmove towards 1.3710. Crucial on the downside is 1.3460 and initial minor intraday resistance is projected at 1.3510
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US In The Loop
The world is focused on US budget deadlock as no agreement has been reached to avoid a potential government shutdown yet. As tomorrow's deadline approaches dangerously, the risk appetite remains under pressure in the market place. In addition, the political turmoil in Italy and the deflationary pressures in the Euro-zone
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Trade Idea Update: USD/CHF - Sell at 0.9135
Despite Friday's resumption of recent decline to 0.9020, lack of follow through selling on break of previous chart support at 0.9024 and the subsequent rebound suggest consolidation would be seen and recovery to the Ichimoku cloud (now at 0.9096-9108) cannot be ruled out, however, still reckon resistance at 0.9138 would
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Trade Idea Update: GBP/USD - Buy again at 1.6080
Despite last week's anticipated resumption of upmove to 1.6183, the subsequent retreat suggests consolidation below this level would be seen and test of the Kijun-Sen (now at 1.6122), then test of previous resistance at 1.6096 cannot be ruled out, however, reckon the Ichimoku cloud top (now at 1.6074) would limit
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Trade Idea Update: EUR/USD - Stand aside
Failure to extend early rally from 1.3472 and the subsequent sharp retreat after faltering below previous resistance at 1.3569 suggest further choppy trading within recent range would be seen and test of said support at 1.3472 cannot be ruled out, however, break of previous support at 1.3462 is needed to
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Trade Idea Update: USD/JPY - Sell at 98.35
The greenback opened lower after breaking previous support at 98.27 on Friday and previous support at 97.86 was also penetrated, suggesting the decline from 100.62 top is still in progress an may extend further weakness to 97.40 (1.236 times projection of 99.68-98.27 measuring from 99.14), then towards 97.20 but reckon
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EURGBP: Key 0.8330 Level In The Midst
EURGBP has been one of the casualties of Italian political fears today. After only 6 months in government, the fragile coalition that is headed by PM Letta looks like it could be unstuck by none other than former PM Silvio Berlusconi. In the past, a flare up of sovereign fears
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USD/JPY Elliott Wave Analysis
The greenback ran into renewed selling interest at 99.14 last week and has fallen again in line with our expectation, our short entered at 99.65 met indicated downside target at 97.65 with 200 points profit, this anticipated decline adds credence to our view that top has been formed at 100.62
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European Market Update
European equities volatility rises ahead of key event risks for the week (PMI data, monthly US jobs report, Japan Tankan Survey and Sales tax announcement, ECB decision, Italy confidence vote)
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US Government Shutdown Looms Over Markets
The US dollar (USD) weakened against the Japanese yen (JPY) and opened lower at 97.88. Political rivalries between the Republicans and Democrats threated to bring talks over the budget to a stalemate. Such a scenario could render the US inept to respect its financial obligations. In either case, a possible
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EUR/USD Elliott Wave Analysis
As the single currency has maintained a firm undertone after this month's rally to 1.3569, retaining our bullish view that the rise from 1.2747 low is still in progress and may extend further gain to 1.3600, then previous minor resistance at 1.3660. In view of the strength of recent rise,
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Trade Idea: EUR/JPY - Stand aside
The single currency opened lower today and slipped after breaking previous support at 132.66, dampening our bullishness and near term downside risk remains for the fall from 134.95 top to bring correction to 131.61 support but a sustained breach of this level is needed to retain near term bearishness for
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European Session: Orders and Options Watch
EUR: The single currency opened lower today, however, euro found decent demand just above support at 1.3472 and has rebounded, more buy orders are reported at 1.3450-60 (stops below 1.3440) and further out at 1.3410-20, mixture of bids and stops is located at 1.3380-85. On the upside, offers are still
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Trade Idea: AUD/USD - Buy at 0.9230
Aussie fell again earlier today and near term downside risk remains for the fall from 0.9524 to bring a stronger correction of recent upmove to 0.9280, however, reckon 0.9250 support would limit downside and bring another rise later, above resistance at 0.9400-05 would suggest low is possibly formed but break
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USDCHF - Looks To Weaken Further
USDCHF – With a follow through lower occurring the past week, further downside is likely in the new week. Immediate support lies at the 0.9000 level. Further down, support lies at the 0.8950 level with a turn below here leaving the pair targeting the 0.8900 level followed by the 0.8800
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EURUSD - Maintains Its Bullish Bias
EURUSD Though closing almost flat the past week, EUR continues to retain its broader upside. Risk of a return to the 1.3700 level remains. Further out, resistance resides at the 1.3800 level followed by the 1.3850 level. Its weekly RSI is bullish and pointing higher supporting this view. Conversely,
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Euro Area September Inflation Retreats To 1.1%
Euro area consumer price index recorded an annual inflation of 1.1% in September, taking a step backward of the ECB's target. The report showed that CPI for the year ended September retreated to 1.1% from a prior of 1.3%, lower than analysts' forecast of 1.1%. Core CPI, which excludes volatile
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IMM Positioning- Long EUR Positions At 2011 Levels
Long euro positions getting crowded. Investors have not been this long the euro since mid 2011 when the ECB was last hiking rates. As the Fed delayed QE tapering net long EUR positions were built to 26% of open interest, which is almost 1 standard deviation above the historical average.
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Weekly Watch: Sept. 30 to Oct. 4, 2013
Rise and shine, forex fanatics! We've got the Weekly Watch ready to start another wacky week--and the final quarter of 2013--of currency-cross trading!
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Daily FX Analysis
US Chicago Fed President Evans stated on Friday that Fed tapering of bond purchases could take place in October or December, while a delay until 2014 was also possible. He expressed further concerns surrounding the US labour-market outlook and the overall dovish tone unsettled the dollar, especially comments that there
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European Shares Sink Over Rome Political Crisis, US Government Shutdown
European stocks traded lower early Monday as the U.S. seemed close to its first government shutdown in 17 years, and Italy's political wrangling continues weighing on trading with the kick start of the week.
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Morning Forex Technical
EUR/USD retains the upside potential, as it is still trading above the 23.6% Fibonacci retracement level of the Sep 6 Sep 19 rally. Moreover, the daily and weekly technical indicators are mostly giving ’buy’ signals. However, at the same time the currency pair remains unable to overcome the September
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Morning Forex Fundamental
The global economy is showing sings of recovery, as fundamental data from all over the world is improving. Nevertheless, the world's largest economy is facing strong political issues, which can have a dramatic effect on the economy. First time in history, U.S. authorities mentioned a deadline when the government could
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Daily Technical Analysis
The EURUSD was indecisive last week. A quick look at the hourly/h4 chart shows a sideways/range condition between 1.3450 1.3560. The bias is neutral in nearest term. We need a clear break from the range area to see clearer direction. Although the bullish momentum is not as convincing as
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Today's Market Outlook
The Euro erased last Friday's gains, after rally stalled near 1.3567 peak and subsequent reversal dipped close to 1.3500 handle. Negative sentiment was confirmed by gap-lower opening, with price moving in the lower part of 1.3460/1.3567, one-week range. Hourly studies turned negative and keep the downside at risk, while 4-hour
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Technical Analysis for Major Currencies
The pair opened this week's trading session lower but remained limited above Linear Regression Indicator 34 and 55 in addition to 1.3452 levels which represents a previous top. Therefore, the possibility of an upside move is still valid but the pair has to confirm that by trading again stably above
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Trade Idea: USD/CHF - Sell at 0.9135
Despite Friday's resumption of recent decline to 0.9020, lack of follow through selling on break of previous chart support at 0.9024 and the subsequent rebound suggest consolidation would be seen and recovery to the Ichimoku cloud (now at 0.9100-08) cannot be ruled out, however, still reckon resistance at 0.9138 would
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Technical Analysis for Crosses
The pair settled last week's trading above the MA 50 keeping chances of the favored upside move earlier. Nonetheless, trading started this week with a bearish opening gap that pushed the pair below the aforementioned level forcing us to stay neutral waiting for confirmation for today's closing at 158.25. Stability
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Trade Idea: GBP/USD - Buy again at 1.6080
Despite last week's anticipated resumption of upmove to 1.6183, the subsequent retreat suggests consolidation below this level would be seen and test of the Kijun-Sen (now at 1.6122), then test of previous resistance at 1.6096 cannot be ruled out, however, reckon the Ichimoku cloud top (now at 1.6074) would limit
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SPD Agree To Coalition Talks With Merkel, Steinbrück Steps Down
In the first step of what could be a long road to building a new German government, the defeated Social Democrats said it will begin talks with Chancellor Angela Merkel's Christian Democrats (CDU) over a possible coalition. Germany's main center-left party announced on Friday it is prepared to hold preliminary
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Trade Idea: EUR/USD - Stand aside
Failure to extend early rally from 1.3472 and the subsequent sharp retreat after faltering below previous resistance at 1.3569 suggest further choppy trading within recent range would be seen and test of said support at 1.3472 cannot be ruled out, however, break of previous support at 1.3462 is needed to
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