InvestMacro FX

By GCI Forex Research

Fundamental Outlook at 1400 GMT (EDT + 0400)

USD

The positioning data produced by the CFTC for the FX Futures market of the Chicago Mercantile Exchange has been displaying a strong swing from USD longs to USD shorts over the past months. So it is hardly surprising that the greenback came under pressure allowing EUR-USD to appreciate to levels above 1.33. The current notable USD short positioning lets a continuation of the recent correction in EUR-USD (i.e. the dollar uptrend) seem likely. The fact that Friday‘s latest data (referring to last Tuesday) illustrates a further rise in USD shorts does not question the reliability of the positioning indicator (as this should have pointed towards a rise in EUR-USD). After all EUR-USD was still trading above 1.31 on Tuesday and it cannot be ex-cluded that the USD shorts were already falling even though the weekly data suggested some-thing else. We would initially expect a further fall in EUR-USD. First of all this means that the support area around 1.2730 would have to be breached.

EUR

The euro came under some selling pressure on Friday as concern over sovereign credit risk intensified. What began as a gradual widening of Ireland’s yields last week amid concerns about the domestic banking system, has now affected other sovereigns on the Eurozone periphery. Media sources continued to speculate that the ECB had been forced to buy sovereign bonds last week in an effort to limit spread widening. Further details are expected today when the ECB is due to announce the value of purchases settled last week. A significant increase beyond the EUR8 mn in purchases settled the week before could weigh further on the euro. Although sovereign supply is light this week, given the recent jitters, attention will focus on Ireland’s attempt to issue up to EUR1.5 bn in notes on Tuesday. The auction could mark a significant test for the euro after poor T-bill auctions last week. Nevertheless our fixed income strategists expect to see solid domestic demand given the small volume on offer, and the fact that an estimated 81% of Ireland’s 2010 issuance program is already complete.

Today, Eurozone CPI is due and the market expects to see a rise to +1.7% y/y (prev. 1.4%). The figure of course conceals a tremendous dispersion of readings across the individual member states. Greece’s EU harmonised CPI for July came in at +5.5% y/y, while Ireland reported a -1.2% y/y decline. The spread of CPI readings underlines the difficulties the ECB will face when choosing the right moment to eventually tighten monetary policy. On Tuesday the August ZEW survey of investor sentiment is scheduled for release. After plunging in June, and falling again in July, a further decline to 9.3 (prev. 10.7) is expected.

We remain bearish on the euro. Q2 GDP data last Friday likely marks the cyclical peak, and future growth and economic data disappointments together with concern over sovereign credit risk, are likely to contribute to euro weakness into year-end

GBP

This is a heavy week for UK data. July CPI, due on Tuesday, is expected to moderate again to +3.1% y/y (prev. +3.2%). Although the reading remains well above the BoE’s 2% medium-term target, Governor King has made it clear that near-term CPI strength would be looked through, and the recent inflation report confirms that inflation is expected to return to target in 2012. On Wednesday, the minutes from the August 5 MPC meeting are due, with weekend press speculation suggesting the possibility of a three-way-split in how the votes were cast. We expect MPC Member Sentance to remain a lone voice in calling for a rate hike. After the recent weakness in house price and consumer confidence, retail sales due on Thursday will be a useful barometer of whether consumer spending has been affected by headlines warning of imminent and severe fiscal consolidation.

We maintain our negative outlook on cable as the BoE will likely be forced to keep policy loose until well into next year, to offset the contractionary and disinflationary consequences of fiscal consolidation. Nevertheless we acknowledge the risk of some further gains against the euro, given that an escalation of the Eurozone sovereign debt crisis would likely lead to Gilt inflows on safe-haven demand.

JPY

Q2 GDP came in far weaker than expected, rising only +0.1% q/q (cons. +0.6%, prev. 1.1%), prompting a temporary surge in global risk aversion that slowly eased as the Asia session wore on. Commenting afterwards, Economic Minister Arai said that he is watching out for the risk that Japan’s economy might hit a soft patch but that he would await the revised Q2 data, due in September, before deciding if additional stimulus is needed. Exchange rate rhetoric continues to flow out of Japan. On Saturday, Prime Minister Kan said that he would “carefully monitor” the yen, and would “communicate” with BoJ Governor Shirakawa “in a way that’s necessary”. The Nikkei reported that efforts to arrange a meeting between Kan and Shirakawa are ongoing but that a date has not yet been set.

USDJPY continues to be driven largely by front-end US yields and will likely remain sensitive to US data surprises. Despite the solid CPI print in the US, the US Treasury yield curve continues to flatten, and US 10y yields fell another -5.2bp on Friday. Front-end yields were relatively unmoved however, providing some relief for USDJPY.

TECHNICAL OUTLOOK

EURUSD BEARISH Decline through 1.2737 has exposed 1.2606 with scope for 1.2152 next. Initial resistance at 1.2933 ahead of 1.3334

USDJPY BEARISH The pair found support at 84.73, a break here would leave little support till 79.95. Near-term resistance at 87.15 ahead of 88.12

GBPUSD NEUTRAL Model is neutral; 1.5999 and 1.5324 mark key near-term directional triggers

USDCHF NEUTRAL Remains heavy below 1.0676 which keeps our focus on the downside. Support holds at 1.0332 ahead of 1.0131

AUDUSD BEARISH Violation of 0.8896 has exposed further weakness towards 0.8781 ahead of 0.8634. Near-term resistance comes in at 0.9035 ahead of 0.9389

USDCAD BULLISH Upside potential is initially capped at 1.0587 ahead of 1.0853. Near-term support comes in at 1.0303 ahead of 1.0108

EURCHF BEARISH Eyes 1.3342 break of which would open up the way for another run towards 1.3074. Near-term resistance at 1.3665 ahead of 1.3924

EURGBP BEARISH Outlook is bearish; violation of 0.8068 would expose 0.7694 next. Short-term resistance is defined at 0.8266 ahead of 0.8363

EURJPY BEARISH Momentum is negative; break of 107.32 would open 104.72. 111.57 defines the near-term resistance.

Forex Daily Market Commentary provided by GCI Financial Ltd.

GCI Financial Ltd (”GCI”) is a regulated securities and commodities trading firm, specializing in online Foreign Exchange (”Forex”) brokerage. GCI executes billions of dollars per month in foreign exchange transactions alone. In addition to Forex, GCI is a primary market maker in Contracts for Difference (”CFDs”) on shares, indices and futures, and offers one of the fastest growing online CFD trading services. GCI has over 10,000 clients worldwide, including individual traders, institutions, and money managers. GCI provides an advanced, secure, and comprehensive online trading system. Client funds are insured and held in a separate customer account. In addition, GCI Financial Ltd maintains Net Capital in excess of minimum regulatory requirements.

DISCLAIMER: GCI’s Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be U.S.ed as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.

By CountingPips.com

The latest Commitments of Traders (COT) data out on Friday showed that futures speculators continued to decrease their bets for the U.S. dollar against the euro for a sixth consecutive week as of August 10th, according to the COT data released by the Chicago Mercantile Exchange. Non-commercial futures positions, those taken by hedge funds and large speculators, were net short the euro against the U.S. dollar by -3,731 contracts after being net short the euro by -7,297 contracts the week before on August 3rd. This marks the best euro position in the futures market since the week of December 8, 2009 when positions were short by -511 contracts.

Euro futures positions have now improved for six straight weeks as investor sentiment has turned around quickly in the past few months. The euro improvement has coincided with a rise in the euro/dollar spot exchange rate that reached above 1.3000 before retreating some last week. Euro short positions have rebounded off the all-time low level of -113,890 in May and could be on the way to the long side for the first time since December 1, 2009.

The COT report is published every Friday by the Chicago Mercantile Exchange (CME) and shows futures positions as of the previous Tuesday. It can be a useful tool for traders to gauge investor sentiment and to look for potential changes in the direction of a currency or commodity. Each currency contract is a quote for that currency directly against the U.S. dollar, where as a net short amount of contracts means that more speculators are expecting that currency to fall against the dollar and net long position expect that currency to rise versus the dollar.

Despite the weekly improvement, the euro remained the only major currency on the short side against the dollar last week as the British pound sterling contracts in the CME futures market turned over to the long side against the dollar for the first time in a year. The Australian dollar, New Zealand dollar, Japanese yen, Swiss franc, Canadian dollar and Mexican peso all continued to have a net long amount of contracts against the dollar.

The British pound positions numbered 5,021 long positions as of August 10th after being on the short side on August 3rd with -250 short positions. This marks the fifth straight week of improvement in British pound sterling positions against the dollar.

Swiss franc long positions, which moved over to the long side against the dollar in the middle of June, dipped to 10,901 long contracts as of August 10th after increasing to 16,223 long contracts the week prior.

The Japanese yen net long contracts rose last week to 52,478 from 47,998 net long contracts on August 3rd. Yen positions have risen substantially from May after being short by -65,612 contracts on May 4th and have increased for two weeks a row.

The Australian dollar futures positions gained for fifth straight week and were net long by 54,370 contracts as of August 10th following a net 48,715 long contracts on August 3rd. The New Zealand dollar futures positions fell after advancing for seven straight weeks with 12,544 long contracts after a total of 15,059 long contracts as of August 3rd.

The Canadian dollar long positions increased to a net of 41,179 long contracts after 34,182 net longs the week before while Mexican peso long contracts advanced for a fifth straight week to 72,369 longs from 55,141 longs the week prior.

COT Data Summary (vs. the US Dollar) as of August 10th, 2010

Euro: -3,731 shorts from -7,297 shorts on August 3rd
British pound sterling: 5,021 long contracts from -250 shorts
Australian dollar: 54,370 long contracts from 48,715
Canadian dollar: 41,179 long contracts from 34,182
Japanese yen: 52,478 long contracts from 47,998
Mexican peso: 72,369 long contracts from 55,141
New Zealand dollar: 12,544 long contracts from 15,059
Swiss franc: 10,901 long contracts from 16,223

Go to the Commitment of Traders CME raw futures data

Hewlett-Packard Company or HPQ in the New York Stock Exchange has been exchanging on a bearish track for the last couple of months. The first sign of the bad things to come was when the 50-day moving average (blue line) crossed below the 200-MA (red line). Over the last three months, its shares also failed to go beyond its previous high in April. Instead, it even registered successive lower lows during the same period. Last week alone, its stock experienced a loss of 12.5%. Ouch! A bearish breakaway gap during the beginning of last week highlighted the market’s negative sentiment towards it. It did not stop there as it also broke below the support of what appears to be a descending triangle.

At present, HPQ is trading just above 40.00. A break below 38.00 (its last major support), could send it to 30.00 which is the target as gauged by projecting the height of the triangle from the point of breakout. But since the RSI is already in the extreme oversold level, the HPQ could consolidate for awhile before heading south again. Note also that a breakaway gap is usually followed by another gap – the run-away. If this true then you better start to at least lighten your positions.

Anyway, last week’s bloodbath started when the company’s CEO, Mark Hurd, resigned from his position. This June, a female marketing contractor for HP approached the company’s board of directors and said that Hurd had sexually harassed her. The board concluded that he did not violate the company’s sexual harassment policy though it was found that he had falsified some expense report documents to conceal his “close personal relationship” with the contractor. This scandal gravely undermined his credibility and the market’s sentiment towards the company. With the company’s leadership now in transition, expect its shares to dip at least in the short term.

More on LaidTrades.com …

Welcome to another week of forex trading! In today’s FX feature is an update of the GBPUSD pair which I posted back on August 4 (please see my previous blog here). As you can see from its 4-hour chart, the GBPUSD or the Cable has retraced downwards after reaching a 6-month high of 1.5998 on August 4. But despite its recent weakness, I am still bullish on the British pound. At present, the pair is trading just about just above 1.5500. The previous high at 1.5500 plus the uptrend line should be able to prevent the pair from falling further. A bounce off these supports could push the pair back up to 1.5900. A break below 1.5500, on the flip side, could send it down to 1.5100. But with an oversold condition, as indicated in the stochastics, and an intact uptrend line, the pound, in my opinion, has a higher chance of moving north at least in the short term.

On the economic front, the UK’s inflation and retail sales figures are scheduled to be released on August 17 and 19, respectively. Month-over-month CPI in July is seen to be at -0.2% due to weaker consumer spending. Because of this, the year-over-year count is projected to have slowed to 3.1% from 3.2%. July retail sales is also anticipated to have tapered to 0.4% from 0.7%. And according to the data that was published by the British Retail Consortium (BRC), sales in the retail level have indeed weakened as fears over a probable slash in government spending caused the consumers to only spend for their essential needs.

Since a dip in the UK’s inflation and retail sales accounts is already expected, the market has likely priced this. Given this, the pound can just trade in a range-bound fashion unless a worse-than-projected tallies are printed. A surprise upticks in the accounts, on the other hand, can push the pound higher.

More on LaidTrades.com …

By Anton Eljwizat – The NZD/USD pair has experienced much bearishness in the last few days as it currently trades at 0.7030. The current bearish trend is expected to come to an end anytime soon, and a bullish correction may be in the making. I will illustrate below that the NZD/USD may very well be heading for a reversal. Traders are strongly advised to take advantage of the trend at an early stage.

• Below is the 8 hour chart of the NZD/USD currency pair.

• The technical indicators used are the Slow Stochastic, Williams Percent Ranges, and Relative Strength Index (RSI).

• Point 1: There is a “doji” candlestick that has formed on the chart, indicating that a reversal should take place.

• Point 2: The Slow Stochastic indicates a bullish cross, signaling that the next move may be in an upward direction.

• Point 3: The Relative Strength Index (RSI) signals that the price of this pair currently floats in the over-sold territory, suggesting upward pressure.

• Point 4: William Percents Range also supports the upward direction.

• The volatile downward movement which occurred prior to this upward correction has generated these indicators, and there appears to be room for this correction to continue.

NZD/USD 8-Hour Chart

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Down Trend

Prices should stay below (1.29320) in order to maintain the bearish outlook.. EURUSD is facing a selling pressure pushing it down as long as it remains below (1.29320) any four hours close below (1.27003) will open the way for the instrument to test the next support level at (1.26487). Any four hours bare close above (1.29320) will change instrument`s direction. Traders should consider selling each rally with a stop loss at (1.29320).

Market Analysis by 4xEagleEye.com

By Natalie R. – Last week’s trading session was characterized by the recovery of the U.S. dollar. The recovery took place as a batch of disappointing data from the U.S. economy has created speculations that a global economic recovery might be halted. As a result, the yen, which is considered to be a safe asset as well, strengthened, and energy prices, such as crude oil, dropped.

If the negative data will continue to dominate this week as well, these trends are likely to precede, especially the bullish dollar. Traders are advised to follow the major publications, mainly from the U.S. and the euro-zone.

Here are today’s leading news events:

• 09:00 GMT, Euro-zone’s Consumer Price Indices (CPI) – The CPI is the main gauge of the region’s inflation. If the end result will reach above expectations for 1.7%, the euro might strengthen as a result.

• 12:30 GMT, U.S. Empire State Manufacturing index – This is a survey of about 200 manufacturers in New York state, who are asked to rate their general business conditions. A positive data, above 8.1, might erase some of the dollar’s gains.

• 13:00 GMT, TIC Long-Term Purchases – This indicator measures the difference between foreign long-term securities purchased by U.S. citizens, to ones purchased by foreigners. If the end result will reach expectations for 35.3B, the dollar might strengthen further.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Source: ForexYard

The U.S. dollar corrected looses against most of the major currencies during last week’s session, as data showed that global recovery might take longer than expected. This decreased risk-appetite in the market, and turned investors to look for safer assets, such as the dollar and the Japanese yen. Crude Oil prices also fell as a result. With a heavy news week ahead, this trend might extend if the economic publications will continue to provide signals for a slowdown in the global recovery.

Economic News

USD – Negative Economic Data Boosts the Dollar

The U.S. dollar rallied vs. most of the major currencies during last week’s trading session. The dollar gained about 500 pips against the euro and about 400 pips against the British Pound.

The dollar fell last week as a result of several disappointing publications from the U.S. economy. The U.S. Trade Balance, a report which measures the difference between imported and exported goods and services, showed that the U.S. trade deficit widened sharply to $49.9B in June, failing to reach expectations for a $42.0B deficit. In addition, the U.S. employment condition continues to deteriorate. The U.S. weekly Unemployment Claims showed that 484,000 peoples have filed for unemployment insurance for the first time during the past week, well above expectations for 465,000 individuals. This continued the negative employment data from the Non-Farm Payrolls publications which released a week ago. The negative data keeps investors cautious regarding their portfolios, and as a result increases risk-aversion in the market. This boosts the dollar, which is considered to be a safe investment. As long as the U.S. economy continues to provide negative signals the dollar may rise further.

As for the week ahead, many interesting publications are expected from the U.S. economy. Traders are advised to follow the Long-Term Purchases, the Building Permits, the Producer Price Index (PPI), the Unemployment Claims and the Philly Manufacturing Index. These indicators tend to have a large impact on the market, and each publication is likely to influence the dollar’s trading.

EUR – Euro Erases Profits as Data Shows Global Recovery May Take Longer Than Expected

The euro fell against most of the major currencies during last week’s trading session. The euro dropped about 500 pips against the U.S. dollar, and the EUR/USD pair is now trading around the 1.2790 level. The euro also fell about 450 pips vs. the yen and about 150 pips vs. the British pound.

Two main reasons led to the euro’s downfall last week. The first reason was the negative data from the U.S. economy. Data showed that the unemployment condition in the U.S. continued to deteriorate during the past week. In addition, the U.S. Trade Balance fell more than expected, and as a result created concerns that the recovery of the U.S. economy will take longer than expected, which will probably halt global recovery as well. This increased risk-aversion, and turned investors to close their long positions on relatively risky currencies, such as the euro and the pound.
The second reason for the euro’s drop is the dissipating data from the euro-zone. The European Industrial Production failed to reach expectations for a 0.7% rise in June, and has fallen by 0.1%. In addition, French Preliminary Non-Farm Payrolls saw merely a 0.2% rise during the 2nd quarter, failing to reach expectations for a 0.4% rise. The disappointing data has added to the uncertainty in the market, and as a result weakened the euro.

As for this week, the economic indicator which might have the largest impact on the euro looks to be the German ZEW Economic Sentiment. This is a survey of about 350 German institutional investors, who are asked to rate the economic outlook of Germany. A positive end result might initiate a correction for the euro against the major currencies.

JPY – Yen Strengthens Against the Euro and the Pound on Increased Risk Aversion

The yen appreciated against most of the major currencies during last week’s trading session. The yen gained about 450 pips against the euro, and about 350 pips against the British pound. Against the U.S. dollar the yen saw a volatile session without a clear trend.

The yen rose significantly last week, as disappointing data from the U.S. economy increased concerns that global recovery may take longer than expected. In addition, negative reports from the Japanese economy also contributed to the uncertainty in the market. The Japanese Current Account, which measures the difference between imported and exported goods and services rose to 1.36T, yet failed to reach expectations for 1.44T. In addition, the Core Machinery Orders rose by 1.6% in June, well below expectations for a 5.6% rise.
It currently seems that for as long that data from Japan, the U.S. and the euro-zone will indicate that global economic recovery might be halted, the yen, as safe-haven, is likely to strengthen as a result.

Looking ahead to this week, traders are advised to follow the major economic publications from Japan, the U.S. and the euro-zone, and to take under consideration that positive data might increase risk appetite, and as a result erase the yen’s gains from the past week.

Crude Oil – Crude Oil Falls To $75.05 a Barrel

Crude Oil is trading near a one month low, as a barrel of crude oil is currently trading around $75.70. A barrel of crude oil was traded for about $80 when last week’s trading took off, yet crude saw a sharp decline, and reached a weekly low of $75.05 on Friday.

Crude oil fell during last week’s session as negative data from the U.S. economy has created concerns that the world’s largest consumer of energy products will reduce its demand for fuel. Crude oil reached its monthly low following the disappointing U.S. Retail Sales. At the moment, crude oil continues to weaken as an early publication has shown that the Japanese economy has grown less than expected during the 2nd quarter, adding to concerned regarding a reduced demand for oil.

As for the week ahead, traders are advised to follow the main publications from the U.S and the euro-zone, as they usually have a large affect on crude oil’s trading. Traders are also advised to follow the U.S. Crude Oil Inventories report on Wednesday, as this report tends to have an instant impact on oil prices.

Technical News

EUR/USD

While the pair took a significant drop to close out last week’s trading, it has been fairly steady since markets opened. The Stochastic Slow on the daily chart indicates a bullish cross may form soon, typically a sign that upward movement could occur. This theory is supported by the Relative Strength Index on the 8-hour chart. Traders are advised to go long today.

GBP/USD

Despite some small price fluctuations in overnight trading, the pair is trading at the around the same rate as when markets opened for the week. That being said, the Slow Stochastic on the daily chart shows signs of impending upward movement. Traders may want to open long positions today, as bullish movement could take place.

USD/JPY

Following a steep drop in overnight trading, the pair now appears to be trading in neutral territory. With most technical indicators not showing a clear indication of where the pair could be moving, traders may want to take a wait and see approach with their positions today. A clearer picture could present itself in afternoon trading.

USD/CHF

With no strong price shifts recorded in overnight trading, most technical indicators are not showing a clear direction for the pair at the moment. That being said, market volatility is expected later today, so traders will want to pay close attention to both the Bollinger Bands and Relative Strength Index on the 4 and 8-hour charts for any signs of movement.

The Wild Card

S&P500

The CFD has seen a steep drop in value over the course of the last week. That being said, the Slow Stochastic on the daily chart and the Relative Strength Index on the 8-hour chart both show the S&P trading in oversold territory, meaning an upward correction is likely today. CFD traders may want to go long today in order to capitalize on a potentially lucrative price shift.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

By eToro – Equity markets retraced this week as investors returned to the risk off trade. Prices of riskier currencies, along with petroleum and grains retreated as investors absorbed a number of economic data points that where softer than expected. For the week, the S&P 500 Index declined by 43 points or 3.85 percent.

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Forex Market Analysis provided by eToro

Disclaimer: Trading in the Foreign Exchange market might carry potential rewards, but also potential risks. You must be aware of the risks and are willing to accept them in order to trade in the foreign exchange market. Don’t trade with money you can’t afford to lose.