{"id":12092,"date":"2010-08-16T16:44:18","date_gmt":"2010-08-16T20:44:18","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=12092"},"modified":"2010-08-16T16:44:18","modified_gmt":"2010-08-16T20:44:18","slug":"forex-daily-market-commentary-96","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2010\/08\/16\/forex-daily-market-commentary-96\/","title":{"rendered":"Forex Daily Market Commentary"},"content":{"rendered":"

By GCI Forex Research<\/strong><\/p>\n

Fundamental Outlook at 1400 GMT (EDT + 0400)<\/strong><\/p>\n

USD<\/span><\/em><\/strong><\/p>\n

The positioning data produced by the CFTC for the FX Futures market \t\t\tof the Chicago Mercantile Exchange has been displaying a strong \t\t\tswing from USD longs to USD shorts over the past months. So it is \t\t\thardly surprising that the greenback came under pressure allowing \t\t\tEUR-USD to appreciate to levels above 1.33. The current notable USD \t\t\tshort positioning lets a continuation of the recent correction in \t\t\tEUR-USD (i.e. the dollar uptrend) seem likely. The fact that \t\t\tFriday\u2018s latest data (referring to last Tuesday) illustrates a \t\t\tfurther rise in USD shorts does not question the reliability of the \t\t\tpositioning indicator (as this should have pointed towards a rise in \t\t\tEUR-USD). After all EUR-USD was still trading above 1.31 on Tuesday \t\t\tand it cannot be ex-cluded that the USD shorts were already falling \t\t\teven though the weekly data suggested some-thing else. We would \t\t\tinitially expect a further fall in EUR-USD. First of all this means \t\t\tthat the support area around 1.2730 would have to be breached.<\/p>\n


\nEUR<\/span><\/em><\/strong><\/p>\n

The euro came under some selling pressure on Friday as concern over \t\t\tsovereign credit risk intensified. What began as a gradual widening \t\t\tof Ireland’s yields last week amid concerns about the domestic \t\t\tbanking system, has now affected other sovereigns on the Eurozone \t\t\tperiphery. Media sources continued to speculate that the ECB had \t\t\tbeen forced to buy sovereign bonds last week in an effort to limit \t\t\tspread widening. Further details are expected today when the ECB is \t\t\tdue to announce the value of purchases settled last week. A \t\t\tsignificant increase beyond the EUR8 mn in purchases settled the \t\t\tweek before could weigh further on the euro. Although sovereign \t\t\tsupply is light this week, given the recent jitters, attention will \t\t\tfocus on Ireland’s attempt to issue up to EUR1.5 bn in notes on \t\t\tTuesday. The auction could mark a significant test for the euro \t\t\tafter poor T-bill auctions last week. Nevertheless our fixed income \t\t\tstrategists expect to see solid domestic demand given the small \t\t\tvolume on offer, and the fact that an estimated 81% of Ireland’s \t\t\t2010 issuance program is already complete.<\/p>\n

Today, Eurozone CPI is due and the market expects to see a rise to \t\t\t+1.7% y\/y (prev. 1.4%). The figure of course conceals a tremendous \t\t\tdispersion of readings across the individual member states. Greece’s \t\t\tEU harmonised CPI for July came in at +5.5% y\/y, while Ireland \t\t\treported a -1.2% y\/y decline. The spread of CPI readings underlines \t\t\tthe difficulties the ECB will face when choosing the right moment to \t\t\teventually tighten monetary policy. On Tuesday the August ZEW survey \t\t\tof investor sentiment is scheduled for release. After plunging in \t\t\tJune, and falling again in July, a further decline to 9.3 (prev. \t\t\t10.7) is expected.<\/p>\n

We remain bearish on the euro. Q2 GDP data last Friday likely marks \t\t\tthe cyclical peak, and future growth and economic data \t\t\tdisappointments together with concern over sovereign credit risk, \t\t\tare likely to contribute to euro weakness into year-end<\/p>\n


\nGBP<\/span><\/em><\/strong><\/p>\n

<\/em><\/strong> This is a heavy week for UK data. July CPI, due on Tuesday, is \t\t\texpected to moderate again to +3.1% y\/y (prev. +3.2%). Although the \t\t\treading remains well above the BoE’s 2% medium-term target, Governor \t\t\tKing has made it clear that near-term CPI strength would be looked \t\t\tthrough, and the recent inflation report confirms that inflation is \t\t\texpected to return to target in 2012. On Wednesday, the minutes from \t\t\tthe August 5 MPC meeting are due, with weekend press speculation \t\t\tsuggesting the possibility of a three-way-split in how the votes \t\t\twere cast. We expect MPC Member Sentance to remain a lone voice in \t\t\tcalling for a rate hike. After the recent weakness in house price \t\t\tand consumer confidence, retail sales due on Thursday will be a \t\t\tuseful barometer of whether consumer spending has been affected by \t\t\theadlines warning of imminent and severe fiscal consolidation.<\/p>\n

We maintain our negative outlook on cable as the BoE will likely be \t\t\tforced to keep policy loose until well into next year, to offset the \t\t\tcontractionary and disinflationary consequences of fiscal \t\t\tconsolidation. Nevertheless we acknowledge the risk of some further \t\t\tgains against the euro, given that an escalation of the Eurozone \t\t\tsovereign debt crisis would likely lead to Gilt inflows on \t\t\tsafe-haven demand.<\/p>\n


\nJPY<\/span><\/em><\/strong><\/p>\n

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

USDJPY continues to be driven largely by front-end US yields and \t\t\twill likely remain sensitive to US data surprises. Despite the solid \t\t\tCPI print in the US, the US Treasury yield curve continues to \t\t\tflatten, and US 10y yields fell another -5.2bp on Friday. Front-end \t\t\tyields were relatively unmoved however, providing some relief for \t\t\tUSDJPY.<\/p>\n


\n<\/span><\/em>
\nTECHNICAL OUTLOOK<\/span><\/strong><\/p>\n


\n<\/span><\/strong> EURUSD BEARISH Decline through 1.2737 has exposed 1.2606 with scope \t\t\tfor 1.2152 next. Initial resistance at 1.2933 ahead of 1.3334<\/p>\n

USDJPY BEARISH The pair found support at 84.73, a break here would \t\t\tleave little support till 79.95. Near-term resistance at 87.15 ahead \t\t\tof 88.12<\/p>\n

GBPUSD NEUTRAL Model is neutral; 1.5999 and 1.5324 mark key \t\t\tnear-term directional triggers<\/p>\n

USDCHF NEUTRAL Remains heavy below 1.0676 which keeps our focus on \t\t\tthe downside. Support holds at 1.0332 ahead of 1.0131<\/p>\n

AUDUSD BEARISH Violation of 0.8896 has exposed further weakness \t\t\ttowards 0.8781 ahead of 0.8634. Near-term resistance comes in at \t\t\t0.9035 ahead of 0.9389<\/p>\n

USDCAD BULLISH Upside potential is initially capped at 1.0587 ahead \t\t\tof 1.0853. Near-term support comes in at 1.0303 ahead of 1.0108<\/p>\n

EURCHF BEARISH Eyes 1.3342 break of which would open up the way for \t\t\tanother run towards 1.3074. Near-term resistance at 1.3665 ahead of \t\t\t1.3924<\/p>\n

EURGBP BEARISH Outlook is bearish; violation of 0.8068 would expose \t\t\t0.7694 next. Short-term resistance is defined at 0.8266 ahead of \t\t\t0.8363<\/p>\n

EURJPY BEARISH Momentum is negative; break of 107.32 would open \t\t\t104.72. 111.57 defines the near-term resistance.<\/p>\n

Forex Daily Market Commentary<\/strong><\/em> provided by<\/em><\/strong> GCI Financial Ltd<\/strong><\/a>.<\/strong><\/span><\/p>\n

GCI Financial Ltd (\u201dGCI\u201d) is a regulated securities and commodities trading firm, specializing in online Foreign Exchange (\u201dForex\u201d) 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 (\u201dCFDs\u201d) 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.<\/p>\n

DISCLAIMER: GCI\u2019s 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.<\/p>\n","protected":false},"excerpt":{"rendered":"

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…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-12092","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/12092","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=12092"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/12092\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=12092"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=12092"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=12092"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}