Daily Forex Report - USD mixed, growth linked currencies outperform

Posted by admin as Forex News

• USD: Mixed, nfp slightly better than expectation, unemployment rises to 26 year high
• JPY: Lower, Q2 GDP confirms Japan’s economy emerging from recession
• EUR: Lower, pressured by continued deterioration in US jobs outlook
• GBP: Lower, UK auto sales rise for second month in a row in July
• CAD and AUD: AUD higher & CAD higher, Canada’s unemployment rises but jobs growth improved

Overview     
USD traded mixed Friday as investors digest the release of US August unemployment. The headline unemployment rate rose to 9.7% from 9.4% last month which was its highest level since June of 1983 and nonfarm payrolls declined by 216k which was slightly better than market consensus of -220k. The August employment report shows that nonfarm payroll job loss has slowed but the report suggests that the US is facing a jobless recovery and the recovery will likely be weak. Stubbornly high level of unemployment in the US will hurt consumer demand. In pre-USD trade USD traded lower against the growth related currencies mixed against Europe and higher against the JPY as investors continue to try to assess the outlook for the global recovery. CAD was supported by report of an unexpected rise in jobs created in August. GBP was supported by report that UK auto sales rose for the second month in July. JPY was pressured by uncertain outlook for risk as equity markets trade mixed. The IMF says that the global economy is emerging from downturn and expects the recovery to be sluggish. Fed’s Fisher says the US is likely to enter a prolonged period of sluggish growth and unemployment to remain high. Economist Stiglitz sees significant chance of another contraction in the US economy. Today’s slightly better than expected decline in nfp sparked light USD demand as the data contributes to uncertainty about the strength of the US recovery.

Today’s US data:
August nfp falls 216K and the unemployment rate rises to 9.7%. July job losses were revised to -463 from -443  and June job losses revised -276 from -247. One out of every 10 Americans are out of work. The nfp is at its best level in over a year and unemployment is at a 26 year high. The USD firmed after the release of the unemployment as the report contributes to uncertain outlook for the US recovery. ECRI rose to a ten month high indicating the risk of deflation has diminished.

Upcoming US data:
Monday is Labor Day holiday and the US markets are closed. Next week’s US economic calendar includes the September 8th release of July consumer credit expected at -4.5 bln compared to -10.3 bln last month. On September 10th initial jobless claims for week ending 09/05 will be released expected at 560k compared to 570k last month along with July trade balance expected at -27.5 bln compared to -27.1 bln last month.           On September 11th August import prices will be released expected at 0.9% compared to -0.7% last month along with preliminary University of Michigan consumer sentiment expected 65.3 compared to 65.7 last month. July wholesale inventories and the Treasury budget for August will be released on September 11th as well. Wholesale inventories are expected to fall by 1% compared to -1.7 last month the Treasury budget is expected to -161.50 bln compared to -111.91 bln last month.

JPY
JPY traded lower as equity markets edged higher and US nfp is reported slightly better than expected. Report that Japan’s Q2 GDP was unrevised confirms that Japan’s economy has emerged from recession. There was limited reaction to report that the DPJ party favors strong JPY to stimulate purchasing power and consumer demand. Japan’s incoming PM Hatoyama says Japan will maintain strong ties with the US. JPY has been firming since the Japanese last weekend election which ushered in the DPJ party. The DPJ party is expected to focus on promoting domestic growth and to move the Japanese economy away from dependence on export led growth. Optimism about improving domestic economic outlook in Japan has encouraged demand for the JPY and stocks. JPY price direction will focus on equity markets and risk sentiment.

Next week’s Japanese economic calendar includes the September 8th release of August money supply expected at 2% compared to 1.9% last month. On September 10th July current account and August corporate good prices will be released along with leading indicators for July. Corporate good prices are expected to rise 0.5% compared to 0.4% last month and leading indicators are expected flat. On September 11th July machinery orders will be released along with July industrial output. Machinery orders are expected to fall 26% compared to -29.7 last month.

Key technical levels to watch in USD/JPY include support at 91.75 the July 13th low with resistance at 93.55 the August 31st high.

EUR
EUR traded lower after the release of US August unemployment as the data generates concern about the outlook for the US recovery and limits risk appetite. ECB President Trichet discussed the possible conditions for exit from unconventional monetary policy. According to Trichet inflation risk would be the main reason for an eventual exit from the accommodative policy and he expects liquidity to remain for the time being. According to Trichet many of the credit measures will unwind naturally. Trichet went on to say that the exit strategy does not include considerations about interest policy. The ECB appears to be signaling that rate policy is a separate issue from the exit strategy from unconventional stimulus. ECB Stark says that the withdrawal of stimulus will come when upside risks to price stability merge. ECB’s Weber warns that the financial crisis is not over yet and that there’s a great deal of uncertainty about what lies ahead for the EU and global economy. There were no major EU economic reports released today but Swiss August inflation was reported at 0.1%. The Swiss CPI report confirms that inflation risk in Switzerland remains low and this may increase the risk of SNB intervention. Officials from the UK, France and Germany have written a letter to the G-20 stating that they should stick to current stimulus plans. Central bankers and government officials are trying to discourage speculation that they will quickly exit quantitative ease and withdraw stimulus fearing that too quickly and exit would put the global recovery at risk. The G-20 meets this weekend and US Treasury Secretary Geithner is expected to seek a globally coordinated exit strategy from stimulus policies and to state that it’s too early to begin removing economic stimulus.

Next week’s EU economic calendar includes the September 7th release of September Sentix index expected -14 compared to -17 last month along with German July industrial orders expected at 3% compared to 4.5% last month. On September 8th German July trade balance will be released expected when at 11.3 bln compared to 11 mln last month along with German July industrial production expected at 0.3% compared to -0.1% last month. On September 9th German August CPI will be released expected at 0.1% compared to flat last month.

The technical outlook for the EUR is mixed as EUR remains range bound. Expect EUR support at 1.4175 the September 1st low with resistance at 1.4380 the September 1st high.

GBP
GBP opened higher supported by report of rising UK auto sales. GBP turned lower after the release of US August unemployment as the unemployment report clouds the outlook for the US and global recovery. UK auto sales rose for the second month in a row in July by 6%. The rise in auto sales is another hopeful sign that the UK economy recession is ending. This week the UK reported better than expected services and construction PMI and rising business expectations. GBP has been underperforming with selling pressure attributed to ongoing concern about the outlook for the UK economy and in response to the BOE’s recent decision to expand quantitative ease. In addition, GBP has been pressured by report of a record budget deficit in July and concern that rising deficit spending will force the UK government to issue more debt and eventually raise taxes to cover the spending shortfall. Focus turns to next week’s BOE policy meeting. No policy change is expected. The trade will be looking to see whether they BOE outline possible exit strategies from quantitative ease. It is widely expected that the BOE will be the last central bank to withdraw stimulus because of concern about the tenuous outlook for recovery in the UK.

Next week’s UK economic calendar includes the September 7th release of RIC’s house price balance expected at -7 compared to -8.1 last month. On September 8th August BRC retail sales will be released expected at 1.5% compared to 1.8% last month along with Nationwide Consumer confidence expected at 62 compared to 60 last month. On September 9th trade July trade balance will be released expected -6.32 bln compared to -6.45 bln last month along with NIESR GDP estimate expected unchanged at -0.4%. BOE meet on September 10th, no policy changes is expected. On September 11th PPI will be released expected at 0.6% compared to 0.5% last month.

The technical outlook for GBP is mixed as GBP rises back above 1.6300. Expect near-term support at 1.6150 the August 27th low with resistance at 1.6445 the August 25th high.

CAD
CAD traded higher supported by report of an unexpected rise in Canada’s employment growth in August. Canada reported that the labor market had 27,100k new jobs in August, the consensus was for 10K loss in employment growth. The trade ignored report that Canada’s August unemployment rate rose to 11 1/2 year high of 8.7% from 8.6% last month. Most of the improvement in Canada’s jobs growth was part-time work .CAD has underperformed this week pressured by increased political uncertainty in Canada as the Canadian Liberal party said late Tuesday that they would no longer support the minority government. The Liberal party has called for a no-confidence vote. The threat of intervention also limits demand from the CAD. BOC’s Lane last week expressed concern about the strength of the CAD and the impact on Canada’s recovery. Lane’s comments increase the risk of intervention to limit CAD gains.

Next week’s Canadian economic calendar includes the September 8th release of July building permits expected at 0.6% compared to 1% last month. On September 9th July building permits will be released expected at 0.6% compared to 1% last month. On September 10th July trade balance will be released expected at 0.9 bln compared to -0.06 bln last month. July New Housing Price Index will be released on September 11th expected at 0.1% compared to -0.2% last month.

The technical outlook for CAD is mixed negative as USD/CAD rises falls below 1.1090. Look for near-term support at 1.0715 the August 25th low with resistance at 1.1125 the August 17th high.

AUD
AUD traded higher supported by global recovery hope as the IMF says the global economy is emerging from downturn and Japan’s Q2 GDP confirms that the Japanese economy is emerging from recession. AUD has been the best performing currency supported by RBA rate hike speculation and a sharp rise in the price of gold. Gold prices have surged over the last couple of days in reaction to report that the sovereign wealth fund of China is selling some of China’s USD reserves for gold. AUD gains were partly limited by today’s release of US August unemployment that points to a weak recovery in the US. The RBA is expected to be the first central bank to hike rates as the global economy recovers. The Shanghai Index closed higher adding support to the AUD.AUD price action is closely correlated to risk sentiment and the direction of equity markets in particular Shanghai Index. Wednesday, Australia reported much stronger than expected Q2 GDP. Stronger than expected GDP encourages speculation that the RBA will hike interest rates at the next policy meeting. Some analysts suggest that the RBA is actually falling behind the rate hike cycle and a number of analysts expect the RBA to raise rates before year end. The RBA elected to hold policy steady at 3% Tuesday and failed to lay out a timeline for rate hikes.

Next week’s Australian economic calendar includes the September 9th release of July retail trade expected at 0.5% compared to -1.4% last month. On September 10th August employment will be released expected unchanged at 5.8% with employment change at -7k.

The technical outlook for the AUD is positive as AUD rises above 8400. Expect AUD support at 8315 the September 3rd low with resistance at 8480 the August 15th high and 8525 the September 22nd high.

US Morning Notes - USD mixed to lower awaiting today’s US nfp release

Posted by admin as Forex News

FX Highlights

• USD is opening mixed ahead of today’s US jobs data with CAD and AUD higher, European currencies flat and JPY lower, there is optimism that today’s US unemployment report will show the slowest loss of jobs in over a year and that the report will support recovery hope and risk appetite, crude prices are higher, growth linked currencies rise, CAD supported by unexpected rise in Canadian jobs growth, ECB officials discuss possible plans for exit from stimulus, Weber warns of continued uncertainty about future growth outlook
• Focus turns to today’s release US unemployment for August
• Canada unexpectedly adds 27,100K jobs in August, unemployment rate rose to 11.5 year high of 8.7% from 8.6% last month, CAD higher
• IMF says the global economy is emerging from downturn, recovery to be sluggish
• Japans incoming PM Hatoyama says Japan will maintain strong ties with the US, DPJ party favors strong JPY to stimulate purchasing power and consumer demand, Japan’s Q2 GDP is unrevised and confirms the Japanese economy is emerging from recession
• Australia’s Treasurer Swan says it premature to withdraw stimulus and 2010 growth will likely be sluggish
• Japan’s Q2 CAPEX falls 21.7% y/y, JPY lower
• Fed’s Fischer says US likely to enter period of prolonged sluggish growth, unemployment to remain high, deflation the larger risk than inflation
• Economist Stiglitz sees significant chance of another contraction in the US economy
• ECB Trichet says inflation risk is the reason for eventual exit from unconventional monetary policy, for time being liquidity expected to remain, withdrawal of stimulus will come when upside risks to price stability emerge, ECBs Weber says financial crisis is not over yet, EUR flat
• Swiss August CPI rises 0.1%, CHF lower
• UK auto sales rise for second month in July by 6%, GBP higher
• Treasury Secretary Geithner calls for tougher worldwide bank capital and liquidity rules by 2012
• US equity markets set to open higher, European equities higher, Nikkei closed 27 points lower

Upcoming Events

• US- Friday, August unemployment will be released expected at 9.5% with nfp at -220k
• CAN- Friday, August unemployment will be released expected at 8.7% with employment growth at -10k, the report has already been released

EU Morning Report – EURUSD falls on ECB’s Trichet comments

Posted by admin as Forex News

The euro falls on comments from Trichet and is headed for a second weekly loss against the dollar on speculation the ECB’s president will today reiterate the bank will refrain from raising interest rates.

• The key idea that stuck with investors from Trichet’s ECB conference yesterday is that the economic recovery will be “bumpy” and it is “too early” to start exiting from stimulus measures helping stabilize the economy.
• Traders expressed their disappointment over the president’s comments by selling the euro and buying the dollar, sending the EURUSD down over 100 pips.  The euro may struggle to regain yesterday’s losses on speculation that Trichet will restate his less than hawkish views on the economy later today at the ECB Watchers Conference in Frankfurt.
• The G-20 finance ministers and central bankers will meet today in London to discuss measures to foster a recovery in the global economy.  One of the main focus points for the upcoming G-20 conference is the timing of the exit strategy from their fiscal and monetary stimulus efforts aiding the economic recovery from the worst global recession since World War II.
• According to economists ahead of the NFP report today, it is estimated that employers in the US probably cut another 225,000 jobs in August, and the jobless rate increased to 9.5%, underscoring threats to consumer spending.  The projected drop in payrolls, if realized, would be the smallest since August 2008, and follow 247,000 jobs losses in July.

Currency and Commodity to watch out for: EURUSD & Gold

• The EURUSD pivot point is at 1.4325 with a preference to enter into short positions at 1.4315.
• The gold pivot point is at 995.40 with a preference to enter into short positions at 992.00

Today’s calendar and market movers:

• Canada Employment Change expected to rise to -12,400
• US Non-Farm Employment Change expected to show a -225,000 for August
• US Unemployment Rate expected to rise to 9.5% from 9.4%

Stocks:

• US stocks ended positive, snapping a four-day losing streak, after stronger-than-expected retail sales eased concerns about the economy ahead of today’s important NFP report.
• As of 06:05 GMT the Asian markets are mixed with the Nikkei trading at -0.27% and the Hang Sent at 0.53%.

Daily Forex Outlook - Gold nears $1000 an ounce

Posted by admin as Forex News

CURRENCY TRADING SUMMARY - 4^th September (00:30GMT)

U.S. Dollar Trading (USD) continued to be sold in the Asian session as news of no new curbs on banking helped shanghai rise +4.8%. Weekly Jobless Claims forecast at 560k came in at 570k. Also released, August ISM-manufacturing forecast at 48 came in at 48.4 vs. 46.4 previously. Crude Oil was down -{content}.09 to close at .96. In US share markets, S&P ended +8 points (0.85%) at 1003, NASDAQ ended +16 points (0.82%) at 1983 and DOW JONES ended +63 points (0.69%) at 9344. Looking ahead, August Non Farm Payrolls forecast at -225k vs. -247k previously and Unemployment Rate forecast at 9.5% vs. 9.4% previously.

The Euro (EUR) traded above 1.4300 to touch 1.4350 before easing after lackluster ECB President Trichet comments post rate meeting. The ECB held at 1.0% but Trichet noted that the recovery will be bumpy and uneven. July retail sales also weighed falling -0.2% vs. 0.1% forecast. Overall the EUR/USD traded with a low of 1.4190 and a high of 1.4295 before closing at 1.4270. Looking ahead, ECB President speaks again.

The Japanese Yen (JPY) tested 92 in early Asian before the bounce in Chinese stocks led to reversal of direction. USD/JPY was found a little short ahead of the US data today and the pair jumped back above 92.50. GBP/JPY had the biggest bounce from below 150 Yen to above 151.50. Overall the USDJPY traded with a low of 91.95 and a high of 92.79 before closing the day around 92.60 in the New York session. UPDATE Q2 Capex -21.7% vs. -22.9% forecast Q/Y.

The Sterling (GBP) led the market recovery on the back of positive stocks and continued the bounce on UK economic data. August Services PMI came in at 54.1 vs. 53.2 previously. Cable broke higher in Europe to test 1.64 before fading with Euro weakness. Overall the GBP/USD traded with a low of 1.6237 and a high of 1.6414 before closing the day at 1.6340 in the New York session.

The Australian Dollar (AUD) continued to trend higher breaking above 0.8400 after shrugging off the weakness from earlier in the week and some soft trade data yesterday. July Trade Balance forecast at -850mn blew out to -1.56bn vs. -0.54bn previously. Helping the Aussie rally was the continued rally in Gold and strong AUD/JPY support below 77 Yen. Overall the AUD/USD traded with a low of 0.8316 and a high of 0.8428 before closing the US session at 0.8390.

Gold (XAU) press coverage of the Gold break out help the pair continue to rally trading close to the 00 level before fading late in the day. Overall trading with a low of USD4 and high of USD7 before ending the New York session at USD0 an ounce.

TECHNICAL COMMENTARY

Euro - 1.4255
Initial support at 1.4178 (Sept 1 low) followed by 1.4046 (AUG 17 low). Initial resistance is now located at 1.4407 (Aug 27 high) followed by 1.4447 (Aug 5 high)

Yen - 92.75
Initial support is located at 91.74 (July 13 low) followed by 90.54 (February 13 low). Initial resistance is now at 94.07 (August 28 high) followed by 95.06 (Aug 14 high).

Pound - 1.6330
Initial support at 1.6114 (Sept 1 low) followed by 1.6034 (Jul 13 low). Initial resistance is now at 1.6381 (Aug 28 high) followed by 1.6546 (Aug 24 high).

Australian Dollar - 0.8400
Initial support at 0.8239 (AUG 27 low) followed by the 0.8156 (AUG 17 low). Initial resistance is now at 0.8478 (Aug 14 high) followed by 0.8519 (Sept 22 high).

Gold - 993
Initial support at 944 (Aug 31 low) followed by 939 (Aug 24 low). Initial resistance is now at 997 (Sept 3 high) followed by 1000 (Psychological Round Number).

Daily Forex Report - USD rebounds, downside limited by higher jobless claims

Posted by admin as Forex News

• USD: Mixed, jobless claims higher than expected, service ISM as expected, rumor of China SWF selling
• JPY: Lower, risk sentiment improves, MOF flows confirm foreign demand for Japanese equities
• EUR: Lower, EU services PMI rise, retail sales fall, ECB holds policy steady maintains accommodation
• GBP: Higher, UK services PMI rises to a two year high, libor rates fall to record low
• CAD and AUD: AUD higher & CAD lower, Australian imports rise, political uncertainty in Canada

Overview     
USD traded mostly lower Thursday pressured by improving risk appetite as equity markets and commodity prices rise on global recovery hope. Recovery hopes are fueled by an upgrade in US economic outlook from the Fed and of the global economic outlook form the OECD, along with better earnings from US retailers. The FOMC minutes for August state that US recession is ending and risks to the US economy have eased considerably. The OECD says the global recession is ending and the recovery may be faster than expected. Home Depot and Target reported better than expected sales. USD was also pressured by a rumor that China’s sovereign wealth fund is selling USD for gold and other investments. This generates concern that China may be diversifying out of the USD. GBP and the EUR were supported by report of better than expected services PMI data for August. The ECB elected to hold monetary policy unchanged as expected. In the press conference following the ECB policy decision ECB President Trichet said the ECB will continue to inject funds over one year at 1%. This means that the ECB is not yet signaling an exit strategy from accommodative policy. EUR turned lower as the ECB offers no signal when stimulus will be withdrawn. Trichet also said he sees signs of economic stabilization in the EU and the ECB upped its 2009 and 2010 growth forecast. Commodity currencies were supported by improving global growth outlook and rising commodity prices. AUD rallied despite report of the much wider than expected July trade deficit. CAD gains limited by political uncertainty in Canada and threat of intervention. US economic data was mixed with jobless claims falling less than expected and services PMI in line with forecast. In the August FOMC meeting minutes the Fed specifically expressed concern about the jobs outlook as possible roadblock to the recovery. USD edged a bit higher after the release of higher than expected jobless claims and the ISM report as equities trim early gains.

Today’s US data:
Jobless claims for the week ending 8/29 fell 4K to 570k a decline to 560k was expected. August services PMI rose to 48.4 compared to 46.4 last month, a reading of 48 was expected.

Upcoming US data:
On September 4th August unemployment rate will be released expected at 9.5% compared to 9.4 last month with nonfarm payrolls -220k compared to -247k in July.

JPY
JPY traded lower pressured by improving risk sentiment and firmer European and US equity market trade. JPY has been firming since the Japanese election last week which ushered in the DPJ party. The DPJ party is expected to focus on promoting domestic growth and to move the Japanese economy away from dependence on export led growth. Optimism about improving domestic economic outlook in Japan has encouraged demand for the JPY and stocks. In addition, a member of the DPJ party says that strong JPY is good for Japan’s economy. If DPJ party can shift Japan’s economic growth focus away from exports Japanese officials will be less inclined to seek a weaker JPY to boost export competitiveness. This partly explains why the JPY is trading near a seven week high even as investors are moving to riskier assets as risk appetite improves. MOF flows data for week ending August 29th showed that foreigners were again net buyers of Japanese stocks. Foreign purchase of Japanese stocks had been on the rise ahead of the election as well and it looks like investors are starting to rebuild positions in the Nikkei. JPY held up well versus USD despite significant pressure cross trade with the AUD/JPY supported by sharp rise in the price of gold and RBA rate hike speculation, GBP/JPY and EUR/JPY supported by  report of better than expected services PMI data from the UK and the EU and improving risk sentiment. JPY price direction will continue to focus on equity markets and risk sentiment.

Key technical levels to watch in USD/JPY include support at 91.75 the July 13th low with resistance at 93.55 the August 31st high.

EUR
EUR opened higher supported by report of better than expected EU services PMI and improving risk appetite as speculation mounts that the global recession is ending. The FOMC minutes for August said that the worst has passed for the US economy and the OECD suggests that the recovery may be faster than expected. EU August services PMI rose to 49.9 from 45.7 last month. The rise in the services PMI is another piece of EU economic data that suggest the EU recession is ending. There was little reaction to report that EU July retail sales declined by 0.2% or the ECB’s decision to hold interest rate policy steady. The ECB confirmed that it will continue to provide liquidity over one year period at 1%. This means that the ECB is not yet signaling an exit strategy from stimulus. Officials from the UK, France and Germany have written a letter to the G-20 stating that they should stick to current stimulus plans. Central bankers and government officials are trying to discourage speculation that they will quickly exit quantitative ease and withdraw stimulus fearing that too quick an exit would put the global recovery at risk. The G-20 meets this weekend and US Treasury Secretary Geithner is expected to seek a globally coordinated exit strategy from stimulus policies and to state that it’s too early to begin removing economic stimulus. This is fairly positive for risk sentiment and may boost recovery hope, demand for equities and selling of the USD. Trichet went on to say that he sees signs of economic stabilization and ECB boosted growth forecasts for 2009 and 2010. The ECB expects the EU economy to grow at 0.2% in 2010, up from original forecast of a contraction of 0.3% made in June. EUR turned lower midsession as equities trim early gains.

The technical outlook for the EUR is improving as the EUR rises back above 1.4300. Expect EUR support at 1.4175 the September 1st low with resistance at 1.4380 the September 1st high.

GBP
GBP traded higher supported by report of better than expected UK services PMI and a rebound in risk sentiment. UK August services PMI rose to a two year high at 54.1. This compared to 53.2 last month. Business expectations also rose from last month with sentiment supported by improving credit markets as the BOE’s quantitative ease helped to send sterling libor rates to a record low. Global credit markets continue to thaw. The rise in UK services PMI follows Wednesday’s report of better than expected UK construction PMI. UK August construction PMI rose to its highest level in 18 months. GBP was also supported by rising gold prices which helped to boost equity markets. The rise in UK construction and services PMI is unlikely to encourage any change in BOE policy. The BOE meet on September 10th and are expected to hold rate policy and the level of quantitative ease unchanged. GBP has been underperforming with selling pressure attributed to ongoing concern about the outlook for the UK economy and in response to the BOE’s recent decision to expand quantitative ease. In addition, GBP has been pressured by report of a record budget deficit in July and concern that rising deficit spending will force the UK government to issue more debt and eventually raise taxes to cover the spending shortfall. GBP firmed in cross trade versus EUR supported by speculation that today’s UK services data confirms that the UK recession is nearing and end.

The technical outlook for GBP is mixed as GBP rises back above 1.6300. Expect near-term support at 1.6150 the August 27th low with resistance at 1.6445 the August 25th high.

CAD
CAD traded mixed and continues to underperform despite sharp gains in metals prices and improving risk appetite. CAD gains have been limited by increased political uncertainty in Canada as the Canadian Liberal party said late Tuesday that they would no longer support the minority government. The Liberal party has called for a no-confidence vote. CAD gains were also limited by concern that the Canadian recovery will not be as robust as had been expected because Canada’s Q2 GDP was weaker than expected. The threat of intervention also limits demand from the CAD. BOC’s Lane expressed concern last week about the strength of the CAD and the impact on Canada’s recovery. Lane’s comments increase the risk of intervention to limit CAD gains. There were no major economic reports in today’s trade. This week’s key focus is Friday’s release of Canada’s unemployment for July. The trade expects the July unemployment to show that the rate of job losses slowed in Canada.

On September 4th August unemployment rate will be released expected at 8.6% and employment growth expected at -22.7. August IVEY manufacturing PMI will also be released on September 4th expected at 53 compared to 51.8 last month.

The technical outlook for CAD has turned negative as USD/CAD rises above 1.1100. Look for near-term support at 1.0890 the August 25th low with resistance at 1.1125 the August 17th high.

AUD
AUD traded higher supported by improving risk sentiment and rising commodity prices. Gold prices have surged over the last couple of days in reaction to report that the sovereign wealth fund of China is selling some of China’s USD reserves for gold. The Shanghai Index closed 4.8% higher and European and US equity markets rallied as well. AUD price action is closely correlated to risk sentiment and the direction of equity markets in particular Shanghai Index. The global equity markets are supported by recovery hope and there is talk that the Chinese government may be taking action to boost its stock market. AUD rallied despite report above much worse than expected widening of Australia’s July trade deficit. July trade deficit widened to 1.5 bln, a deficit of 850 mln was expected. Exports declined 1% and imports rose 4%. The import rise suggests higher domestic demand and the report may contribute to increased RBA rate hike speculation. Wednesday, Australia reported much stronger than expected Q2 GDP. Stronger than expected GDP encourages speculation that the RBA will hike interest rates at the next policy meeting. Some analysts suggest that the RBA is actually falling behind the rate hike cycle and a number of analysts expect the RBA to raise rates before year end. The RBA elected to hold policy steady at 3% Tuesday and failed to lay out a timeline for rate hikes. Goldman Sachs analysts have raised their AUD forecast to 8700 in three months from a prior forecast of 8200 because of strong Australian GDP and RBA rate outlook.

The technical outlook for the AUD is positive as AUD holds above 8300. Expect AUD support at 8239 the August 27th low with resistance at 8480 the August 15th high and 8525 the September 22nd high.

AUDUSD: Attempting A Retest Of The 0.8469 Level

Posted by admin as Daily forex analysis

With a reversal of its declines off the 0.8469 level, its YTD high now seen and a follow through higher in progress, AUDUSD is currently focusing on heading back towards the 0.8469 high. With this view being supported by its daily studies, a clean invalidation of the mentioned level should…

EUR/USD Continues its Consolidation Between our Trend Lines

Posted by admin as Daily forex analysis

The EUR/USD is consolidating between our trend lines as they creep towards their respective inflection points. The EUR/USD is trading lower this morning after America’s headline Unemployment Rate came in two basis points higher than analyst expectations. However, the EUR/USD is bouncing off of our 1st tier uptrend line, and…

GBP/USD Stabilizes above our 3rd Tier Uptrend Line

Posted by admin as Daily forex analysis

The GBP/USD is stabilizing further above our 3rd tier uptrend line, yet can manage to break free of our 2nd tier downtrend line. These two trend lines are colliding soon, and we notice multiple inflection points occurring in the EUR/USD. Hence, the two currency pairs are implying there could be…

USD/JPY’s Bounce Loses Steam

Posted by admin as Daily forex analysis

The USD/JPY’s bounce is losing momentum due to inadequate buy-side activity. The USD/JPY failed to close above our 1st tier uptrend line and September highs on the 4-hours while our 2nd tier downtrend line hangs in the distance. Investors were acting on oversold conditions, and rightly so. The psychological impact…

FX Thoughts for the Day

Posted by admin as Daily forex analysis

Aussie has risen slightly during the day and is now trading near the singinficant Resistance region 0.8450-70. If the current upside momentum continues, a strong break above this Resistance region (0.8450-70) might trigger a rise towards 0.8600-50 in the coming days. SUpport is seen in the region 0.8400-0.8380, a break…