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Do You Believe in CAD?USDCAD resumed the downtrend, as Q2 GDP of Canada showed 4.5% rise exceeding 3.7% forecast, and pushing the odds for September rate hike to 41% from 27.5% just a day ago. The pair closed Thursday below 1.25 again, and there are some arguments in favor of further selloff of the pair. The Canadian currency is supported by the sharp rise in Brent, as 30% of Canadian budget is dependent on oil&gas sector. The crude oil reacted to the consequences of hurricane Harvey. It has paralyzed at least 4.4 million barrels per day (bpd) of refining capacity, sending Brent to 52.89 high. And it may support the demand on Brent further, driving CAD higher as well. And take in mind Friday's Non-Farm report that is not expected to be really strong after July positive surprise. Besides, the statistics is against USD: during last 20 years August NFP data was lower than expected in 16 cases. In this environment we expect further depreciation of USDCAD with the next target at 1.24 area.
by HelenRush
EUR Looks Tasty EURUSD unexpectedly slid to 1.1866 low, although just a couple of days ago it had tried to beat new highs above 1.20. The drivers of USD popularity were positive sentiment regarding new tax reforms from Trump, and better than expected American data. ADP report showed the largest private payroll growth in 5 months, adding 237K vs. 185K forecasted. Q2 GDP was also revised higher more than expected to 3% from 2.6%. And that was enough to make the market to believe in USD again. However, we need to be cautious in the current environment, as tax reform optimism may disappear in a minute, and labor data on Friday may show a sad picture. After ADP report the sentiment about Non-Farms is overheated, and if it’s not confirmed by the real data, the selloff may be huge. Besides, take in mind that market expects the ECB to announce QE tapering during its meeting next week. And it’s the argument in favor of EUR appreciation. Given the above mentioned, the current levels look very attractive for buying EURUSD with the next target at 1.1960 followed by 1.20.
by HelenRush
Kiwi Will Not Recover After That NZDUSD failed to break 0.7330 resistance level a week ago, and since that time we saw only shy attempts of recovery. It means the market doesn't believe in NZD, and even the recent USD weakness won't be able to help the pair to rise again. And this case was confirmed today by fundamentals. Despite quite positive comments from Reserve Bank of New Zealand governor, there was one negative factor for NZD. Wheeler said that a lower New Zealand dollar is needed to increase inflation and support the stable growth. That's not a hint, it's a clear call-to-action and message to the market - there is no use buying NZD now. And if the target is not reached, RBNZ may go even further with monetary policy changes in order to weaken the national currency. In this environment we expect further weakness for NZDUSD with initial target at 0.7170 followed by 0.7130.
by HelenRush
JPY Reached New Highs –For How Long? USDJPY came closer to strong support area around 108.30. And now the key question whether it’s ready for a breakout? First, we need to understand the trigger behind the move. This morning it was all about geopolitics. We got to know North Korea had launched a missile test. And this time everything was different, as we saw an overflight of Japanese airspace! And it is already a violation of sovereignty, and escalation of tensions between North Korea and the rest of the world. Japanese government issued an emergency alert. What does it mean for currencies? It means that safe heavens are of interest again, and the demand for JPY and CHF may be rising in the nearest future. But is it enough to trigger the breakout of really strong support in the pair with USD? It remains to be seen, as Japanese government is not happy with the appreciating yen hitting the export sector of the country. There is a big chance to see a reversal of the downtrend or, at least, a deep correction. If confirmed, USDJPY next target may be at 108.90 followed by 109.50.
by HelenRush
Time To Dump Euro Last week the market was busy awaiting Jackson Hole's speeches from key monetary officials. This week the market will be digesting the consequences of the speeches. The surprising rise of euro was not about ECB's Draghi. He kept silence on the sensitive issues, though confirmed the positive momentum in Eurozone. It was all about Janet Yellen. She was quite optimistic, but she didn't say anything the market would like to hear. No comments on balance sheet reduction, not a word on December rate hike. And given the exaggerated investor expectations it was enough to dump USD. So what is next? US Non-Farm Payrolls of course, scheduled for release this Friday. This time the reports will be scrutinized even more closely than usual, as it's the last piece of labor data before the September FOMC meeting. And there are all the chances USD will sink even deeper, as hardly we may see two strong labor report in a row. The market may start to price in such odds from the beginning of the week, meaning EURUSD has the potential to reach strong resistance level at 1.20 sooner rather than later.
by HelenRush
Draghi vs. Yellen – EURUSD wins EURUSD will be the key player today, as the market awaits for any new hints on monetary policy stance from Draghi and Yellen in Jackson Hole. For now the basic scenario is the following: 1. The Fed confirms the balance sheet changes are coming soon. 2. The ECB will give no hints on the terms of QE tapering, meaning announcement at September meeting is not a done deal. This is practically priced in, and initial selling of EURUSD won't last long. In a couple of hours the pair may recover all the losses. However, during this week we got more hawkish comments from various ECB officials starting with Schauble who said the central bank should tighten policy sooner rather than later, and ending with Weidmann saying he “sees no acute need to extend QE into 2018.” If Draghi turns out just a little bit more optimistic on economy stance and a little bit more hawkish on monetary policy that will be enough to trigger broad-based buying of EUR. In this case EURUSD may sharply jump higher to 1.1890, and show some attempts to break it. if succeeded, the next target is at 1.1960.
by HelenRush
USD Fell But Not For LongIt looked like everything was over, and we may have a sigh of relief, as North Korea issue is out of the table, and there are no more topics to pressure USD for a moment. However, Trump keeps providing the market with new reasons to worry. The other night he said: “If we have to close down our government, we’re building that wall. One way or the other, we’re going to get that (Mexico) wall.” What does it mean? It means it's too early to buy USD, as Mr. President keeps bringing new worrying issues to the table. And investors voted for it by selling USDJPY to 108.84. However, this morning the pair shows the attempts to recover, and this is very important, as even in this unstable environment the market realizes that the pair has gone too low, and the current levels look very attractive given the BOJ easy monetary stance, and the Fed more aggressive stance. One of the reasons USDJPY may resume the rise to 109.70 today, is that investors expect from Jackson Hole speeches the confirmation of the Fed readiness to start balance sheet reduction soon. And up to the moment we get that confirmation the pair may keep going up.
by HelenRush
Kiwi Ready for Breakout NZDUSD came under selling pressure this morning, as Pre-Election Economic and Fiscal Update (PREFU) came out less optimistic than expected. On the whole the economy state of New Zeland is quite robust, however, there were hints on slower growth in future. NZ finmin revised lower GDP growth outlook from 3.7% to 3.5%. And it may be related with a strong national currency which appreciated from May till July by more than 10%. Moreover, according to Global Dairy Auction, the dairy prices have not shown any increase during the last 5 weeks. And we must say that dairy industry plays a big role in New Zealand economy. The country exports about 95% of its dairy production. In 2016, dairy was New Zealand's largest export sector (18% of total goods and service exports), meaning the lower dairy prices may have negative impact on country’s budget. In this environment the Reserve Bank of New Zealand will most probably keep talking down NZD hinting on neutral or easier monetary stance. The pair is trading around 0.72 area and is ready to break the key support level in the nearest future. If broken, the next target is at 0.7140.
by HelenRush
EUR Watches Draghi On Monday, EURUSD managed to close above 1.18, but it is sliding down Tuesday morning. The pair feels unstable, as the ECB hinted last week that President Draghi will not reveal any new policy paths during the Jackson Hole symposium, It means QE tapering may come not earlier than October, although before the market priced in September as the start of tapering process. And this will be the main factor for EURUSD to be capped by 1.1800 for now. Although strong euro is damaging for export oriented German economy, there is still a hope that Draghi may be a little bit more hawkish during his speech in Jackson Hole, just because economy is doing quite well. We saw significant fall in unemployment to lowest level since February 2009 (it was 9.1% in June). We also saw strengthening price pressure: from 0.2% yoy in July, 2016 it rose to 1.3% currently. And if we hear any positive comments from Draghi this week, it may fuel the EURUSD rally. The nearest target for the pair may become 1.1850 followed by 1.1890.
by HelenRush
Gold Breakout of $1,300 Just a Matter of TimeGold has gained 2.5% during the last month touching $1,300.77 high last Friday - the level not seen since November, 2016. But will it have courage to move further? There are all the chances to see the breakout if some conditions are met. First, we don’t need strong USD. The lower the chances of a more aggressive monetary policy tightening from the Fed, the better for yellow metal. Second, low inflation globally. The weaker the price pressure all over the world, and especially in the US, the stronger arguments for gold buying. Right now Euro zone, and US CPI is staying below the 2% target level, and UK CPI has slowed down to 2.6% from 2.9% in June. Third, geopolitics. North Korea issue is still on the table, and every time we see tensions escalation, risk-off sentiment will be triggering the demand on gold. And the last, but not the least. Recently, gold ETF’s has shown a modest build, and large investors are favoring gold once again. And it’s a good sign of market sentiment changes. Thus, the breakout of $1,300 may be just a matter of time, and once the deal is done, it opens the way to next strong resistance area around $1,300.
TVC:GOLD
by HelenRush
1
All You Need To Know About USDJPYWhat happened to USDJPY? It broke strong support around 109.00 and slid to 4-month low at 108.60. And now look at 10-year yields that hit 2.17% beating a double bottom at Thursday’s low and the August, 11 low, standing at 2.18%.The bond market is hinting it doesn’t trust Fed, and doesn’t believe in tightening. Meanwhile, gold reached $1,300.77, again confirming market doubts about rate hikes. But later we saw a reversal both in gold and yen prices, showing the market is not ready to totally discount the Fed hawkish stance. The area around 108.60/70 is a strong support. And it’s not easy to break. We saw the low of 108.68 last week. And we also saw the low of 108.69 in June. Most probably the conflict in Washington will keep pressuring the pair, and we may even see the slide to April,2017 lows around 108.30. However, any attempts to break that level will be followed by deep corrections, so be careful!
by HelenRush
It’s Time to Sell AUD AUDUSD has gained 150 pips during a couple of days. But what war the trigger, and is it really the start of a new rally? It’s always worth watching the market sentiment, and its reaction to economic events. If an indicator came out above expectations, and the currency was not able to show a strong appreciation, it’s the sign of a looming retreat. Today we saw better than forecasted labor data out of Australia, and AUDUSD is not able to hold its initial gains. If there is a single trigger driving the currency up, wait for correction. Yesterday, the only driver of AUDUSD jump was large option expiry. That’sit. If an asset having strong correlation with a currency is going up, and the currency lags behind, it’s time for retracement. Today Gold, playing a big role in lives of both Australian economy and Australian currency, added 0.22% during the day. And AUD is tittering around 0%. I think it’s time to sell AUDUSD with initial target at 0.7880, followed by 0.7840 if broken.
by HelenRush
Euro is Ready to Jump EURUSD is in wait-and-see mode after US retail sales release, and is ready to make a breakthrough. It’s not the data that matters. It’s all about the reaction of the asset. And the USD behavior speaks itself. The significantly better than expected retail sales data (0.6% mom vs 0.4%) coupled with sharp rise of Empire State Manufacturing PMI were not able to trigger broad base long term rally on USD. What does it mean? It means market doesn’t think that single positive report may be enough to convince the FOMC to switch to a more hawkish stance on monetary policy. Today the market will focus on FOMC minutes. The statement most probably won’t show anything surprising, and it will be enough to disappoint the market, triggering USD selloff. That’s what EURUSD needs to show strong rally. The nearest target may be seen at 1.1790 followed by 1.1850.
by HelenRush
Yen Is Doomed On Tuesday, USDJPY jumped higher rising more than 1.0% and touching 100.84. The first leg higher was triggered by Wall Street Journal article on North Korea backing away from its threat to launch missiles towards Guam. It reduced the demand on risk-off assets putting yen under pressure again. And it may become the start of a long-term rally given the strong yen is not appreciated by Japanese government given export oriented nature of economy. However, everything will depend on the released by the States data. Today the market was focused on US retail sales report Four months in a row it missed expectations, but today monthly rise was 0.6% far above the forecasted 0.4%. This is the largest growth since December, 2016, but it was driven by a surge in motor vehicles (record incentives) and department stores. Year-over-year number was revised higher and showed 4.2% rise in July. It drove the rate hike expectations higher supporting USD demand. It means, now USD/JPY has all the chances to go higher targeting 111.00 in short period and 111.70 to follow.
by HelenRush
CAD Has Chances to RecoverUSDCAD may resume the selloff this week. The pair has risen 9 trading days in a row until it reached 1.2752. It looks like it cannot go higher, and it means it’s the right time to focus on fundamentals which may trigger the pair slide. We have already noted Canadian economy is doing fine. The labor market show good growth. Retails sales arein creasing. GDP has showed average growth of 3.5% during the last 3 quarters. This week CPI numbers are scheduled for release, and if it exceeds expectations, it will inspire CAD to speed up the gains. There are all chances for such a scenario, as Ivey PMI price component increased sharply over the previous month. Besides, we need to pay attention to American data. The weaker the numbers, the larger the selloff of USD. US retail sales on Tuesday may become the needed trigger of US Dollar weakness, if we get another weaker than expected report. The next target for USDCAD is 1.2650 and 1.2600 is to follow.
by HelenRush
CPI Kills Dollar USDJPY reached 108.73, the level not seen since June, 14. That was the logical reaction to worse than expected US CPI release. July US consumer price index came out at 1.7% vs +1.8% yoy forecast, and the monthly growth was 0.1% vs 0.2% expected. This is the smallest increase since March, and 5th month of disappointment in a row. What does it mean? It means the chances of the Fed rate hike before the year end go lower. If there is no inflation, there is no rush to raise the rates. The probability of a hike by year-end is now 42.5%, from 47.3% a month earlier meaning that more than a market half doesn’t believe in more tightening this year. On the back of rising geopolitical tension with North Korea and lower odds of the Fed rate hike USDJPY has all the chances to go lower with initial target at 108,70 followed by 108.00.
by HelenRush
Euro May Rise on PPI EURUSD is still under pressure, and it’s all about geopolitics. Additional pressure comes from EURCHF moves, as traditional safe heaven swissy is very popular now. However, we still have hopes that the conflict between Washington and Pyohgyang will not reach the critical point, and the current speculations just give us good opportunity to buy euro at cheaper price. Today new wave of speculations on QE tapering revived - ECB poll sees announcement of change of stimulus program in September If it were not for geopolitics, EUR would jump higher on the news. But now we have to just wait and look for interesting opportunities to enter the market with longs. For example, today the USA release PPI data which is perceived as a leading indicator of CPI scheduled for publication on Friday. If the numbers come out below expectations, it may trigger EURUSD reversal with initial target at 1.1790.
by HelenRush
How to Profit on GeopoliticsThere is a new topic in the market – geopolitics. And I know how to take profit on that! In the moments like this the market is focused on such safe haven assets like CHF, JPY, USD and gold. At the same time risk assets like RUB, AUD, NZD come under selling pressure. And this understanding will help us to find interesting crosses. So, yesterday, Donald Trump promised to hit North Korea with fire and fury in case of any signs of danger to the USA. A couple of hours later we learnt that the KPA strategic force was now carefully examining the operational plan for making an enveloping fire at the areas around Guam with medium- to long-range strategic ballistic rocket Hwasong-12 in order to contain the US major military bases on Guam. If the speculations keep going and the escalation is rising, the crosses like AUD/JPY have all the potential to fall further. Forthepairtheinitialtargetmaybefoundat 86.00 followedby 85.60.
by HelenRush
Aussie Selloff Will be Unstoppable AUDUSD has neared strong technical support at 0.79, and the speed at which the pair breaks it through will determine the speed of further AUD depreciation. We need to remember that Australian economy is very sensitive to local currency appreciation, as it hurts trade and tourism activity due to more expensive goods and services. Given China is one of the key trade partners of Australia, we need to monitor the reports out of PRC, as they may be a leading indicator of future demand on Australian export. And today we saw Chinese trade data. Both export and import has slowed the growth hinting the possibility of weaker demand from Beijing. And this is the first signal AUD may come under pressure, if the trend is confirmed. And here is the second signal – Australian trade minister Ciobo had a moan about the strong Australian dollar. It won’t take long when other officials join the camp, and then the aussie selloff will be unstoppable. So, we are waiting for further depreciation of AUDUSD with nearest target at 0.79, giving the way to 0.7840 once it broken.
by HelenRush
Euro is as Stable as Horse EURUSD turned out to be one of the strongest pairs in the currency market today. And by this we can conclude the market is not ready to sell euros even after stronger than expected US Non-Farm Payrolls report. The market is not ready to take profit on recent euro appreciation. And the market doesn’t believe in USD, and believes in euro. Consider this – the released today industrial production data out of Eurozone was worse than expected showing the decrease by 1.1% mom against the forecasted rise by 0.2%. The single currency was supposed to fall, or at least stop rising. But it never happened. The Friday’s fall of EURUSD was used as a perfect opportunity to upload the longs. And the thing is that the single positive report from the USA is not enough to convince the market the rate hikes are justified. Investors need to see sharp rise in inflation in order to really believe. Thus, the US CPI report is in focus this week. And up to its release euro may keep going up. The next target for EURUSD may stay at 1.1870.
by HelenRush
NZD Will Follow RBNZ The coming week will be exciting for NZDUSD. But for dollar moves, the Reserve Bank of New Zealand monetary meeting will have a significant effect on the pair. Therearehighchancestoseetheratesunchangedatcurrent 1.75%. Theeconomygrowthisslowing. Inflationisslowing. The CPI slid to 1.7% to 2.2% previously. The recent meeting we saw the RBNZ was quiet on the recent NZD appreciation. However, the local economy is dependent on the export activity, and on the recent rise of national currency may have negative effect on its state. Thus, we don’t rule out the central bank will be more cautious about NZD appreciation. It may put NZD under pressure and send it lower with initial target at 0.7330 followed by 0.7260.
by HelenRush
Yen Has More To Lose Two days ago USDJPY touched 1.5-month low at 109.92, and reversed the move right away, right now trading around 110.70. And all this happened despite rather dovish comments from Fed’s Bullard opposing to another rate hike before the year end. Now the market is focused on US data. Recently, we have seen some disappointments, and the Fed looked less hawkish than it was expected. And this was the reason the USD was falling. However, the labor data may help American currency. If number of new jobs exceeds 180K, it will be perceived positively. Andifwagesgrowthisabove 0.3%, itwilldriveUSDcrazy. Today we need to pay attention to Non-Manufacturing ISM, as it’s one of the best leading indicators of Non-Farm Payrolls results, given the fact that 70% of employed Americans work in service sector. If the numbers come up better than expected, USDJPY may target 111.00 followed by 111.70.
by HelenRush
Cable Have More Tests to PassCable becomes even stronger in the wake of better than expected PMI Manufacturing numbers. It reached 55.1 versus 54.4 in June mostly thanks to significant jobs creation. Isn't it an indicator of activity pickup and stronger economic growth? However, we need to pass some more tests, before we confirm the longer-term bullish trend. For example, Services PMI will be of more interest given the service-oriented nature of the British economy. But the most significance the market will pay to the looming BOE monetary meeting coupled with Quarterly Inflation report. If inflation forecasts revised up, and Monetary Policy Committee reveals even more hawks voting for a rate hike, it will push cable higher. GBP/USD has already broken strong psychological resistance at 1.32, and the next target may be at 1.3280.
Long
by HelenRush