Monday, Aug 10, 2009, 14:38 GMT
By John Hardy Consultant/FX Strategist Saxo Bank
Key days ahead for USDJPY as FOMC meeting likely to help decide whether rally is overambitious or a sign of more to come.
USD shaking off past behavior as positive employment sees USD strength. EURUSD looking to follow up on correction lower this week?
MAJOR HEADLINES – PREVIOUS SESSION
New Zealand Jul. QV House Prices fell -5.0% YoY vs. -7.1% in Q1.
Japan Jun. Adjusted Current Account Total out at ¥1799B vs. ¥1350B expected
Japan Q2 Housing Loans rose 0.4% YoY vs. 3.5% in Q1
Australia Jun. Home Loans rose 1.1% vs. 1.8% expected
Japan Jul. Preliminary Machine Tool Orders fell -72.2% YoY vs. -72.8% in Jun.
Norway Jul. CPI out at -0.6% MoM and underlying CPI at -0.6% vs. -0.2%/-0.2% expected.
THEMES TO WATCH – UPCOMING SESSION
(All times GMT)
UK Jul. BRC Retail Sales Monitor (2301)
UK Jul. RICS House Price Balance (2301)
Australia Jul. NAB Business Conditions/Confidence (0130)
China Jul. Producer/Purchasing Price Index (0200)
China Jul. CPI (0200)
China Jul. Retail Sales (0200)
China Jul. Industrial Production (0200)
China Jul. Trade Balance (no time given)
Japan BoJ Target Rate (no time given)
Japan Jul. Consumer Confidence (0500)
Market Comments:
Friday saw a watershed break from recent behavior in the USD, as the extension in the equity market rally failed to punish the greenback - a pattern we have seen so many times in the recent past. The Yen was the biggest loser vs. the dollar initially as bonds also came under significant pressure in an all-out riskfest immediately after the US employment report. But the European currencies have opened the new week here on a weaker note as equity markets have corrected lower after the rather limp US close on Friday and the JPY has taken back some of the lost territory vs. especially the pound sterling. Speaking of stock markets around the world, it is interesting to note that the Shanghai composite has had a rough going over the last several sessions and that many of the EM currencies are also finding it tougher to move stronger against the "safer" USD and Euro. So despite signs of continued optimism in some of the biggest markets, there are signs that risk appetite is waning a bit at the fringes of the market.
A very interesting article from Bloomberg today has China accusing Australia's Rio Tinto of "spying" and costing Chinese steel producers some $100+ billion over a 10-year period. It is a bit surprising that the story has not weighed more on the Aussie, as one can only wonder if any follow up move by the Chinese authorities down the road could have them bullying Australian companies in some way or even sanctioning them. China is set to release a raft of data tonight. It is becoming consensus knowledge that the Chinese numbers are fiction, so it is far more interesting to see how the markets react to the data than it will be to read the data and try to glean anything from it.
With last week's last day providing a very interesting pivot point in the market, it makes this week critical for the follow up action. The USD seems to have pivoted to the strong side and could be at least set for at least a consolidation to the strong side. The JPY was very weak on Friday, but it has been extremely rare to see, for example, a falling EURUSD and rising EURJPY simultaneously for any extended period of time, so the JPY will bear a good deal of watching, especially at this Wednesday's FOMC meeting and release of the new monetary policy statement. Has the BoE set the example by insisting on a very cautious stance and even expanding the QE programs as data has shown signs of recovery, comfortable in the face of enormous slack in capacity utilization and employment?
Any shock to the upside in bonds (fall in yields) this week as the 10-year yield approaches the critical 4% level - something the Fed probably eyes with extreme distaste unless it is buying what the green shootists are selling - could see the JPY pivot quickly back to the strong side. The JPY has been a tough nut to crack lately. The last time it had anything approaching as poor a performance as it saw on Friday, it marked a bottom and the JPY appreciated strongly for four or five weeks.
Chart: EURUSDA look at the weekly EURUSD chart shows the strong reversal from the attempt to new highs since the December spike. This sets up expectations for a try back lower to the lower end of the previous range. The first stress test comes with the rising trendline and then the more significant structural support in the 1.3750 area defined by an old high and retest combination (the orange flatline below). The 40-week (200-day) moving average is not in play anytime soon, but will rise rapidly in coming weeks.
More analysis: saxo bank market news and analysis
Risk Warnings:
Saxo Bank A/S shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by Saxo Bank that clients will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades in accordance with the recommendations in an analysis, especially leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the analysis do not occur as anticipated.
Please read our full Analysis Disclosure & Disclaimer at www.saxobank.com/analysis/disclimer
By John Hardy Consultant/FX Strategist Saxo Bank
Key days ahead for USDJPY as FOMC meeting likely to help decide whether rally is overambitious or a sign of more to come.
USD shaking off past behavior as positive employment sees USD strength. EURUSD looking to follow up on correction lower this week?
MAJOR HEADLINES – PREVIOUS SESSION
New Zealand Jul. QV House Prices fell -5.0% YoY vs. -7.1% in Q1.
Japan Jun. Adjusted Current Account Total out at ¥1799B vs. ¥1350B expected
Japan Q2 Housing Loans rose 0.4% YoY vs. 3.5% in Q1
Australia Jun. Home Loans rose 1.1% vs. 1.8% expected
Japan Jul. Preliminary Machine Tool Orders fell -72.2% YoY vs. -72.8% in Jun.
Norway Jul. CPI out at -0.6% MoM and underlying CPI at -0.6% vs. -0.2%/-0.2% expected.
THEMES TO WATCH – UPCOMING SESSION
(All times GMT)
UK Jul. BRC Retail Sales Monitor (2301)
UK Jul. RICS House Price Balance (2301)
Australia Jul. NAB Business Conditions/Confidence (0130)
China Jul. Producer/Purchasing Price Index (0200)
China Jul. CPI (0200)
China Jul. Retail Sales (0200)
China Jul. Industrial Production (0200)
China Jul. Trade Balance (no time given)
Japan BoJ Target Rate (no time given)
Japan Jul. Consumer Confidence (0500)
Market Comments:
Friday saw a watershed break from recent behavior in the USD, as the extension in the equity market rally failed to punish the greenback - a pattern we have seen so many times in the recent past. The Yen was the biggest loser vs. the dollar initially as bonds also came under significant pressure in an all-out riskfest immediately after the US employment report. But the European currencies have opened the new week here on a weaker note as equity markets have corrected lower after the rather limp US close on Friday and the JPY has taken back some of the lost territory vs. especially the pound sterling. Speaking of stock markets around the world, it is interesting to note that the Shanghai composite has had a rough going over the last several sessions and that many of the EM currencies are also finding it tougher to move stronger against the "safer" USD and Euro. So despite signs of continued optimism in some of the biggest markets, there are signs that risk appetite is waning a bit at the fringes of the market.
A very interesting article from Bloomberg today has China accusing Australia's Rio Tinto of "spying" and costing Chinese steel producers some $100+ billion over a 10-year period. It is a bit surprising that the story has not weighed more on the Aussie, as one can only wonder if any follow up move by the Chinese authorities down the road could have them bullying Australian companies in some way or even sanctioning them. China is set to release a raft of data tonight. It is becoming consensus knowledge that the Chinese numbers are fiction, so it is far more interesting to see how the markets react to the data than it will be to read the data and try to glean anything from it.
With last week's last day providing a very interesting pivot point in the market, it makes this week critical for the follow up action. The USD seems to have pivoted to the strong side and could be at least set for at least a consolidation to the strong side. The JPY was very weak on Friday, but it has been extremely rare to see, for example, a falling EURUSD and rising EURJPY simultaneously for any extended period of time, so the JPY will bear a good deal of watching, especially at this Wednesday's FOMC meeting and release of the new monetary policy statement. Has the BoE set the example by insisting on a very cautious stance and even expanding the QE programs as data has shown signs of recovery, comfortable in the face of enormous slack in capacity utilization and employment?
Any shock to the upside in bonds (fall in yields) this week as the 10-year yield approaches the critical 4% level - something the Fed probably eyes with extreme distaste unless it is buying what the green shootists are selling - could see the JPY pivot quickly back to the strong side. The JPY has been a tough nut to crack lately. The last time it had anything approaching as poor a performance as it saw on Friday, it marked a bottom and the JPY appreciated strongly for four or five weeks.
Chart: EURUSDA look at the weekly EURUSD chart shows the strong reversal from the attempt to new highs since the December spike. This sets up expectations for a try back lower to the lower end of the previous range. The first stress test comes with the rising trendline and then the more significant structural support in the 1.3750 area defined by an old high and retest combination (the orange flatline below). The 40-week (200-day) moving average is not in play anytime soon, but will rise rapidly in coming weeks.
More analysis: saxo bank market news and analysis
Risk Warnings:
Saxo Bank A/S shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by Saxo Bank that clients will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades in accordance with the recommendations in an analysis, especially leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the analysis do not occur as anticipated.
Please read our full Analysis Disclosure & Disclaimer at www.saxobank.com/analysis/disclimer
No comments:
Post a Comment