S&P 500 futures are up 0.4% as risk sentiment holds steadier to start the session. All eyes are on Fed chair Powell’s appearance later today to set the mood before the weekend. It is anticipated that he will confirm expectations of a rate cut in September. I wouldn’t expect him to be too explicit about it though. But we’ll see.
This article was written by Justin Low at www.forexlive.com.
Markets:
The focus finally turns back to the economic calendar today and we got a round of PMI data from the euro area and UK to work through.
The French numbers were a beat on the services side but it is likely a one-off, owing much to a demand boost from the Paris Olympics. The German numbers were bad and that tempered with the euro a little on the release. But as markets are already pricing in a rate cut by the ECB for next month, the reaction has been rather minimal overall.
EUR/USD caught a brief algo spike from 1.1150 to 1.1165 before turning lower to 1.1128, then now trading just 0.1% lower at around 1.1135.
The dollar had been weaker throughout the week but is finding a bit of a footing today. That comes as bond yields are also bouncing back, erasing the drop from yesterday. And that is underpinning USD/JPY, with the pair now up 0.5% to around 146.00. The less dovish comments from the Fed’s Schmid here is also helping somewhat.
Besides that, GBP/USD is still marching forward and helped by a stronger UK PMI data. The pair is up just above 1.3100 as it looks to the 2023 high next at 1.3142.
In other markets, equities remain steady after regaining some composure yesterday. S&P 500 futures are up 0.2% with European indices also sitting modestly higher so far on the day.
All eyes now turn towards more US data to come, before moving on to Jackson Hole and Fed chair Powell’s appearance ahead of the weekend tomorrow.
This article was written by Justin Low at www.forexlive.com.
It’s not exactly the type of softer language that markets would like to be hearing from the Fed. The narrative that traders want right now is that ‚labour market is bad, we want rate cuts now‘. So, this doesn’t quite fit with that. USD/JPY is now up just above 146.00 with 10-year Treasury yields at the highs for the day at 3.835% – up by 6 bps.
This article was written by Justin Low at www.forexlive.com.
They still have about three weeks to guide markets the other way if they so choose not to cut again next month. But given the balance of probabilities and the prevailing language at the moment, a 25 bps rate cut is pretty much locked in.
This article was written by Justin Low at www.forexlive.com.
Currency dynamics and inflation is always a tricky ordeal to debate and/or navigate through. But for most major economies, currency movements are rather controlled and arguably play a small role in terms of influencing price pressures. The same goes for the euro area, or so at least that is what the ECB has been preaching over the years.
If we put that aside, what does the recent rise in the euro mean for the central bank and also the economy in general? Let’s take a look.
First off, let’s check on how the euro is performing in 2024 as a whole. With the dollar as the benchmark, the single currency is actually the second best performer among the major currencies.
And even so, the euro is just up nearly 1% only against the greenback. It feels rather surprising to see that, no? That especially given the dark outlook surrounding the dollar recently.
Going back on topic, how does this really impact the euro area economy if at all?
Well, considering the state of the manufacturing sector – especially Germany – a stronger euro is not exactly a helping factor in that regard. Demand conditions are weak and foreign demand is also struggling, not least with China’s worries. But with manufacturing already struggling, a stronger currency will make for more expensive exports and not help with the industry plight.
It’s certainly not too strong a factor yet considering the changes as seen above. However, every small thing counts especially when the economy is starting to show signs of a struggle again in Q3.
The ECB having to cut rates at a quicker pace might help to limit this as a factor in general. But their main battle is still on the inflation front, unlike the Fed.
As such, a stronger euro might be welcome slightly especially since it looks like we’re encountering a couple of bumps along the way in the disinflation process. That despite the argument above from the ECB that the exchange rate isn’t quite as important a factor in influencing prices.
Anyway, the latest CPI report in July here shows that price pressures aren’t exactly worsening but they’re not coming down all too quickly and convincing either.
If there is a tick up in inflation, even if due to base effects, towards year-end then that could give reason for the ECB to pause once again.
And that might invite further strength to the euro, with traders having now priced in ~66 bps of rate cuts in the next three meetings to December.
In turn, that feeds back into the cycle of putting more pressure on the manufacturing industry. And it all circles back to heaping pressure on the ECB again in having to chase rate cuts amid a stuttering economy.
This article was written by Justin Low at www.forexlive.com.
UK factory orders fell once more this month but less than July at least. The output expectations balance remains positive at least, though down to 9 from 25 in the month before. CBI notes that „the stop-start recovery seen in recent months continued in August but it is encouraging that manufacturers still remain confident that output will tick up over the autumn“.
This article was written by Justin Low at www.forexlive.com.
After the surge in mortgage applications in the week before that, we are seeing things moderate back last week. The surge in activity in the week before owes much to the sharp drop in rates, with it weighing on the average rate of the most popular US home loan once again.
This article was written by Justin Low at www.forexlive.com.
The USD continues to remain
under pressure amid positive risk sentiment and the imminent rate cuts from the
Fed which should help global growth. These are generally bearish drivers for
the greenback.
In fact, the recent strong
appreciation of the NZD has been mostly driven by the US Dollar side of the
equation. After the recent more dovish than expected RBNZ decision, the market is pricing a 95% probability of a rate cut in October and then at least another 25 bps cut before year-end.
The focus now will be on
tomorrow’s Flash US PMIs and then Fed Chair Powell speech at the Jackson Hole
Symposium on Friday.
NZDUSD
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that NZDUSD broke above the key resistance zone around the 0.6050 for good
this time and extended the gains into the 0.6150 level. This is where we can
expect the sellers to step in with a defined risk above the level to position
for a drop back into the 0.6050 support. The buyers, on the other hand, will
want to see the price breaking higher to increase the bullish bets into the 0.6217
resistance.
NZDUSD Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that we have a very strong support zone around the 0.6050 level where we
can find the confluence
of the trendline
and the 61.8% Fibonacci
retracement level. If the price were to get there, we can expect the buyers
to step in with a defined risk below the support to position for a rally into
new highs with a better risk to reward setup. The sellers, on the other hand,
will want to see the price breaking lower to increase the bearish bets into new
lows.
NZDUSD Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can
see that we broke below a minor upward trendline today which was defining the
bullish momentum since the 0.60 handle. This could be a signal of waning momentum,
so the buyers will likely wait for a bigger pullback or a catalyst before resuming
the uptrend. The red lines define the average daily range for today.
Upcoming
Catalysts
Tomorrow we get the US Jobless Claims and US PMIs. On Friday we conclude the
week with Fed Chair Powell speaking at the Jackson Hole Symposium.
This article was written by Giuseppe Dellamotta at www.forexlive.com.
Even though the lack of headlines in the last two days were befitting of a summer lull, there was some decent action in markets. But today, that seems to be absent with broader markets also struggling for any conviction. US futures are flat while bond yields are also little changed on the day. That isn’t giving FX traders much to work with as such.
USD/JPY remains caught in a whirlwind of sorts, trading in a roughly 130 pips range today. The pair is up 0.5% to near 146.00 and well off its low of 144.92 from Asia trading earlier.
Besides that, other major currencies are struggling to really get going today. The dollar has been weaker so far this week but is keeping steadier for now. That said, the ranges among dollar pairs are leaving a lot to be desired.
And as a whole, the dollar remains vulnerable to a further drop as highlighted yesterday here.
The focus this week continues to be on the PMI data tomorrow and then Fed chair Powell’s appearance in Jackson Hole just before the weekend.
This article was written by Justin Low at www.forexlive.com.
The USD continues to remain
under pressure amid positive risk sentiment and the imminent rate cuts from the
Fed which should help global growth. These are generally bearish drivers for
the greenback.
In fact, the appreciation
of the AUD has been mostly driven by the US Dollar side of the equation,
although it outperformed the other major currencies due to the hawkish RBA. In
fact, the market pared back more aggressive rate cuts expectations and it’s now
seeing just one cut by the end of the year.
The focus will be on
tomorrow’s Flash PMIs and then Fed Chair Powell speech at the Jackson Hole
Symposium on Friday.
AUDUSD
Technical Analysis – Daily Timeframe
On the daily chart, we can
see that AUDUSD had an incredible rally from the lows set at the beginning of August
as the market erased the growth scare and added to the gains as the risk sentiment
kept on improving. The next target for the buyers should be the high at the
0.68 handle. The sellers, on the other hand, will want to see the price falling
back below the key 0.67 handle to start target new lows.
AUDUSD Technical
Analysis – 4 hour Timeframe
On the 4 hour chart, we can
see that we now have a good support
zone around the 0.67 handle where we can find also the trendline
for confluence.
This is where we can expect the buyers to step in with a defined risk below the
trendline to position for new highs with a better risk to reward setup. The
sellers, on the other hand, will want to see the price breaking lower to pile
in for a drop into the 0.6550 level next.
AUDUSD Technical
Analysis – 1 hour Timeframe
On the 1 hour chart, there’s
not much else we can glean from this timeframe other than waiting for a pullback
into the key support zone where the buyers will look for a bounce, while the
sellers will look for a break. The red lines define the average daily range for today.
Upcoming
Catalysts
Tomorrow we get the Australian PMIs, the US Jobless Claims and US PMIs. On
Friday we conclude the week with Fed Chair Powell speaking at the Jackson Hole
Symposium.
This article was written by Giuseppe Dellamotta at www.forexlive.com.