EUR/USD: Fed Getting More Hawkish And US Data Improving
Growth Aces | Jun 24, 2015 05:28AM ET
GROWTHACES.COM Forex Trading Strategies
Taken Positions
EUR/USD: long at 1.1215, target 1.1550, stop-loss 1.1160, risk factor **
GBP/USD: long at 1.5785, target 1.5990, stop-loss 1.5730, risk factor ***
CHF/USD: short at 0.9315, target 0.9090, stop-loss 0.9380, risk factor **
EUR/GBP: long at 0.7150, target 0.7400, stop-loss 0.7080, risk factor ***
EUR/CHF: long at 1.0440, target 1.0680, stop-loss 1.0380, risk factor *
EUR/JPY: long at 139.50, target 142.00, stop-loss 137.80, risk factor *
EUR/CAD: long at 1.3780, target1.4020, stop-loss 1.3700, risk factor ***
GBP/JPY: long at 195.25, target 197.30, stop-loss 194.00, risk factor *
CHF/JPY: long at 133.65, target 136.00, stop-loss 132.10, risk factor **
Pending Orders
AUD/NZD: sell at 1.1300, target 1.1100, stop-loss 1.1400, risk factor ***
EUR/USD: Greece Deal Will Support The EUR, But Fed Is Getting More Hawkish And US Data Are Improving
(long again opened at current market level of 1.1215)
- Federal Reserve Governor Jerome Powell on Tuesday said the US economy could be ready for a first interest rate hike in September, followed by a second increase in December. Powell said the US economy would likely strengthen in the second half of the year.
- Total orders for durable goods dropped 1.8% mom in May after falling 1.5% mom in April and vs. a median forecast for a 0.6% mom drop. Last month's drop was caused in part by a 35.3 percent plunge in orders for aircraft, which is often a volatile category. Excluding transportation, orders rose 0.5% mom. A key category that tracks business investment plans - orders for non-military capital goods excluding aircraft - rose 0.4% mom in May, reversing a 0.3% mom drop in April. So far this year, durable goods orders are down 2.2% from January-May 2014. The category that tracks business investment is down 2.6% through May this year. American factories have struggled this year, in part because a strong USD has made US goods more expensive overseas and cheaper oil prices have made energy firms buy less equipment.
- New single-family home sales rose 2.2% mom in May to 546k from upwardly revised 534k in April. The market expected a reading of 530k vs. 517k in April before the revision. The gain of 5.1% in May existing home sales (released on Monday) and a 2.2% May increase in new home sales suggest that the situation of housing sector is improving strongly.
- Hawkish comments from Powell and good home sales data supported the USD yesterday. But the market was focused mainly on the lack of agreement between Greece and its creditors. The EUR/USD fell 1.1135 yesterday. We do not see reasons for such a panic move to be continued today, but it shows that investors are getting nervous and that the volatility may be elevated in the coming days.
- Greek economy minister George Stathakis said today two or three items remained to settle with international lenders on a package of proposals put forward by Greece to break a deadlock in negotiations a cash-for-reforms deal. He said those issues included long term debt relief and VAT exemptions in the Greek islands, a very sensitive issue for the right-wing Independent Greeks party that supports Prime Minister Alexis Tsipras' coalition government. However he said he was confident a deal would be reached at a European Union summit on Thursday and that it would be supported by Tsipras' leftist Syriza party, despite objections expressed by some in the party.
- We are still of the opinion that Greece deal will be reached soon, which should help the EUR in the short term. Our long position hit the stop-loss level yesterday, but we got long again today encouraged by the EUR/USD recovery in the morning of the European session. We went long also on the EUR/CAD.
- In our opinion, a rise in the EUR/USD after reaching agreement on Greek debt will be short-lived. A stronger corrective move in the EUR/USD is possible during summer months due to improving US data and Fed getting ready to a rate hike in September.
- The US macroeconomic figures are getting better, the Fed is getting more hawkish and the Eurozone data are mixed. After yesterday’s stronger-than-expected PMI reading, today’s German Ifo's business climate index dropped to 107.4 in June from 108.5 in May. That was its weakest reading since February and was below the consensus forecast for a reading of 108.1.
- A final US GDP growth reading for the first quarter 2015 (12:30 GMT) is likely to be ignored, as the data are a distant path and will bring nothing new for the markets.
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Significant technical analysis' levels:
Resistance: 1.1267 (hourly high Jun 23), 1.1283 (hourly high Jun 23), 1.1347 (high Jun 23)
Support: 1.1155 (session low Jun 24), 1.1135 (low Jun 23), 1.1049 (low Jun 5)
GBP/USD: Get Long Waiting For Greece Deal And Further BOE Hawkish Comments
(long again at 1.5790)
- Martin Weale, a member of the BoE's Monetary Policy Committee who voted for rate rises last year, believed the central bank should be ready to raise rates as soon as August. Weale dropped his call for higher rates at the start of this year, shortly before a slide in oil prices.
- Weale said wages were now rising faster than he had expected they would when he had previously voted for a rate rise in the latter part of 2014.
- The BoE has identified wage growth as one key factor that will aid its decision as to when Britain's economic recovery is robust enough to support higher interest rates.
- Martin Weale is a known hawk in the MPC, so his comment will be rather ignored by the market. However, in our opinion, recent streams of hawkish comments from the BoE policymakers suggest that the first rate hike will take place at the beginning of 2016 or even at the end of 2015. On the other hand, the Fed will be first with its September hike, so the GBP/USD may be under pressure in the third quarter. A stronger rise in the GBP/USD is possible in the fourth quarter of 2015.
- Short-term view on the GBP/USD is dependent on the situation in Greece. Our long GBP/USD position hit the stop-loss yesterday, but we are of the opinion that market panic was inordinate, and expect a recovery in the GBP/USD. We went GBP/USD long at current market price, but this position is quite risky. We suggest lower allocation in today’s GBP/USD long due to higher risk and volatility. We are still GBP/JPY long, which should make up for our yesterday’s losses on the GBP/USD.
Significant technical analysis' levels:
Resistance: 1.5813 (hourly high Jun 23), 1.5831 (high Jun 23), 1.5910 (high Jun 22)
Support: 1.5700 (psychological level), 1.5640 (38.2% fibo of 1.5170-1.5930), 1.5627 (low Jun 17)
Source: Growth Aces Forex Trading Strategies
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