Forex Analysis: EUR/USD, GBP/USD, AUD/USD.
SGT Markets | Jun 23, 2017 04:36AM ET
EUR/USD
German Manufacturing PMI better than expected, German Services decline.
Eyes also on Eurozone Manufacturing PMI (Preliminary release).
The Fed remains on track for a third rate hike this year despite not-so-strong inflation. However, the market odds of a hike later in the year remain low. U.S. house market seems to get better as well (let’s check confirmations with today New Home Sales release).
On the other hand, French Manufacturing PMI and NFP higher than expected but last German ZEW Economic Sentiment released confirmed its slowdown.
The ECB deposit rate was kept unchanged at minus 0.4 percent and the main refinancing rate at zero. The European Central Bank ruled out further interest-rate cuts in a sign that it’s moving closer to an exit from its stimulus program. Policy makers reiterated their pledge to increase the size or duration of their bond-buying program if the economy deteriorates. Updated forecasts show a stronger growth outlook but a weaker inflation picture across the projection horizon.
Even earlier than hitting our First Resistance at 1.1194, we expected a downmove (due to relative strength of USD expectations) and 1.11 could be retested in search of the strong supports in that area. Finally, we expect a consolidation around that level.
Our special Fibo Retracement is confirming the following S/R levels against the monthly and weekly trendlines obtained by connecting the relevant highs and lows back to 2012:
Weekly Trend: Bearish
1st Resistance: 1.1194
2nd Resistance: 1.1291
1st Support: 1.1100
2nd Support: 1.1022
EUR
Recent Facts:
9th of March, ECB Interest Rate decision + ECB Press Conference
Interest Rates unchanged, ECB President Dovish (can be cut again in the future if necessary).
14th of March, German CPI + German ZEW Economic Sentiment
German CPI as expected, German ZEW worse than expected.
24th of March, German Manufacturing PMI
Significantly better than expected.
30th of March, German CPI
Lower than expected.
31st of March, German Unemployment Change + Eurozone CPI
German Unemployment Change better than expected (for the sixth time in a row), Eurozone CPI worse than expected.
3rd of April, German Manufacturing PMI
As expected.
11th of April, German ZEW Economic Sentiment
Better than expected.
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21st of April, French Manufacturing PMI + German Manufacturing PMI
Better than expected.
23rd of April, French Elections (first round)
Centrist Emmanuel Macron, a pro-EU ex-banker and former economy minister, emerged as the leader of the first round of voting and qualified for a May 7 runoff alongside the second-place finisher, far-right leader Marine Le Pen.
24th of April, German Ifo Business Climate
Better than expected.
27th of April, ECB Interest Rate decision + ECB Press Conference
Unchanged, eyes on next Inflation data.
28th of April, CPI (Preliminary)
Higher than expected.
2nd of May, German Manufacturing PMI
As expected.
3rd of May, German Unemployment Change + Eurozone GDP (Preliminary)
German Unemployment Change better than expected (for the 5th time in a row).
Eurozone GDP (Preliminary) as expected.
7th of May, French Elections
Centrist pro-EU Macron Won French Elections.
12th of May, German GDP (Preliminary release)
As expected.
16th of May, Eurozone GDP (Preliminary release) + Trade Balance + ZEW Economic Sentiment
Better than expected.
17th of May, Eurozone CPI
As expected.
23rd of May, German Manufacturing PMI
Better than expected.
30th of May, German CPI (Preliminary release)
Worse than expected.
31st of May, German Unemployment Change + Eurozone CPI (Preliminary)
German Unemployment Change better than expected (for the 8th time in a row), Eurozone CPI worse than expected.
1st of June, German Manufacturing PMI
Slightly better than expected.
8th of June, GDP, Interest Rate Decision + ECB Press Conference
GDP better than expected, ECB moving closer to an exit from its stimulus program.
13th of June, French Non-Farm Payrolls
Better than expected.
13th of June, German Zew Economic Sentiment
Worse than expected.
23rd of June,
German Manufacturing PMI better than expected.
German Services PMI worse than expected.
Eurozone Manufacturing PMI.
USD
Recent Facts:
5th of May, Nonfarm Payrolls + Unemployment Rate
Better than expected.
11th of May, U.S. Producer Price Index (PPI)
Higher than expected.
12th of May, U.S. Retail Sales + Core CPI (Inflation data)
Worse than expected.
18th of May, Initial Jobless Claims + Philadelphia Fed Manufacturing Index
Better than expected.
23rd of May, Manufacturing PMI + New Home Sales
Worse than expected.
24th of May, FOMC Meeting Minutes
U.S. central bank kept its benchmark rate unchanged, highlighting a slowdown in economic activity (more proof that weakness in the first-quarter was temporary is needed for future rate hikes).
26th of May, Core Durable Good Orders + U.S. GDP (Preliminary release)
Core Durable Goods Orders worse than expected, GDP (Preliminary) better than expected.
31st of May, Chicago PMI + Pending Home Sales
Worse than expected.
1st of June, ADP Nonfarm Employment Change + ISM Manufacturing PMI
Better than expected.
2nd of June, Nonfarm Payrolls + Unemployment Rate
Nonfarm Payrolls worse than expected, Unemployment Rate better than expected.
13th of June, Producer Price Index
Core PPI (ex food and energy) better than expected.
14th of June, CPI + Retail Sales
Worse than expected.
14th of June, FOMC Interest Rates Decision + Statement
Interest Rate hike as expected (to 1.25%).
GBP/USD
The day after Governor Carney ruled out imminent rate hikes, warning of weak wage growth and incomes as Britain prepares to leave the European Union, pound attempted a significant recovery as Bank of England (BoE) chief economist Haldane revealed that he is likely to vote for rate hike “relatively soon”.
UK CPI (Inflation) data again higher than expected while UK Retail Sales worse than expected. Last data regarding UK manufacturing and industrial production were worse than expected along with UK GDP, Preliminary release.
Current price struggling around our Resistance (1.2705 area) after that the negative post-Brexit sentiment drove GBP/USD back below 1.27 area where important Supports converge. Now we expect a re-test below 1.27 back again and finally a consolidation setup around that area.
Brexit Secretary David Davis starts negotiations in Brussels, which will be followed by a Brussels summit during this week where British Prime Minister Theresa May will encounter fellow European Union leaders.
The pound fell sharply on Friday after British Prime Minister Theresa May's Conservative Party lost its parliamentary majority in a general election, leaving no single party with a clear claim to power ahead of the start of negotiations on Britain's divorce from the European Union.
And there are still some unresolved tensions with Scotland and Northern Ireland, which voted against leaving the EU. Theresa May provided no clear plan about the comprehensive “free-trade” partnership with EU members she wants to achieve.
Our special Fibo Retracement is confirming the following S/R levels against the monthly and weekly trendlines obtained by connecting the relevant highs and lows back to 2001:
Weekly Trend: Bearish
1st Resistance: 1.2705
2nd Resistance: 1.2830
1st Support: 1.2530
2nd Support: 1.2380
GBP
Recent Facts:
4th of August, Bank of England Interest Rates decision (expected a cut)
Bank of England lowers Interest Rates as expected (record low of 0.25%) and increases purchase program.
15th of March, Job Market
Better than expected.
16th of March, Interest Rates Decision + BoE Meeting Minutes
A Bank of England policymaker unexpectedly voted to raise interest rates.
11th of May, UK Manufacturing Production + Trade Balance + BoE Interest Rate Decision
Manufacturing Production + Trade Balance worse than expected.
The Bank of England made no changes to monetary policy but warned that living standards will fall this year as the headwinds from Brexit mount.
16th of May, UK CPI (Inflation data)
Higher than expected.
17th of May, UK Job Market
Worse than expected.
18th of May, Retail Sales
Better than expected.
25th of May, GDP (Preliminary)
Worse than expected.
1st of June, UK Manufacturing PMI
Slightly better than expected.
2nd of June, Construction PMI
Better than expected (Highest level since February 2016).
5th of June, UK Services PMI
Worse than expected.
8th of June, UK General Elections
British Prime Minister Theresa May's Conservative Party lost its parliamentary majority in a general election, throwing the country's politics into turmoil and potentially disrupting Brexit negotiations.
9th of June, industrial production + manufacturing production
Worse than expected.
13th of June, UK CPI
Higher than expected.
14th of June, UK Job Market
Claimant Count Change better than expected, Average Earnings Index worse than expected.
15th of June, Retail Sales
Retail Sales worse than expected.
20th of June, BoE Gov Carney Speech
Carney ruled out imminent rate hikes, warning of weak wage growth and a likely hit to incomes as Britain prepares to leave the European Union.
USD
Recent Facts:
See above.
AUD/USD
Recently scheduled Fed’s speeches are providing hawkishness while UK (commonwealth included) is seen in a bearish global setup. Crude oil was subdued because of investors' doubts about the overall timing of output cuts ruled by OPEC after a drop in U.S. inventories.
A large part of the gains in the Australian dollar was driven by the Country’s job market report (seen as stronger-than-expected). The strength caught investors by surprise and helped take AUD/USD out of its 0.757 psychological barrier to its strongest level in 2 months.
Australia GDP also better than expected but the performance came one day after the Reserve Bank of Australia (RBA) cautioned that growth "is expected to have slowed in the March quarter",
In the last meeting, the Reserve Bank of Australia held Interest Rates at 1.5% as expected but reporting that the current account widened to a deficit of A$3.1 billion, compared with a surplus of A$100 million seen for the first quarter.
Insisted overextension above 0.757 area ended but now that level should work as significant Resistance. If price will fall consistently below 0.757 then it is likely to see area 0.748, first, and 0.740, finally (closing the technical figure opened at the beginning of June). In the opposite scenario, only a breakout of 0.764 will lead up to our first new Resistance in area 0.768.
Our special Fibo Retracements are confirming the following S/R levels against the monthly and weekly trendlines obtained by connecting the relevant highs and lows back to 2012:
Weekly Trend: Neutral
1st Resistance: 0.7680
2nd Resistance: 0.7735
1st Support: 0.7480
2nd Support: 0.7408
AUD
Recent Facts:
7th of February, RBA Interest Rates Decision + RBA Rate Statement
RBA held steady as expected at a record low 1.50%, while noting better economic conditions with China.
8th of February, New Zealand Interest Rate Decision + RBNZ Monetary Policy Statement
Interest Rates unchanged and RBNZ’s agenda contains no changes for 2017.
16th of February, Employment Change
Better than expected.
28th of February, New Home Sales, Current Account, Private Sector Credit.
1st of March, Australia GDP
Better than expected.
16th of March, Employment Change + Unemployment Rate
Worse than expected.
2nd of April, Retail Sales
Worse than expected.
4th of April, RBA Interest Rate Decision
Interest Rates unchanged, as expected. Dovish tone in Philip Dowe’s Speech.
9th of April, Home Loans
Worse than expected.
13th of April, Australia Employment Change
Better than expected.
18th of April, RBA Meeting Minutes
Dovish.
26th of April, Australia CPI
Lower than expected.
2nd of May, RBA Interest Rate Statement
RBA holds Rates at 1.5%.
4th of May, Australia New Home Sales + Trade Balance
Worse than expected.
9th of May, Australia Retail Sales
Worse than expected.
18th of May, Australia Employment Change
Better than expected.
24th of May, Australia Construction Work Done
Worse than expected.
24th of May, Moody’s Credit Rating on China
Moody's Investors Service downgraded China's credit rating to A1 from Aa3, changing its outlook to stable from negative.
25th of May, OPEC Meeting
OPEC decided to extend production cuts by nine months to March 2018.
30th of May, Building Approvals + Private House Approvals
Better than expected.
1st of June, Australia Retail Sales
Better than expected.
6th of June, Reserve Bank Of Australia Interest Rate Decision and Statement
In the last meeting, the Reserve Bank of Australia held Interest Rates at 1.5% as expected, reporting that the current account’s deficit widened.
7th of June, Australia GDP
Better than expected.
15th of June, Australia Employment Change
Better than expected (3rd month in a row).
USD
Recent Facts:
See above.
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