FX Analysis: EUR/USD, GBP/USD, AUD/USD
SGT Markets | Sep 27, 2017 05:48AM ET
EUR/USD
In her last speech, Fed Chair Yellen specified that downward pressure on inflation could prove unexpectedly persistent. Data suggests labour market is healthy, without substantial slack and not overheated. But the Fed want to remain “open minded” about another interest rate hike this year.
Germany's election showed surging support for a far-right party that left Chancellor Angela Merkel scrambling to form a governing coalition. Building a coalition could take months as the three-way tie-up has not been tested at national level.
New York Federal Reserve President William Dudley said the Fed is on track to gradually raise interest rates given factors depressing inflation are "fading" and the U.S. economy's fundamentals are sound. He said:
I expect inflation will rise and stabilize around the (Fed's) 2% objective over the medium term ... in response, the Federal Reserve will likely continue to remove monetary policy accommodation gradually.
Catalonia is planning to hold a referendum on independence on Sunday 1 October: the referendum is deemed unconstitutional by the Spanish Constitutional Court, yet the Catalan government has claimed to declare Catalonia independent from Spain in case of a yes-vote.
During his last ECB Press Conference, President Draghi said that growth forecasts for the Eurozone will keep on the good pace though inflation is doing worse than expected. Growth projections were made considering EUR/USD at 1.18 level (the current or higher levels are considered due to excessive volatility and this is considered to be slowing down CPI measures).
EU preliminary September PMIs surpassed expectations, indicating that economic activity picked up at the end of the third quarter, back to their recent multi-year highs.
As we wrote previously, breakout of 1.1856 (very important Support area) led down to the next Support area (1.176). Now we expect a consolidation phase between 1.176 and 1.185.
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: Overbought
1st Resistance: 1.1856
2nd Resistance: 1.1990
1st Support: 1.1756
2nd Support: 1.1655
EUR
Recent Facts:
7th of May, French Elections
Centrist pro-EU Macron Won French Elections
Get The News You Want
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 Better than Expected
Eurozone Services PMI Worse than Expected
26th of June, German Ifo Business Climate
Better than Expected
29th of June, German CPI
Better than Expected
30th of June, German Unemployment Change + Eurozone CPI
German Unemployment Change Better than Expected, Eurozone CPI higher than Expected
3rd of July, German Manufacturing PMI
Better than Expected
5th of July, French Services PMI + German Services PMI + Eurozone Retail Sales
Better than Expected
18th of July, German ZEW Economic Sentiment
Worse than Expected
24th of July, German Manufacturing PMI + Eurozone Manufacturing PMI + Eurozone Services PMI
Worse than Expected
28th of July, German CPI
Better than Expected
31st of July, Eurozone CPI (Preliminary) + Unemployment Rate
Eurozone CPI (Preliminary) as Expected, Unemployment Rate Better than Expected
1st of August, German Manufacturing PMI + Unemployment Change
Worse than Expected
15th of August, German GDP (Preliminary release)
Worse than Expected
17th of August, Eurozone CPI
As Expected
22nd of August, German ZEW Economic Sentiment
Worse than Expected
23rd of August, German Manufacturing PMI
Better than Expected
25th of August, German Ifo Business Climate
Better than Expected
31st of August, German Unemployment + CPI (Preliminary release)
German Unemployment Worse than Expected, CPI Better than Expected
1st of September, Manufacturing PMI
Worse than Expected
7th of September, ECB Press Conference
Draghi said that growth projections were made considering EURUSD @1.18 level (the current or higher levels are considered due to excessive volatility and this is considered to be slowing down CPI measures) and in October some clearer actions will be taken in order to push inflation upwards (possibly by monitoring EURUSD and reducing overshooting in EUR currency levels).
13th of September, Eurozone Employment Change
Better than Expected
15th of September, Eurozone Wages, Trade Balance
Better than Expected
18th of September: Eurozone CPI
As Expected
19th of September: German ZEW Economic Sentiment, German ZEW current conditions
Better than Expected
22nd of September, German Manufacturing PMI
Better than Expected (at its highest since May 2011)
USD
Recent Facts:
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%)
23rd of June, Manufacturing PMI
Worse than Expected
26th of June, Durable Goods Orders
Worse than Expected
28th of June, Pending Home Sales
Worse than Expected
29th of June, U.S. GDP + U.S. Job Market
GDP Better than Expected, Job claims slightly worse than expected
3rd of July, ISM Manufacturing PMI
Better than Expected
5th of July, FOMC Minute Meeting
U.S. Federal Reserve members insisted that expectations are that inflation will rise to 2% target in 2019
6th of July, ADP Nonfarm Employment Change + ISM Non-Manufacturing PMI
ADP Nonfarm Worse than Expected, ISM Non-Manufacturing Better than Expected
7th of July, Nonfarm Payrolls + Unemployment Change
Nonfarm Payrolls Better than Expected, Unemployment Change Worse than Expected
13th of July, PPI
Better than Expected
14th of July, U.S. Core Retail + U.S. CPI
Worse than Expected
20th of July, Philadelphia Fed Manufacturing Index
Worse than Expected
25th of July, Conference Board Consumer Confidence
Better than Expected
27th of July, Core Durable Goods Orders
Worse than Expected
28th of July, U.S. GDP (Preliminary release)
As Expected
1st of August, ISM Manufacturing PMI
Slightly Worse than Expected
2nd of August, ADP Nonfarm Employment Change
Worse than Expected
3rd of August, ISM Non-Manufacturing PMI
Worse than Expected (at the lowest since October 2016)
4th of August, Nonfarm Payrolls + Unemployment Rate
Job Market Better than Expected
8th of August, Job Openings
Better than Expected
10th of August, PPI
Worse than Expected
11th of August, U.S. CPI
Worse than Expected
15th of August, U.S. Core Retail Sales
Better than Expected
23rd of August, Manufacturing PMI and New Home Sales
Worse than Expected
29th of August, CB Consumer Confidence
Better than Expected
30th of August, ADP Nonfarm Employment Change + GDP
ADP Nonfarm Employment Change Better than Expected, GDP relevantly better than expected
1st of September, U.S. Nonfarm Payrolls + Unemployment rate
Worse than Expected
1st of September, ISM Manufacturing
Better than Expected
6th of September, ISM Non-Manufacturing PMI
Worse than Expected
13th of September, PPI
Worse than Expected
15th of September, Retail Sales
Worse than Expected
15th of September, Manufacturing Production + Industrial Production
Worse than Expected
19th of September, Building Permits
Better than Expected
20th of September, FOMC Statement + FOMC Press Conference
Fed confirmed inflation view, labour market growth and scheduled rate hikes
26th of September, Fed Chair Yellen speech
Federal Reserve to continue gradual interest rate hikes despite uncertainty about the path of inflation. It "would be imprudent to keep monetary policy on hold until inflation is back to 2%," she said.
GBP/USD
In the USA, the Fed wants to increase gradually interest rates. On the one hand, data suggests labour market is healthy, without substantial slack and not overheated. On the other hand, inflation data creates uncertainty.
Moody's has downgraded the UK's credit rating to Aa2. Outlook to stable after the downgrade. Moody's sees growth of 1% this year, and doesn't expect growth to recover to historic trends "over the coming years."
In her last speech, Prime Minister Theresa May on Brexit negotiations proposed that Britain stay in the EU’s single market for a two-year “period of implementation” to smooth the Brexit process.
Last Carney’s speech was about monetary policy that may have to "move in order to stand still" due to possibility that global equilibrium interest rates are rising. De-integration effects of Brexit are likely to be inflationary but any rate hikes are expected to be gradual and limited.
He added that any loss of trade openness with EU after Brexit is unlikely to be immediately compensated by ties with new partners.
Fed's projections point to three rate hikes in 2018, two in 2019 and one in 2020 and to shrinking balance sheet in October following schedule it laid out in July. Interest rate hikes schedule remains unchanged and if conditions were to weaken, would also consider balance sheet reinvestment.
Last UK Retail Sales data on the upbeat.
As we previously wrote, 1.346 tested back and violated is leading, finally, to a test in area 1.336 (important Support area).
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: Overbought
1st Resistance: 1.3460
2nd Resistance: 1.3610
1st Support: 1.3362
2nd Support: 1.3285
GBP
Recent Facts:
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.
30th of June, GDP
UK GDP as Expected, with improving Current Account
3rd of July, UK Manufacturing PMI
Worse than Expected
4th of July, Construction PMI
Slightly Worse than Expected
5th of July, Services PMI
Slightly Worse than Expected
7th of July, Manufacturing Production
Worse than Expected
12th of July, UK Job Market
Better than Expected
18th of July, CPI
Worse than Expected
20th of July, UK Retail Sales
Better than Expected
26th of July, UK GDP release (Preliminary)
As Expected
1st of August, Manufacturing PMI
Better than Expected
2nd of August, Construction PMI
Worse than Expected (at the lowest since October 2016)
3rd of August, Services PMI
Better than Expected
10th of August, Manufacturing Production
As Expected
15th of August, UK CPI
Worse than Expected
16th of August, UK Job Market
Better than Expected
17th of August, Retail Sales
Better than Expected
24th of August, GDP (Preliminary release)
UK GDP (Preliminary release) as expected but Business Investment (Preliminary release) Worse than Expected
1st of September, Manufacturing PMI
Better than Expected
4th of September, Construction PMI
Worse than Expected
5th of September, Services PMI
Worse than Expected
8th of September, Trade Balance and Manufacturing Production
Better than Expected
12th of September, CPI
Higher than Expected
13th of September, Job Market
Better than Expected
14th of September, BoE Meeting Minutes
The BoE’s monetary policy committee voted 7-to-2 to leave interest rates at their current record low of 0.25% following its policy meeting but the bank said in its rate statement that the economy is looking slightly, so an interest rate hike move is likely “over the coming months” if the economy performs broadly in line with officials’ expectations
18th of September, Governor Carney Speech at IMF headquarter
De-integration effects of Brexit are likely to be inflationary but any rate hikes are expected to be gradual and limited
20th of September, Retail Sales
Better than Expected
USD
Recent Facts:
See above.
AUD/USD
Tension and war rhetoric between N Korea and USA are escalating after the N Korean foreign minister accused USA to have declared war.
After last Fed Chair Yellen speech, bets for another interest rate hike by Fed in December are around 60%.
Australia reported its house price index for the second quarter jumped 1.9%, compared with a 1.1% gain seen. The Reserve Bank of Australia repeated that monetary policy is expected steady for "some time" in the minutes of its September rate review.
Australia reported improved job market and interestingly good home loans data for July, but Trade Balance and Retail Sales worse than expected, and GDP on the downbeat too.
Last Australian Manufacturing Index was better than expected and private new capital expenditure for the second quarter jumped 0.8%, well above a 0.3% gain seen. Also Building Approvals and Construction Work Done better than expected.
Break of 0.7916 is now driving bears to sell till 0.783, important demand area.
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: 0.7980
2nd Resistance: 0.8034
1st Support: 0.7828
2nd Support: 0.7735
AUD
Recent Facts:
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)
29th of June, HIA New Home Sales
Better than Expected
4th of July, Retail Sales
Better than Expected
4th of July, Reserve Bank of Australia Interest Rate Decision
RBA holds Rates at 1.5%
6th of July, Australia Trade Balance
Better than Expected
11th of July, Home Loans + NAB Business Confidence
Home Loans Worse than Expected, NAB Business Confidence Better than Expected
12th of July, Westpac Consumer Sentiment
Better than Expected
20th of July, Employment Change + Unemployment Rate
Employment Change Worse than Expected, Unemployment Rate as Expected
25th of July, CPI + RBA Governor Lowe Speech
Worse than Expected
3rd of August, Trade Balance
Worse than Expected
4th of August, Australia Retail Sales
Better than Expected
9th of August, Westpac Consumer Sentiment + Home Loans
Worse than Expected
17th of August, Employment Change
Better than Expected but Full Employment Change negative
30th of August, Australia Building Approvals + Construction Work Done
Better than Expected
1st of September, AIG Manufacturing Index
Better than Expected
6th of September, Australia GDP
Worse than Expected
7th of September, Trade Balance + Retail Sales
Worse than Expected
14th of September, Employment Change
Better than Expected
19th of September, House Price Index
Higher than Expected
USD
Recent Facts:
See above.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.