FX Analysis: EUR, GBP, AUD, USD.
SGT Markets | Jul 20, 2017 05:00AM ET
EUR/USD
Eyes on today ECB Interest Rate Decision and Conference and on U.S. Philadelphia Fed Manufacturing Index.
Doubtful passage of a U.S. healthcare bill is making a worse an already uncertain setup for USD, where weaker-than-expected U.S. inflation data released last week signalled that the Federal Reserve may struggle to justify an increased rate increase later this year. U.S. budget deficit broadened to $90 billion for June versus a year-earlier surplus of $6 billion (exceeding analysts' estimates of a $35 billion deficit).
Let’s not forget that U.S. ISM Manufacturing PMI was at the highest since January 2015 and last U.S. GDP data was also better than expected.
On the other hand, expect for latest Zew Sentiment (which was below the expectations), Germany Manufacturing PMI, Germany Unemployment Change and Germany Consumer Price Index confirmed above expectations.
Draghi said that the ECB must be “prudent” in how it unwinds the stimulus. Bloomberg reported that ECB sources said market misinterpreted Draghi's remarks: the speech "was intended to strike a balance between recognizing the currency bloc's economic strength and warning that monetary support is still needed" Bloomberg said.
Resistance in 1.152 area will work again as USD is clearly oversold. Price will likely to end with converging down to 1.148 Support area first. If that will occur, 1.139 area is likely to be approached next.
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: 1.1524 (fake breakout)
2nd Resistance: 1.1590
1st Support: 1.1480
2nd Support: 1.1390
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.
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3rd of April, German Manufacturing PMI
As expected.
11th of April, German ZEW Economic Sentiment
Better than expected.
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 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.
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%).
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.
Eyes on today release: Philadelphia Fed Manufacturing Index
GBP/USD
Eyes on today UK Retail Sales.
UK CPI (Inflation data) clearly disappointed the expectations. And this adds to UK Manufacturing Production change, which re-entered the negative area, and to the last UK Services PMI, UK Construction PMI and UK Manufacturing PMI, below expectations too. Also last data regarding UK manufacturing and industrial production worse than expected along with UK GDP, Preliminary release. Same for UK Retail Sales. The only recent data on upbeat was UK Job Market data.
Dallas Federal Reserve Bank President Robert Kaplan stated that, while the U.S. is near full employment, inflation has been muted and that he would like to see more progress before raising U.S. interest rates further.
British Trade Minister said that it is perfectly reasonable that people want to have some transitional period until the final agreement with UE will be reached. He added:
But we can't have a perpetual transitional period undermining the concept of Brexit itself.
The agreement between Conservative Party and Democratic Unionist Party is still occupying only the background of the global Sentiment on pound.
As we wrote previously, now we expect a consolidation back around 1.2978, then a down-move with 1.283 fist stop (already hit on the 12th of July).
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: 1.3099
2nd Resistance: 1.3203
1st Support: 1.2978
2nd Support: 1.2830
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.
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.
Eyes on today release: UK Retail Sales.
USD
Recent Facts:
See above.
AUD/USD
Australia Employment Change worse than expected, while Business Confidence and Unemployment Rate somehow pared expectations.
According to the minutes from the last central bank meeting, the RBA believes that the strong labor market removes some of the downside risks in wages and the quarterly economic growth most likely increased in Q2. They made no mention of a rate hike, though.
The dollar fell amid growing investor doubt over President Donald Trump’s ability to deliver on his economic agenda, after a healthcare bill aimed at replacing Obamacare failed to garner enough votes.
Westpac Consumer Sentiment and last Australia Trade Balance reading on the upbeat. Australia also reported Retail Sales for May with a gain of 0.6% month-on-month, beating the expected 0.2% rise but AUD fell after the latest RBA review of interest rates held steady at a record low.
Overbought with overspeculations because USD is falling, so no fundamental reasons for supporting AUD that high. 0.7735 is still now our first Support and first landing area of next-to-come correction downside.
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: Overbought
1st Resistance: 0.7828
2nd Resistance: 0.7916 (fake breakout)
1st Support: 0.7735
2nd Support: 0.7680
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).
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.
USD
Recent Facts:
See above.
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