Greenback Rises On Earlier Fed Rate Hike Speculations
| Sep 09, 2014 04:22AM ET
Market Brief
The US dollars were bid across the board as San Francisco Fed paper showed that the investors expect the rates to remain low for a longer period than the Fed itself. The divergent central bank expectations pushed USD higher against its major G10 peers. EM currencies were offered broadly as the U.S. 10-Year yields rallied to 2.50% for the first time over a month.
The yen recorded the largest drop against the USD as the BoJ minutes added to SF Fed study. The BoJ 7-8th August meeting minutes stated that the effects of sales tax hike (April’13) should dissipate and the inflation should accelerate in the second half of 2014/2015 fiscal year. USD/JPY advanced to fresh highs. The pair cleared offers at 105.75/106.00 and hit 106.34 in Tokyo, Nikkei stocks closed the session up by 0.28%. The bullish USD/JPY trend gains pace, as option bids come to reinforce support at 105.00/50. EUR/JPY advanced to 136.92; offers are solid at 137.00/50, including 21-dma and the daily Ichimoku cloud base.
The board USD strength sent EUR/USD down to 1.2867 overnight, the lowest since July 10th 2013. Higher US yields, tensions in Ukraine/Russia as well as discussions on Scottish independence vote (Sep 18th) keep the bias on the sell side. The fear that the UK situation may spill over the other European countries keep the risk appetite severely subdued. The key support is seen at 1.2746/55 (March/June 2013 lows), then 1.2662 (Nov 2012 low). Option barriers are eyed at 1.2900/50 for today expiry.
GBP/USD extended weakness to 1.6065. Selling pressures intensify as traders evaluate the risk of a potential Scottish exit from the UK. The GBP-futures contracts remain long according to CFTC report of Sep 2nd, the interest is however seen fading walking into Scots vote. We see room for further weakness. The critical support is seen at 1.6000 (psychological level & Fib 50% on July 2013/July 2014 advance). EUR/GBP hit the 100-dma (0.80314) before legging down to 0.80031/0.80159 zone in Asia. Yesterday close above 0.80000 pushed the MACD in the bullish zone suggesting further upside. The option bets turn supportive of EUR/GBP bulls above 0.79500-strikes (50-dma+). Eyes will shift to 0.80850/0.81000 for a break above the 100-dma.
In Australia, the business confidence and conditions deteriorated in August according to NAB indicators. The investment lending increased 6.8%, yet home loans grew at the slower-than-expected pace of 0.3% in month to July (vs. +1.0% exp. & 0.1% in June, revised). AUD/USD dropped to 0.9251, solid support remains at 0.9238/39 (Aug lows). A daily close below 0.9285 will keep the sentiment skewed on the downside, according to MACD 12, 26 analysis.
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Today, the economic calendar consists of French July Budget and Trade Balance, UK July Trade Balance, UK July Industrial and Manufacturing Production m/m & y/y, UK August NIESR GDP Estimate US August NFIB Small Business Optimism, Canadian August Housing Starts, and US July JOLTS Job Openings.
Currency Tech
EURUSD
R 2: 1.3000
R 1: 1.2961
CURRENT: 1.2889
S 1: 1.2755
S 2: 1.2662
GBPUSD
R 2: 1.6280
R 1: 1.6233
CURRENT: 1.6093
S 1: 1.6000
S 2: 1.5855
USDJPY
R 2: 107.00
R 1: 106.50
CURRENT: 106.24
S 1: 105.70
S 2: 105.00
USDCHF
R 2: 0.9456
R 1: 0.9385
CURRENT: 0.9361
S 1: 0.9287
S 2: 0.9212
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