Littlefish FX | Aug 21, 2015 07:12AM ET
Market Commentary
USD remains soft as uncertainty about the Fed’s timing of a rate hike prevails. Thursday’s US data took us no nearer to a conclusion as to when the FOMC will begin the “liftoff”, and with nothing major on the US docket on Friday, the uncertainty is likely to continue into the weekend. US equity markets followed Asian and European indices lower — the S&P 500 down 2.1%, the NASDAQ Composite down 2.8% and the Dow Jones down 2.1%. The decline brings the S&P 500 back to February levels as it slips below the 200-day average. Solid US housing and manufacturing data did little to stop the Treasury rally. The 2-year Treasury note yield held near 0.65%, whilst the 10-year yield traded lower near 2.07%. WTI oil is down again by about 1% as it hovers just above $40/barrel.
EUR pushed through the recent 1.1214-high to 1.1245 on Thursday. This morning, the pair continues to trade around those levels. News that PM Tsipras had called a snap election failed to materially dampen the positive tone. In a televised address, Greece Prime Minister Alexis Tsirpas announced his resignation which is likely to lead to early elections around 20 September. In the meantime, the first important data will be released today in the form of the Euro area flash manufacturing and services PMIs for August. Also due for release is the flash consumer confidence reading for the Euro area and Germany’s latest Gfk consumer confidence reading.
GBP eased slightly as UK retail sales proved anemic, starting the third quarter with a rise, but not as high as markets had expected due to a steep drop in fuel sales. Total retail sales volumes were up by just 0.1% in July as opposed to expectations of a 0.4% rise. Excluding fuel, retail sales rose in line with estimates by 0.4% on the month, a significant rise compared to June’s fall of 0.3%. The slide in GBP was however modest as the CBI’s trends-survey improved quite notably. Today’s data should show UK’s public finances in improving shape.
JPY continues to firm as risk appetite takes a beating. The USD/JPY pair is seen sub the 123 level currently. Risks remain to the downside given dollar weakness as well as ongoing weak sentiment across global, Asian and emerging markets.
Technical Commentary
EUR/USD Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks) Bearish
GBP/USD: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks) Bearish
USD/JPY: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks) Bullish
EUR/JPY: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks) Bearish
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