Swiss PMI Reaches 50, Japan's Business Sentiment Increases
Swissquote Bank Ltd | Jul 01, 2015 06:08AM ET
Forex News and Events
Switzerland's PMI on the rise
In Switzerland, June manufacturing PMI surprised markets to the upside with a reading of 50 versus 49.9 expected and 49.4 in May. The index just reached the 50% threshold, indicating that the industry adapted, to some extent, to a lower EUR/CHF. The index was driven higher by production output (rose from 51.7 to 54.8), stocks of finished goods (50.1 versus 47.1 in May) and purchased prices (43.2 from 40.9 previous reading). However, the picture is not that bright, as the backlog of orders contracted from 51.4 to 51.1, while the quantity of purchases dropped to 50.3 from 52.5.
We, therefore, do not anticipate substantial improvements in the Swiss economy before the very end of the year. Moreover, due to the high dependence of the Swiss economy on its European neighbours, we must see a positive - long-term - resolution of the Greek crisis and a substantial pick up of growth in the eurozone economy, and therefore a weaker Swiss franc, before seeing any improvement in Switzerland’s economy.
EUR/CHF is up 1.50% since Monday, as the SNB announced that it had intervened in the foreign exchange market to limit the appreciation of the CHF against the euro. At the moment, you need CHF 1.0463 to buy €1.
Japan’s business sentiment increases
Today Tankan reports have been released. There are quarterly polls of business confidence issued by the Bank of Japan, which present data for the Japanese Economy. Those data are then used to formulate the monetary policy. 11,000 firms have been asked to assess the Japanese economic conditions. In particular, large firms declared their willingness to increase investments within March 2016 by nearly 10%.
It appears that firms remain confident despite deflation fears persisting. However, Q1 GDP growth was the best quarter in a year. By the way, the figure was revised up to 3.9% annualised earlier this month. For the Bank of Japan, unexpected good data will ease pressure to continue monetary stimulus. Indeed, we think that there is certainly a virtuous circle, which sets to accelerate. Yet, we remain cautious as long as the inflation keeps distant from its target of 2%. Finally, Tankan reports show better data and provide some credit on Shinzo Abe’s policy.
Qualitative easing must be looked, but not overlooked, as only quantitative data will reflect the true state of the economy. We are now waiting for Producer Price Index, and the CPI to be released within the next few weeks to reflect this good sentiment. For the time being, the yen has been strengthening for one month. USD/JPY is trading around 122.64; a break of the support at 121.94 would clearly maintain downside momentum to the pair.
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Silver - Decreasing Toward Support at 15.39
Today's Key Issues Country / GMT Jun Danish PMI Survey, last 52.5 DKK / 09:00 Jun BER Manufacturing PMI, exp 50.2, last 50.8 ZAR / 09:00 BOE's Carney Presents Semi-Annual Financial Stability Report GBP / 09:30 Jun 26 MBA Mortgage Applications, last 1.60% USD / 11:00 Jun 30 FGV CPI IPC-S, exp 0.77%, last 0.83% BRL / 11:00 Jun Challenger Job Cuts YoY, last -22.50% USD / 11:30 Jun ADP Employment Change, exp 218K, last 201K USD / 12:15 Jun Markit Brazil PMI Manufacturing, last 45.9 BRL / 13:00 Jun F Markit US Manufacturing PMI, exp 53.4, last 53.4 USD / 13:45 May Construction Spending MoM, exp 0.40%, last 2.20% USD / 14:00 Jun ISM Manufacturing, exp 53.2, last 52.8 USD / 14:00 Jun ISM Prices Paid, exp 51, last 49.5 USD / 14:00 Revisions: U.S. Construction Spending USD / 14:00 Central Bank Currency Swap Auction Results BRL / 14:50 Currency Flows Weekly BRL / 15:30 Jun New Car Registrations YoY, last 10.78% EUR / 16:00 Jun Budget Balance, last -4.3B EUR / 16:00 Jun Trade Balance Monthly, exp $4000M, last $2761M BRL / 18:00 Jun Exports Total, exp $19690M, last $16769M BRL / 18:00 Jun Imports Total, exp $15632M, last $14008M BRL / 18:00 Jun SACCI Business Confidence, last 86.9 ZAR / 22:00 Jun Vehicle Sales Fenabrave, last 212713 BRL / 22:00 Jun Commodity Price Index MoM, last 0.76% BRL / 22:00 Jun Commodity Price Index YoY, last 9.05% BRL / 22:00
The Risk Today
EUR/USD EUR/USD is decreasing. Hourly resistance is at 1.1278 (29/06/2015 high). Stronger resistance lies at 1.1436 (18/06/2015 high). Hourly support is given at 1.0868 (28/05/2015 low). We expect the pair to stabilize below 1.1100. In the longer term, the symmetrical triangle from 2010-2014 favors further weakness towards parity. As a result, we view the recent sideways moves as a pause in an underlying declining trend. Key supports can be found at 1.0504 (21/03/2003 low) and 1.0000 (psychological support). Break to the upside would suggest a test of resistance at 1.1534 (03/02/2015 reaction high).
GBP/USD GBP/USD is still trading between the hourly resistance at 1.5930 (18/06/2015 high) and 1.5626 (17/06/2015 low). We expect the pair to gain upside momentum and to challenge again the resistance at 1.5930. In the longer term, the technical structure looks like a recovery bottom whose maximum upside potential is given by the strong resistance at 1.6189 (Fibo 61% entrancement).
USD/JPY USD/JPY is consolidating around 122.50. Hourly resistance can be found at 124.62 (10/06/2015 high) and hourly support is given at 121.45 (25/06/2015 low). We expect the pair to gain momentum to reach back the resistance at 124.62. Key resistance still lies at 135.15 (14-year high). A long-term bullish bias is favored as long as the strong support at 115.57 (16/12/2014 low) holds. A gradual rise towards the major resistance at 135.15 (01/02/2002 high) is favored. A key support can be found at 118.18 (16/02/2015 low).
USD/CHF USD/CHF is heading toward the hourly resistance at 0.9433 (05/06/2015 high). Stronger resistance can be found at 0.9573 (28/06/2015 high). Hourly support can be found at 0.9151 (18/06/2015 low). We expect the pair to test the stronger resistance at 0.9503. In the long-term, there is no sign to suggest the end of the current downtrend. After failure to break above 0.9448 and reinstate bullish trend. As a result, the current weakness is seen as a counter-trend move. Key support can be found at 0.8986 (30/01/2015 low).
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