Watch Yellen And BOC Today
Growth Aces | Jul 15, 2015 06:29AM ET
GROWTHACES.COM Forex Trading Strategies
Taken Positions
GBP/USD: short at 1.5670, target 1.5420, stop-loss 1.5770, risk factor **
EUR/CHF: long at 1.0380, target 1.0580, stop-loss moved to 1.0380, risk factor **
GBP/JPY: short at 193.40, target 191.20, stop-loss 194.40, risk factor **
Pending Orders
EUR/USD: sell at 1.1140, target 1.0920, stop-loss 1.1220, risk factor **
USD/JPY: buy at 123.05, target 125.80, stop-loss 122.10, risk factor *
USD/CHF: buy at 0.9360, target 0.9550, stop-loss 0.9280, risk factor *
USD/CAD: buy at 1.2580, target 1.2850, stop-loss 1.2480, risk factor **
AUD/USD: sell at 0.7550, target 0.7350, stop-loss 0.7620, risk factor *
NZD/USD: sell at 0.6860, target 0.6500, stop-loss 0.7020, risk factor *
EUR/GBP: sell at 0.7140, target 0.7000, stop-loss 0.7190, risk factor **
EUR/JPY: sell at 137.20, target 134.00, stop-loss 138.10, risk factor **
AUD/NZD: buy at 1.1050, target 1.1400, stop-loss 1.0970, risk factor *
EUR/USD: All Eyes On Janet Yellen
(sell at 1.1140)
- The European Commission is proposing to give a EUR 7 billion bridge loan to Greece to cover the country's financing needs in July using the European Financial Stability Mechanism. The proposal says the bridge loan would have a maximum maturity of 3 months, and would be repaid to the EFSM from money that Greece is to get from the European Stability Mechanism on the conclusion of negotiations on the next, EUR 86 billion three-year bailout.
- Unlike the European Stability Mechanism (ESM), which is a Eurozone fund, the European Financial Stability Mechanism (EFSM) is an EU-wide fund, backed by the EU budget and therefore, disbursements from it need the approval of all of the EU's 28 governments, rather than just the 19 of the Eurozone. But decisions in the EFSM are taken by qualified majority voting, which means that if 16 countries, representing 65% of the EU's population, support a disbursement, its opponents can be outvoted.
- Greece can only get the bridge loan if it passes a set of reforms in its parliament today.
- US Commerce Department said yesterday retail sales slipped 0.3% mom last month, the weakest reading since February. May's retail sales were revised down to show them rising 1.0% instead of the previously reported 1.2% jump. The reading was below expectations for a 0.2% mom rise. Retail sales excluding automobiles, gasoline, building materials and food services dipped 0.1% after an unrevised 0.7% increase in May, vs. expected 0.4% mom growth. These so-called core retail sales correspond most closely with the consumer spending component of GDP.
- The most important event today is a congressional testimony by Federal Reserve chief Janet Yellen, which might offer more hints about the timing of a US interest rate hike. Yellen provided USD bulls with food for thought on Friday by saying she expected a rate hike at some point this year. As we showed in our Monday’s Market Overview, our US rate expectations are slightly more hawkish than the market consensus, and we still are of the opinion that September will be the month of the first hike. That is why we expect rather hawkish comments from Yellen today.
- We maintain our sell EUR/USD order at 1.1140. The short-term outlook is clearly bearish, but the market has been choppy recently due to Greece headlines, so there is a risk of a strong, unexpected swing.
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Significant technical analysis' levels:
Resistance: 1.1056 (10-dma), 1.1081 (high Jul 14), 1.1196 (high Jul 13)
Support: 1.0965 (low Jul 14), 1.0916 (low Jul 7), 1.0887 (low Jun 1)
GBP/USD Falls After Weaker British Jobs Report
(short for 1.5420)
- The ONS said the unemployment rate rose to 5.6% in three months to May from 5.5% in the three months to April, as the number of people in employment fell by 67k, driven by lower numbers of people in part-time work.
- Total average weekly earnings in the three months to May, including bonuses, rose by 3.2% compared with the same period a year earlier, speeding up sharply from 2.7% in the three months to April. The reading was pretty in line with our forecast, but below market expectations for 3.3% gain. Excluding bonuses, pay rose by 2.8%, the biggest increase in more than six years, vs. growth of 2.7% in the previous period, but below expectations for 3.0% increase. The recovery in earnings and near-zero inflation is boosting the spending power of British households.
- Bank of England Governor Mark Carney said yesterday that earnings data up to April had been a touch firmer than the central bank expected.
- We went short on the GBP/USD at 1.5670 today, in line with our trading strategy released yesterday. The GBP fell and gilts rose, after data showed unemployment unexpectedly rose, while wage growth came in slightly weaker than expected. The target of our short position is 1.5420, and we look for further GBP/USD fall after today’s Fed’s Yellen’s testimony.
Significant technical analysis' levels:
Resistance: 1.5739 (high Jul 1), 1.5775 (high Jun 30), 1.5789 (high Jun 29)
Support: 1.5598 (30-dma), 1.5549 (low Jul 14), 1.5426 (200-dma)
USD/JPY: BOJ Lowers GDP And CPI Forecast
(buy at 123.05)
- The Bank of Japan decided to keep monetary policy unchanged, again by an 8-1 majority vote. As widely expected, the BOJ reiterated its pledge to increase base money, or cash and deposits at the central bank, at an annual pace of JPY 80 trillion.
- The bank trimmed its economic growth forecast. Real GDP forecast was lowered to 1.7% from 2.0% for fiscal year 2015, and left unchanged at 1.5% and 0.2% for fiscal year 2016 and fiscal year 2017, respectively. The statement said that “the year-on-year rate of increase in the CPI will likely be broadly in line with the April forecast”. However, its CPI forecast was lowered to 0.7% from 0.8% for fiscal year 2015, to 1.9% from 2.0% for fiscal year 2016, and to 1.8% from 1.9% for fiscal year 2017 (excluding effects of planned tax hike).
- BOJ Governor Haruhiko Kuroda said at his post-meeting news conference: “Japan's economic growth slowed somewhat in April-June, but I absolutely don't think the weakness will continue in July-September and beyond. (…) Export and output growth have moderated somewhat, but we expect this to be temporary. The slowdown in U.S. economic growth in the first quarter and weakness in Asian economies likely affected Japanese exports with a lag. (…) The expected pace of increase in oil prices is slightly less than what we initially expected. But the contribution of energy price moves on consumer inflation hasn't changed since April. The difference between 2% inflation (which is the BOJ’s target) and the 1.9% projection made for next fiscal year is negligible.”
- We have raised our buy USD/JPY order to 123.05 and the target to 125.80, which is just shy of the multi-year high at 125.86. The stop-loss would be placed below the daily cloud base which is currently at 122.18.
Significant technical analysis' levels:
Resistance: 123.74 (high Jul 14), 123.75 (high Jul 2), 124.38 (high Jun 24)
Support: 122.92 (low Jul 14), 122.55 (hourly low Jul 13), 122.42 (hourly low 13)
USD/CAD: Unchanged BOC Could Spur Profit-Taking On CAD Shorts
(buy at 1.2580)
- Iran and six major world powers reached a nuclear deal on Tuesday. Under the deal, sanctions imposed by the United States, European Union and United Nations will be lifted in return for Iran agreeing to long-term curbs on a nuclear programme that the West has suspected was aimed at creating a nuclear bomb. Oil prices tumbled on Tuesday after the deal was reached. The USD/CAD, which is strongly correlated with oil prices, rose above 1.2800 after Iran deal.
- USD/CAD traders will be eyeing today’s Bank of Canada decision (14:00 GMT). We do not expect any changes in monetary policy. However, following slightly weaker recent Canadian data, some investors may expect that the central bank will act pre-emptively, as it did on 21 January when it surprised the market by cutting rates to 0.75%.
- That is why an on-hold decision could spur profit-taking on recent CAD shorts. In our opinion, lower USD/CAD levels should be used to get long on this pair. We keep our buy USD/CAD order at 1.2580 in anticipation for gains through the 2015 1.2835 peak posted back in March.
Significant technical analysis' levels:
Resistance: 1.2805 (high Jul 14), 1.2835 (high Mar 18), 1.2845 (high Mar 13, 2009)
Support: 1.2724 (session low Jul 15), 1.2716 (low Jul 14), 1.2700 (psychological level)
Source: Growth Aces Forex Trading Strategies
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