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Mysticforex
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Today’s decision by the ECB to increase monetary stimulus triggered the largest one-day decline in the EUR/USD since 2011. The central bank widened the gap between EZ and U.S. monetary policy by cutting interest rates another 10bp and pre-announcing an ABS program. By opting for the one-two punch of rate cut plus ABS purchases the central bank sent a very strong message to the market about how they are worried about the outlook for the Eurozone economy and committed to doing whatever it takes to promote inflation and growth even if it means introducing new measures when previous programs have not even been rolled out. The ECB made it clear that they maintain an easing bias whereas Fed President Mester confirmed that the U.S. asset purchase program will end in October. Non-farm payrolls are scheduled for release tomorrow and chances are job growth accelerated in August. We are looking for healthy job growth with payrolls between 230k to 250k but as long as payrolls exceed 150k, which is significantly lower than the 230k consensus forecast, the Fed will remain on course to end QE. With the divergence in Eurozone and U.S. data and monetary policy expected to widen further this month due to the prospect of a stronger NFP report and positive FOMC meeting, I expect EUR/USD to drop by at least another 200 pips to 1.2750.
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--------------------------------------------------------------------------------------------------------------------------------------- today is the euro's biggest one day fall since late 2011 - the height of the eurozone crisis
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Having broken below the August swing low, the next level of support for GBP/USD is the March low of 1.6462 and below that there is no major support until the 38.2% Fibonacci retracement of the 2013 to 2014 rally at 1.6285. A break back above 1.6645 would be needed to negate the downtrend.
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a glance at the Global Dairy Trade website says there’s another auction today and these have recently been undermining NZD, as indeed it appears to have done today already in addition to the general USD buying. So a heads up just in case we get some volatilty in a couple of hours or so (underway now but it takes a while), judging by recent auctions here and here NZDUSD currently 0.8328 just off session lows of 0.8323.
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Technically, the EUR/AUD remains just above the key 1.4000 support and if it breaks that key level, the pair is likely to target at least 1.3800 before finding a modicum of support. Only a close above the 1.4200 relieves any downward bias.
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EUR/CHF dropped to its lowest level in 1.5 years today as the conflict between Russia and Ukraine takes a greater toll on the currency pair. Economically, the Eurozone has been directly affected by international sanctions on Russia, which triggered a retrenchment in demand for European assets. The Swiss Franc on the other hand has been a big beneficiary of safe haven flows. On top of that, inflation in the Eurozone is falling, triggering concerns from the European Central Bank. Since the beginning of August, there has been growing speculation that the ECB may increase stimulus further with possible action early next week. However we believe that this is unlikely because parts of the program they introduced in June have not been implemented yet and furthermore, the Swiss National Bank has pledged to keep EUR/CHF above 1.20. For this reason, we expect the currency pair to find a bottom soon as the risk of intervention increases with every 10-pip decline in EUR/CHF. Even if the SNB starts with verbal intervention, it could be enough to reverse the decline in the currency pair. So positioning for a bottom in EUR/CHF near current levels with a stop below 1.20 may not be a bad idea.
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The EUR/USD continues to suffer from the down gap which is now in its third day of not being filled. Generally such technical conditions are very bearish but the first up day in nearly a week suggests that the EUR/USD may fill the gap soon and possibly retake 1.3250 area which would alleviate some of the bearish pressure. A break below 1.3150 however would open a new round of selling towards 1.3100
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Technically, there is a small ascending triangle forming in the currency pair that reinforces its upward bias and the importance of a 1.52 break. If this level clears, the next level of resistance is above 1.53. On the downside, the break below 1.51 would expose the currency pair for a move down to 1.50.
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Introduce Yourself Here - Don't Be Shy!!
Mysticforex replied to trading4life's topic in Beginners Forum
--------------------------------------------------------------------------------------------------------------------------------------- Hello rajre, welcome to Traderslaboratory. -
Introduce Yourself Here - Don't Be Shy!!
Mysticforex replied to trading4life's topic in Beginners Forum
--------------------------------------------------------------------------------------------------------------------------------------- Welcome to Traderslaboratory ! -
Technically the unclosed gap in AUD/NZD is very bullish especially if it remains so for a few more days as traders will then take it a sign of structural change in the currency. The 1.1250 level is the natural upside move in the pair while 1.1000 provides the downside support
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Taking a look at the charts there is no major resistance in AUD/JPY until 97.60, the 23.6% Fibonacci retracement of the October 2011 to April 2013 rally. A move back below 94 would be needed to negate the uptrend in the pair
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Recent WSJ poll: Economists overwhelmingly expect the Federal Reserve to hold off raising short-term interest rates until at least 2015. But nearly a third say doing so would mean the central bank waited too long, a new survey found.
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Technically 1.1000 represents and strong intermediate term barrier for USD/CAD with the pair forming a double top at that level. A move through 1.0900 could open a test of 1.0850 while only a break above 1.1050 would reassert a bullish bias for the pair.
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Taking a look at the charts the next significant support level for EUR/USD is near 1.3250, the 38.2% Fibonacci retracement of the July 2012 to May 2014 rally. If this level is broken, there is minor support at 1.32 followed by more significant support at 1.30. EUR/USD needs to rise back above 1.34 to negate the downtrend.
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The US economic news, though not outstanding, remains positive. Yesterday the US building permits number and the housing starts both beat estimates. The nay Sayers pointed out many of the new permits were for rental units, but the market didn't care. The US CPI was up a mere 0.1% for the month and now sits a respectable 1.9% for the year. This number gives the Fed no reason to fear inflation. This afternoon the Fed released their most recent monthly musings. The Bloomberg headline. "Fed Officials Said Job Gains May Bring Faster Interest-Rate Rise," gives you their quick analysis. Some of the members rightly complain the labor market recovery remains slow, but they are optimistic going forward, it will continue to improve. There is nothing in the report that suggest the tapering off of the QE is going to slow. A word of caution, however, the Fed Chairlady is going to speak at the Jackson Hole gathering. Will she offer any new thoughts that might surprise the market?
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EUR/GBP has formed a strong bottom at the 7900 level that has consolidated for more than several weeks suggesting that the pair may be ready to turn and break out above the 8050 level with a possible short covering target of 8200. Only a break of 7900 reestablished the bearish trend.
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Market Drivers for August 19 2014 UK CPI Much cooler Cable tumbles through 1.6650 RBA Minutes suggest further easing unlikely Nikkei 0.83% Europe 0.44% Oil $96/bbl Gold $1300/oz. Europe and Asia: NZD PPI -1.0% vs. 0.7% EUR CA 13.1B vs. 19.2B GBP UK CPI 1.6% vs. 1.8% North America: USD CPI 08:30 USD Building Permits 8:30
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Since the beginning of the month, AUD/NZD has been stuck between a 1.09 and 1.1050 trading range. Over the next 24 hours, the upper bound of this range could be tested if the Reserve Bank of Australia’s monetary policy minutes sound less dovish or if dairy prices continue to fall at tomorrow’s dairy auction. Starting with the RBA minutes, the Reserve bank left their monetary policy statement virtually unchanged earlier this month. However, stronger economic data from China could lead to a bit of optimism and if the RBA minutes sound more positive, it could promote gains in the Australian dollar. Yet barring any big surprises, AUD/NZD should have a smaller reaction to the RBA minutes than New Zealand’s twice a month dairy auction, which has become a big market mover for the currency. NZD/USD fell to 7 week lows after the last auction after prices dropped 8.4%, adding to a decline of 8.9% at the previous auction. Since February dairy prices are down 41%, which is disastrous for the country’s terms of trade, GDP and monetary policy outlook because dairy accounts for approximately a third of New Zealand’s exports by value. Unless we have a big rebound in prices tomorrow, there’s a good chance Fonterra will lower its payout further this year, putting further strain on the economy. Lower dairy prices could be just what AUD/NZD needs to test 1.1050. However whether or not a test of 1.1050 becomes a breakout or a fake-out all depends on the magnitude of tomorrow’s surprises as well as the tone of the RBA Governor Glenn Steven’s speech later this week.
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GBP/CAD is now nearing the bottom of its recent range and a move through 1.8100 would put 1.8000 squarely in view. On the upside only a move through 1.8400 relieves downside bias.
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On a technical basis, lower highs and lower lows is a sign of weakness for USD/CAD. The currency pair dropped out of the uptrend zone encapsulated by the 1st and 2nd Standard Deviation Bollinger Bands, a signal that a deeper sell-off could ensue. If USD/CAD breaks below 1.0870, the 38.2% Fibonacci retracement of the March to July decline there is no major support until 1.08. However if it rises back above 1.0950, a test of 1.10 becomes more likely.
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On a technical basis, lower highs and lower lows is a sign of weakness for USD/CAD. The currency pair dropped out of the uptrend zone encapsulated by the 1st and 2nd Standard Deviation Bollinger Bands, a signal that a deeper sell-off could ensue. If USD/CAD breaks below 1.0870, the 38.2% Fibonacci retracement of the March to July decline there is no major support until 1.08. However if it rises back above 1.0950, a test of 1.10 becomes more likely.
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On Thursday August 14 there will be a flood of data pouring from the EU, mostly pertaining to the anticipated rate of growth. The estimate for EU GDP growth is forecast to drop to 0.7% from the previous estimate of 0.9%. With the big spec short, there is that possibility of a short squeeze at any time. Still, the outlook for the eurozone economy remains bleak. Unless there is a dramatic expansion of the money supply, which is bearish the euro, their economy will continue to deflate, which also seems negative.
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Market Drivers for August 13 2014 UK Average earnings decline -0.2% -slowest pace on record Chinese data proves mixed Nikkei 0.35% Europe 0.85% Oil $97/bbl Gold $1309/oz. Europe and Asia: AUD Wage Price 0.5% vs. 0.8% CNY IP 13.5% vs. 14.5% CNY Retail Sales 12.2% vs. 12.5% GBP UK Average Wage Earnings -0.2% vs. -0.1% GBP Claimant Count -33K vs. -28K North America: USD Retail Sales 08:30 USD Business Inventories 10:00 Cable tumbled in morning London trade today breaking below the 1,6750 mark after BoE Governor Mark Carney noted that both wage and productivity gains were “disappointing” suggesting that the UK central bank will maintain its accommodative monetary policy longer than the market expects. The UK central bank lowered its estimates for wage growth to 1.25% in 2014 from 2.5% previously forecast with Mr. Carney noting that there was heightened uncertainty about the slack in the UK economy. He went further by stating that even if spare capacity was eliminated overnight the right level of bank rate would be the current rate. Mr. Carney’s emphasis on wage growth clearly indicates that the BoE is not yet ready to consider rate hikes as it sees inflationary pressures non-existent and is far more concerned about sustaining growth going forward.
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According to our Double Bollinger Bands, GBP/USD remains in the sell-zone, which means the downtrend is intact. In order for the currency pair to shrug off the downside momentum, it needs to break above the 100-day SMA that sits near 1.6900. Otherwise, there’s still a chance that the currency pair will drop to its next support level of 1.67.