Mysticforex

"TOKYO -- The Finance Ministry announced July 4 a reshuffle of its senior officials. Tatsuo Yamasaki, who was involved in a large yen-selling intervention, was named vice minister of finance for international affairs. Some market experts say Yamasaki's appointment shows the government intends to fight yen appreciation.

Flame Out on AUD/NZD ? On a technical basis, the outlook is not as clear because today’s flame out candle is a strong signal of a potential reversal in AUD/NZD. If the currency pair drops below 1.09, a deeper correction to 1.08 is possible. Resistance is at the June high of 1.1040, a level that needs to be broken before the pair can break out of a broader consolidation that can be seen on the weekly chart.

Having broken below the 1.4300 level and made fresh yearly lows, the EUR/AUD pair is clearly in a steep downtrend. The next target for the shorts is the 1.4000 figure while only a close above 1.4500 relieves downward pressure

In a lively Asian and European session trade, cable rally fizzled in the wake of MPC minutes that showed no tilt towards tightening, while Aussie soared to 9450 after hotter than expected CPI data allayed any fears of further RBA rate cuts. So, a test of 2014 hidhs?

In UK the MPC minutes revealed that UK policy makers remain decidedly nuetrat with respect to monetary policy offering no clues as to when they may hike rates. The minutes showed a 9-0 vote to keep rates unchanged in the July meeting although some members did feel that conditions have become more balanced over the past few months than earlier in the year.

Taking a look at the weekly chart of EUR/GBP, the currency pair is clearly in a downtrend. If the 2014 low of 0.7889 is broken in a meaningful way, there is no support until the July 2012 low of 0.7756. A break above 0.8033 would be needed to negate the downtrend and put EUR/GBP in a better positioned for a trend reversal.

Technically GBP/NZD is nearing the top of its multi-month range with 1.9750 looking to cap the current move. A break higher could open a run to 1.9900 while a drop would target the lower end of the range as 1.9400

Taking a look at the weekly chart of EUR/AUD, if the 2014 low of 1.4360 is broken, the next level of support for the currency pair will be 1.4230, the 38.2% Fibonacci retracement of the 2012 to 2014 rally. If EUR/AUD finds support above 1.4360, it should remain confined between 1.4360 and 1.4600. If 1.46 is broken, there is no major resistance until 1.4850.

Market Drivers for July 21 2014 Risk off flows resume as geopolitical risks and data weigh on thin markets German PPI 0.0% Nikkei closed Europe -0.57% Oil $102/bbl Gold $1315/oz. In Europe meanwhile the economic news continues to point to a slowdown as Italian Industrial Production printed much worse than expected at -2.1% versus 3.6% eyed. The news bodes badly for the EZ flash PMI readings due later this week, suggesting that the rebound in the periphery may have been short lived. The recent geopolitical tensions could also play a major part in the dampening of demand as the diplomatic chill with Russia will no doubt have economic ramifications for Germany – the region’s largest economy. So far the euro has held above the key 1.3500 support, but the pair remains vulnerable to further downside action if the PMIs show significant deterioration.

Cable once again found sellers at the 1.7100 level and remains heavy as traders continue to fear that BoE will err on the side of caution with respect to monetary policy and keep rates at currents until 2015. On Friday rumors of a dovish interview with BoE chief Mark Carney quickly pushed the pair to 1.7040, but it rebounded when the central bank denied the report.

Today's TIC report did reveal both China and Japan increased their ownership of US Treasuries in May. For China, the addition of $7.7B was the first increase since January.

For the past week the EUR/CAD has been trading in a 1.4600-1.4400 range and the lower end of that range is the key support. A break there could open the run towards 1.4000 as the pair heads for fresh yearly lows

From a technical perspective, 1.35 is less significant than the February 3rd low of 1.3477. However taking a look at the chart, today’s decline has taken EUR/USD below trend line support. If the pair breaks its 2014 low of 1.3477, the next stop could be the November low of 1.3295. However if it holds 1.3450 (we’ll give it a bit of flexibility), it could be back into the 1.35 to 1.37 range for the pair.

From a technical perspective, 1.35 is less significant than the February 3rd low of 1.3477. However taking a look at the chart, today’s decline has taken EUR/USD below trend line support. If the pair breaks its 2014 low of 1.3477, the next stop could be the November low of 1.3295. However if it holds 1.3450 (we’ll give it a bit of flexibility), it could be back into the 1.35 to 1.37 range for the pair.

Taking a look at the technicals, cable is now retesting the yearly highs near the 1.7200 level. A failure here would create a double top, but a break above opens up a run all the way towards the 1.7500 figure - a level not seen since 2008.

LACK OF WAGE GROWTH FRUSTRATES POUND RALLY Market Drivers for July 16 2014 China GDP at 7.5% vs. 7.4% eyed UK labor data mixed as jobs increase but wage growth lags Nikkei 0.10% Europe 1.32% Oil $100/bbl Gold $1298/oz. Europe and Asia: CNY GDP 7.5% vs. 7.4% GBP UK Labor -36.3K vs. -27.1K GBP UK Wage growth 0.3% vs. 05% EUR Trade Balance 15.3B vs. 16.3B North America: USD PPI 8:30 USD IP 9:15 CAD BOC statement 10:00 USD Yellen testifies 10:00

Yellen Testifies Tuesday – Buy or Sell the Dollar? Lets start by establishing the facts. Here’s what we know going into Yellen’s speech: 1. U.S. Economy is improving but at a painstakingly slow pace (labor up, activity down) 2. Inflation is bottoming 3. Quantitative Easing will end in October 4. Yields are extremely low with the market underpricing 2015 tightening vs. Fed’s forecasts 5. Fed doesn’t expect to raise interest rates until mid 2015. What does this mean? 1. Fed tightening is still a year away 2. We are looking at another 8 to 12 months of ZIRP 3. Yellen will look to distinguish the difference between tapering and tightening

Having now taken out 9450 level NZD/CAD looks ready to mount a run towards 9500. A break there opens the field for a test of the yearly highs, but a break below 9400 would suggest that the upside bias has been broken

Australian Dollar (AUD/USD): There was over a 10% reduction in the total OI taking the total open back down to 113K after 132K last week. For one week only the total OI in the A$ exceed that in the C$ - now it is 31K smaller. Longs did liquidate but there position remains fairly large at 41.4K.

Having broken above 1.70, the next major resistance level for GBP/USD is 1.7335, the 50% Fibonacci retracement of 2007 to 2009 decline. If the currency pair takes out its current 5 year high of 1.7180, the next stop should be this key level. However if sterling drops below 1.7085, there is no major support until 1.70.

According to the most recent IMF report (Currency Composition of Official Foreign Exchange Reserves, or the COFER Report), From this mass of numbers, there are some interesting points we can glean. Remember, however, the cut off for this report was March 31 so the information is dated. Every Quarter the IMF issues a report called the Currency Composition of Official Foreign Exchange Reserves, or the COFER Report. The most recent report was updated June 30, 2014. Currently there are 146 reporting entities who report this data on a strictly confidential basis. A reporting party may be "member countries of the IMF, non-member countries/economies, and other foreign exchanges reserve holding entities." Ownership of these exchange reserves is shown in three categories. As displayed in the table below, there is the total foreign exchange holdings, broken down into allocated and unallocated reserves. Currency Composition of Foreign Exchange Reserves From this mass of numbers, there are some interesting points we can glean. Remember, however, the cut off for this report was March 31 so the information is dated. 1. Total foreign exchange holdings for the year grew from $11,090B to $11,864B. The largest growth was in unallocated reserves, from $5,006B to $5,689B. I have sent a query to the authors of the COFER report requesting more information about this category, which has been the fastest growing one since the end of 2001 according to COFER. What is the cause of this? Is this all currencies and no metals are included? I will attach anything meaningful should I get a response. 2. The largest reserve currency remains the USD, but of the major identified currencies the USD percentage has decreased from 61.9% to 60.9%. While 1% is minor it is 1% of the $6,175B total. 3. The euro remains the second largest global reserve currency and its share of the allocated reserves increased from 23.6% of the total to 24.5%. This represents an increase in euro ownership of over $55B for the year. The aggressive euro buying came in the third and fourth quarters of 2013. There was liquidation of $10B of euros from the central banks inventory in the Q1 of 2014. This activity might explain why the euro was stronger than expected last year. 4. There has been persistent buying of the Canadian Dollar. The total CB ownership of the C$ increased in every quarter. The total percentage of the allocated reserves went from 1.6% of the total to 1.9%. At the beginning of 2Q 2013 a USD bought 1.007 Canadian but the C$ later sunk to 1.12 thanks in part to jawboning by the Bank of Canada's Stephen Poloz. With the C$ now trading in the 1.0650 area, maybe some of the Central bankers should send Governor Poloz a thank you note. 5. There was a small increase in the ownership on the Aussie and the Japanese yen. The Aussie increased by a little over USD 6B. Surprisingly, central bankers ignored the efforts of PM Abe to weaken the yen and increased their yen ownership by almost $10B. These numbers are merely a snapshot of currency positions held by central banks three months ago. We are not privy to the decisions that led to the positions, nor do we know if they we motivated by economic or political reasons. Further we would expect they have already adjusted their positions based upon their views. How do the experts respond to these numbers? Here are some quotes from Bloomberg: After climbing for three straight quarters, the currency’s..(euro)...share of central-bank reserves identified by the International Monetary Fund was unchanged at 24.5 percent from January through March, down from a record 28 percent in 2009. The euro was less attractive than a year earlier for 62 percent of central banks that took part in a private survey by Central Banking Publications released on June 23. The interest-rate cuts, charge on deposits and liquidity programs that the Frankfurt-based ECB has implemented since early June to avoid deflation have made the 18-nation euro less attractive. Banks from JPMorgan Chase & Co. to Societe Generale SA predict it will lose out to currencies such as South Korea’s won and the Australian dollar, favored for the higher yields paid by their bonds. Most participants in the Central Banking Publications survey said sentiment improved toward the dollar, pound, Chinese yuan, South Korean won and Australian and Canadian dollars, while the New Zealand, Chinese and Brazilian currencies looked the most attractive for future diversification. Low euro-area yields are “a major incentive to diversify into higher-yielding currencies and assets,” Kevin Hebner, a senior foreign-exchange strategist at JPMorgan in New York, said by e-mail on July 1. “The euro is already significantly over-owned.” These are macro ideas from the big players with different ideas, but one theme emerges. They are unfriendly to the euro. My guess is rallies in the EURUSD are going to be contained and met with selling. Eventually the pair will grind lower.

Not my analysis. Not even a chart. A friend sent me this, have yet to evaluate it.

Taking a look at the weekly chart of EUR/NZD, the next level of support for the currency pair is 1.5393. If this level is broken, then there is no major support until the 2013 low of 1.5082. The downtrend in EUR/NZD remains intact as long as the currency pair holds above its former breakdown level of 1.5707.

Technically GBP/AUD has hit a clear resistance ahead of the 1.8400 level and is in the process of establishing a double top. A move through 1.8400 would re-instate the upward trend while a move below 1.8000 would suggest that a much deeper correction is in store.

Between the disappointing trade numbers and Governor Steven’s comment that the Australian dollar is overvalued AUD/CAD completely broke down last week, dropping to its lowest level since March. With Australian and Canadian employment numbers scheduled for release, AUD/CAD will remain in play in the coming week. While the currency pair appears poised for additional losses, according to Australian PMIs, labor market conditions improved in the month of June.