20 Ago 2018

FOREX Newsletter

FOREX Newsletter

August 20, 2018

 

  Pulse of the Market

·      Dollar fell against the major currencies following softer than expected U.S consumer confidence

·      Slightly weaker Eurozone trade and current account data had very little impact on the Euro

·      Of all the major currencies, Sterling experienced the weakest recovery

·      Canadian Dollar benefitted from stronger than expected consumer price growth

  

The second full week in August was a good one for the U.S Dollar. The greenback extended its gains against most of the major currencies but the rally is slowing as investors cover their shorts in EUR/USD, AUD/USD and other major currencies. Softer than expected U.S consumer confidence helped to fuel their recoveries but the prospect of 2 relatively quiet data weeks and the potential for a disruptive trade meeting between the U.S. and China also encouraged investors to reduce their short positions. The most important event risk next week will be the U.S. and China’s trade talks on August 21 and 22. If the talks go well, risk appetite will improve allowing deeply oversold currencies like the Australian dollar to recover. However if the U.S. and China continue to bump heads, we could see renewed losses for euro, sterling and Aussie along with gains for the U.S Dollar. U.S fundamentals are still sound and next week’s FOMC minutes will remind us that the Fed is on course to raise rates in September. So at most we expect the pullback in USD/JPY to take the pair to 109.90 or 110. After hitting a low of 1.13 on Wednesday, EUR/USD ended the week near 1.14. Like the U.S., slightly weaker Eurozone trade and current account data had very little impact on the currency. Eurozone PMIs are due for release in the week ahead and of all the economic reports on the calendar, these are the most important because previously, we’ve seen very little sign of trade tensions impacting the Eurozone economy but if the August numbers show a slowdown, euro will resume its slide. If the data shows that manufacturing and service sector activity continued to expand at a faster pace, EUR/USD could extend its gains to 1.15. Of all the major currencies, Sterling experienced the weakest recovery. With short positions at their highest level since May 2017, GBP/USD was at the greatest risk of a short covering rally. Consumer spending rose 3 times more than expected in July, year over year CPI growth accelerated to 2.5%, well above the central bank’s 2% target and the unemployment rate dropped to its lowest level in 43 years. There was a slowdown in wage growth and zero price growth on a month to month basis, but the improvements should have overshadowed the deterioration. Yet it did not, which shows how strong the selling pressure really is. The problem is that the risk of a no-deal Brexit is growing but taking a look at the GBP/USD daily chart – higher highs and higher lows suggest that a stronger recovery is brewing. If it happens, it would be driven by Brexit headlines or a deeper pullback in the U.S Dollar because there are no major UK economic reports for the rest of the month. All three of the commodity currencies traded higher today with the Canadian leading the gains.

 

 

Time(GMT)   Economic Release IMP Actual Forecast Prior
06:00 German Producer Price Index (YoY) (JUL) Low     3.0%
07:00 Japan Convenience Store Sales (YoY) (JUL) Low     1.1%
08:00 Switzerland Total Sight Deposits CHF (AUG 17) Low      
09:00 Euro-Zone Construction Output w.d.a. (YoY) (JUN) Low     1.8%
15:00 U.S Fed’s Bostic Speaks on U.S. Economic Outlook in Tennessee Low      
22:45 New Zealand Net Migration s.a. (JUL) Low     4840
23:30 ANZ Roy Morgan Weekly Consumer Confidence Index (AUG 19) Low      

 

Euro

The single currency traded better against the U.S. Dollar on Friday. The single currency continues to be supported by the announcement of renewed trade talks between the United States and China later this month. Considering the limited impact on European banks, the recent sell-off in the Euro appears to have been overdone. Overall, the EUR/USD traded with a low of 1.1365 and a high of 1.1443 before closing the day around 1.1441 in the New York session.

 

Yen

The Japanese Yen pair was under pressure last week on trade tensions and on revelations the Bank of Japan is under pressure to move away from its accommodative policy. Early in the week, the Yen was supported by solid domestic data. Late in the week, geopolitical tensions sparked a flight-to-safety rally into the Japanese Yen. Overall, the USD/JPY traded with a low of 110.29 and a high of 111.03 before closing the day around 110.54 in the U.S session.

 

British Pound

The British Pound struggled during the last week, as we reached down to the next support level. People are starting to price in the idea of a “no deal Brexit”, so things are becoming much more negative. At this point, the trade of the century might be buying the British pound at low levels, but clearly you need a longer-term signal to start doing that. Overall, the GBP/USD traded with a low of 1.2695 and a high of 1.2752 before closing the day at 1.2752 in the New York session.

 

Canadian Dollar

The Canadian Dollar strengthened against its U.S counterpart on Friday after data showed a surge in domestic inflation triggered increased bets on another Bank of Canada interest rate hike as soon as September. Canada’s annual inflation rate surged to 3.0 per cent in July, its highest in nearly seven years, versus 2.5 per cent the previous month. Overall, USD/CAD traded with a low of 1.3049 and a high of 1.3167 before closing the day at 1.3062 in the New York session.

 

Australian Dollar

The Australian Dollar broke sharply last week amid expectations that domestic interest rates would remain at historical lows longer than expected and rising geopolitical turmoil that dampened demand for higher-yielding currencies. The Australian Dollar weakened as the central bank showed no intention of raising rates over the near future. Overall, AUD/USD traded with a low of 0.7250 and a high of 0.7317 before closing the day at 0.7315 in the New York session.

 

 

Euro-Yen

EUR/JPY is trading above 14, 50 and 100 days moving average. Fast stochastic is giving a bullish tone and MACD is issuing a bearish stance. The Relative Strength Index is above 34 and lies below the neutral zone. In general, the pair has gained 0.26%.

 

Sterling-Yen

Currently, GBP/JPY is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bullish tone and MACD is indicating a bearish stance. The Relative Strength Index is above 25 reading and lies below the neutral zone. On the whole, the pair has lost 0.01%.

 

Aussie-Yen

Currently, the cross is trading below 14, 50 and 100 days moving average. Fast stochastic is giving a bullish tone and MACD is indicating a bearish stance. The Relative Strength Index is above 40 reading and lies below the neutral region. In general, the pair has gained 0.46%.

  

Euro-Sterling

This cross is currently trading above 14, 50 and 100 days moving average. Fast stochastic is indicating a bullish tone and MACD is also issuing a bullish signal. The Relative Strength Index is above 60 and lies above the neutral region. On the whole, the pair has gained 0.29%.

  

Sterling-Swiss

This cross is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bearish stance and MACD is also indicating a bearish tone. The Relative Strength Index is above 30 and lies below the neutral region. In general, the pair has gained 0.19%.

 

Appendix

  

FOREX Closing Prices for August 17, 2018
Currency Open High Low Close Net Chg
EUR/USD 1.1375 1.14435 1.1365 1.14414 0.0066
USD/JPY 110.867 111.033 110.296 110.54 -0.3420
GBP/USD 1.27109 1.2752 1.26959 1.2752 0.0039
USD/CHF 0.99665 0.9976 0.9931 0.99558 -0.0010
USD/CAD 1.31553 1.31672 1.30497 1.30621 -0.0092
EUR/JPY 126.127 126.584 125.555 126.461 0.3220
GBP/JPY 140.985 141.143 140.202 140.957 -0.0160
CHF/JPY 111.206 111.29 110.787 111.054 -0.1620
AUD/JPY 80.468 80.938 80.071 80.856 0.3710
EUR/GBP 0.89465 0.89759 0.8934 0.89726 0.0026
EUR/CHF 1.13385 1.13921 1.13277 1.13899 0.0051
GBP/CHF 1.26656 1.26992 1.26485 1.26954 0.0023

  

Daily Pivot Points
  Trading Range  
Contract S3 S2 S1 Pivot R1 R2 R3
EUR/USD 1.1311 1.1338 1.1390 1.1417 1.1468 1.1495 1.1547
USD/JPY 109.48 109.89 110.21 110.62 110.95 111.36 111.69
GBP/USD 1.2659 1.2677 1.2715 1.2733 1.2771 1.2789 1.2827
USD/CHF 0.9888 0.9909 0.9933 0.9954 0.9978 0.9999 1.0023
USD/CAD 1.2901 1.2976 1.3019 1.3093 1.3136 1.3211 1.3254
EUR/JPY 124.79 125.17 125.82 126.20 126.85 127.23 127.87
GBP/JPY 139.45 139.83 140.39 140.77 141.33 141.71 142.27
CHF/JPY 110.29 110.54 110.80 111.04 111.30 111.55 111.80
AUD/JPY 79.44 79.75 80.31 80.62 81.17 81.49 82.04
EUR/GBP 0.8904 0.8919 0.8946 0.8961 0.8988 0.9003 0.9030
EUR/CHF 1.1283 1.1306 1.1348 1.1370 1.1412 1.1434 1.1477
GBP/CHF 1.2612 1.2630 1.2663 1.2681 1.2714 1.2732 1.2764

 

Sources:  News, Charts & Quotes (Courtesy: Reuters, US Department Of Treasury)

 

Disclaimer

This information has been prepared for information only and does not constitute an offer or commitment. This information does not constitute investment advice as defined by the rules of the FCA.

The firm or its staff members may trade on their own account and may from time to time hold or act as market makers in investments mentioned in this document. Please note that the firm makes no warranty, expressed or implied, as to the accuracy or completeness of the information and opinions herein. All parties are advised to seek independent professional advice as to the suitability of any products and to their tax, accounting, legal or regulatory implications. City Credit Capital (UK) Ltd is authorized and regulated by the Financial Conduct Authority, reg 232015.