USD/CAD Weekly Fundamental Analysis for August 22-26, 2011

The USD/CAD pair was little changed last week, as investors were concerned over the outlook for global growth amid signs economic growth is slowing down in the United States, while mounting fears from the European debt crisis boosted demand for lower yielding assets, which provided the USD/CAD pair with the needed momentum to maintain its previous gains.

Rising pessimism in global financial markets should put the CAD under more pressure over the coming period, where investors fear the U.S. economy is heading into a double dip recession, and since the United States is Canada’s largest trading partner, we should expect the Canadian economy to suffer deeply, and that should provide the USD/CAD pair with bullish momentum, unless of course the Fed announce a third round of quantitative easing, since it will put the USD under huge pressure. Moreover, a looming liquidity crisis in Europe could also weigh down on confidence levels, and that should also provide the USD/CAD pair with more upside momentum.

Highlights for this week that will probably affect the USD/CAD pair’s direction are:

Monday August 22:

No major data is queued for release from both the United States and Canada on Monday, as the start of the week will be focused on the prevailing downbeat sentiment and fear of the worsening outlook.

Tuesday August 23:

Canada will release the retail sales index for the month of June at 12:30 GMT, where retail sales are expected to rise by 0.5%, compared with 0.1% in May, while retail sales less autos are expected to rise by 0.2% in June, compared with 0.5% in May.

The United States will start the data at 14:00 GMT with the New Home Sales for July which are expected with 1.0% rebound to 315 thousand from 312 thousand.

Wednesday August 24:

The Durable Goods Orders are due from the United States at 12:30 GMT for July and expected with 2.0% rebound following 2.1% slump while excluding transportation expected with 0.6% drop following 0.1% rise.

Thursday August 25:

The weekly jobless claims are due from the U.S. as usual at 12:30 GMT after last week they unexpectedly rose to 408 thousand.

Friday August 26:

The week will end with the infamous GDP from the U.S. at 12:30 GMT. The preliminary reading for the second quarter is expected downbeat on the market with the projected downside revision to 1.1% from 1.3%. Personal consumption expected with upside revision to 0.2% from 0.1% while the Core PCE expected steady at 2.1%.

The week will end with the University of Michigan Confidence final reading for August at 13:55 GMT, which is expected with an upside revision to 56.0 from the advanced estimate of 54.9.

EUR/USD Weekly Fundamental Analysis for August 22-26, 2011

We can still see the heavy pressure on the market and the evident risk aversion and anxiety for a new protracted and harsh recession, which is still keeping the EUR/USD under heavy pressure.

Last week the EUR/USD fluctuated heavily with the mixed sentiment and the jitters are evident with the slowing growth in the United States and deepening debt crisis in the euro area, all pressuring risk aversion and affecting the euro’s stability.

The euro is expected to continue fragile this week after Merkel and Sarkozy failed to stem the confidence crisis and the instability on the back of prevailing fear of contagion and deepening debt crisis. Last week the sluggish GDP from the euro area will add more pressure with the expected weak sectors performance and contraction expected in the manufacturing sector, further pressuring the euro.

Eyes will also be on the U.S. GDP which is expected with a downside revision that will keep the fear predominant and risk aversion the strong theme in the market.

The pessimism is dominant and the negativity is gaining momentum and we do not expect a drastic change from the data which will keep the EUR/USD biased south on haven demand and risk aversion and the only support to the sentiment is an intervention from policy makers to stem the crisis and coordinated action to ease the jitters and calm investors which so far is still not expected and accordingly we can expected the same trend and fear to prevail this week as well.

Other news from the euro area and the U.S. economy to affect the pair this week:

Monday August 22:

No major data is queued for release from both nations on Monday as the start of the week will be focused on the prevailing downbeat sentiment and fear of the worsening outlook.

Tuesday August 23:

Germany will start at 07:30 with the flash Manufacturing PMI for August which is expected to slow to 51.0 from 52.0 while the PMI Services is also expected weaker at 52.0 from 52.9.

The euro area starts the fundamentals this week with the flash estimate for the August PMI at 08:00 GMT. The Manufacturing PMI is expected to contract in August at 49.5 from 50.4 while the services PMI is expected to slow to 51.0 from 51.6 and the Composite PMI is expected flat at 50 from 51.1.

Germany will return with the ZEW Survey for August at 09:00 GMT with the Current Situation Index expected to slow to 85.0 from 90.6 while the Economic Sentiment to slow to -25.0 from -15.1.

The euro Area ZEW Economic Sentiment Index is due also at 09:00 GMT and likely declined in August following -7.0.

The United States will start the data at 14:00 GMT with the New Home Sales for July which are expected with 1.0% rebound to 315 thousand from 312 thousand.

Wednesday August 24:

Germany will start at 08:00 GMT with the IFO Survey for August. The IFO Business Climate index is expected to slow to 111.2 from 112.9 while the Current Assessment is expect at 120.1 from 121.4 and the IFO Expectations to drop to 103.2 from 105.0.

The euro area will report the Industrial New Orders for June at 09:00 GMT which is expected flat down from the previous month’s rally of 3.6%.

The Durable Goods Orders are due from the United States at 12:30 GMT for July and expected with 2.0% rebound following 2.1% slump while excluding transportation expected with 0.6% drop following 0.1% rise.

Thursday August 25:

Germany will start at 06:00 GMT with the Gfk Consumer confidence for September which is expected to slow to 5.2 from 5.4.

The weekly jobless claims are due from the U.S. as usual at 12:30 GMT after last week they unexpectedly rose to 408 thousand.

Friday August 26:

The euro area’s week will end with the M3 Money Supply for July at 08:00 GMT which is expected to rise slightly on the year to 2.2% from 2.1%.

The week will end with the infamous GDP from the U.S. at 12:30 GMT. The preliminary reading for the second quarter is expected downbeat on the market with the projected downside revision to 1.1% from 1.3%. Personal consumption expected with upside revision to 0.2% from 0.1% while the Core PCE expected steady at 2.1%.

The week will end with the University of Michigan Confidence final reading for August at 13:55 which is expected with an upside revision to 56.0 from the advanced estimate of 54.9.

EUR/CHF Weekly Fundamental Analysis for August 22-26, 2011

The EUR/CHF ended another hectic week and about to start a new one with the prevailing negative sentiment and evident risk aversion which keeps the franc poised for more gains.

Fears are evident over the worsening outlook for the global economic recovery and the deepening debt crisis which intensifies the flow of haven demand on the franc amid the high risk and uncertainty. The heavy selloff across the board last week fueled swissy gains despite the continued efforts from the SNB to stem the rally.

It is clear that the pessimism is dominant and no relief is in sight with the existing fear of a double-dip recession driving the market back to its financial crisis times, and that is only more volatile for swissy on fears of a sudden SNB move again.

Last week the SNB assured again their readiness to act which fell short of market expectations as an expansion of sight deposits to 200 billion francs and talk of intervention in forwards as well as expanding the money supply did not weaken the franc much especially as investors were still expecting something drastic as far as a currency fix or peg.

This week we foresee the same volatility and choppy trading to be evident with the downbeat sentiment over the outlook for growth and also anxiety over any sudden SNB moves and we expect the EUR/CHF to maintain the bearish trend and will only turn higher if the SNB acted strongly to stem the rally and indeed intervened to alter the gains as the sentiment is surely still bearish and risk aversion will keep the franc strong.

Other news from the euro area and the Swiss economy to affect the pair this week:

Monday August 22:

Switzerland will start the week at 07:00 GMT with the M3 Money Supply for the year ending in July after the reported previous 5.2%.

Tuesday August 23:

Swiss trade figures for July are due at 06:00 GMT as investors will assess the impact of the appreciating franc on trade after Switzerland reported a trade surplus of 1.74 billion in June with 5.2% rise in exports and 2.5% rise in imports.

The euro area starts the fundamentals this week with the flash estimate for the August PMI at 08:00 GMT. The Manufacturing PMI is expected to contract in August at 49.5 from 50.4 while the services PMI is expected to slow to 51.0 from 51.6 and the Composite PMI is expected flat at 50 from 51.1.

The euro Area ZEW Economic Sentiment Index is due also at 09:00 GMT and likely declined in August following -7.0.

Wednesday August 24:

The euro area will report the Industrial New Orders for June at 09:00 GMT which is expected flat down from the previous month’s rally of 3.6%.

Thursday August 25:

Both nations have no data queued for release which will leave the pair subject to the market sentiment and the focus on critical GDP figures from the United States on Friday which will affect the sentiment.

Friday August 26:

The euro area’s week will end with the M3 Money Supply for July at 08:00 GMT which is expected to rise slightly on the year to 2.2% from 2.1%.

Switzerland will end the week with the KOF Swiss Leading Indicators for August at 09:30 GMT which is expected to retreat to 1.85 from 2.04.

USD/JPY Daily Fundamental Analysis for August 22, 2011

The USD/JPY pair continued its bearish move reaching its post-war levels, where investors increased demand for lower-yielding currencies due to the uncertainty regarding the global recovery.

The slowing U.S. economy and the disappointing Japanese data increased concerns over the global recovery, which in turn drove investors to abandon the higher-yielding currencies and focus on the safe haven investments.

On the other hand, the Japanese currency advanced against other majors despite comments from the Japanese Finance Minister that the government is monitoring the yen’s movements, and another intervention in the FX market could be witnessed.

The Japanese economy will release the supermarket store sales for July at 05:00 GMT, where the previous reading showed a rise of 0.1%. The convenience store sales for July will be released at 07:00 GMT, where it had a prior reading of 9.0%.

The U.S. economy will issue the Chicago Fed Activity Index for July at 12:30 GMT, where it’s expected to drop by 0.48 from the previous fall of 0.46.

USD/CHF Daily Fundamental Analysis for August 22, 2011

As of 07:00 GMT, the Swiss economy will release money supply M3 for the year ending April, yet it is expected to have slight effect on the pair’s movements, where theUSwill release some mortgage data.

If the negative general negative sentiment seen last week continued, it is more likely that the pair will move to the downside as the franc is predicted to strengthen. However, further monetary intervention or announcements by Swiss policy makers may enable the franc to continue its drop as targeted by the SNB which pledged to take all necessary measures to halt the franc’s runaway.

The main high this week is the Swiss trade data which will show the status of exports in the month of July and how much it was affected by the franc’s appreciation.  In the U.S., the main focus will probably on GDP for the second quarter as the annualized GDP for the second quarter is predicted to be downwardly revised which may increase worries that the slowdown would lead the U.S. to another recession.

USD/CAD Daily Fundamental Analysis for August 22, 2011

The USD/CAD pair dropped on Friday, as a slight wave of optimism after Spain announced more budget cuts to help reduce the swelling deficit overshadowed fears over the outlook for global growth, which provided the CAD with momentum to rise against the USD, pushing the USD/CAD pair to the downside.

Moreover, the consumer price index was released from Canada for July, where CPI rose in line with expectations, signaling core inflation remains under control in Canada.

The uncertainty that continues to dominate global financial markets should continue to boost demand for lower yielding and more safe assets, and accordingly, we preserve our bullish outlook for the USD/CAD pair, and any downside movements are not expected to prevail for long, since risk aversion will provide the USD/CAD pair with the needed bullish momentum.

Monday August 22:

No major data is queued for release from both the United States and Canada on Monday, as the start of the week will be focused on the prevailing downbeat sentiment and fear of the worsening outlook.

NZD/USD Daily Fundamental Analysis for August 22, 2011

New Zealand’s currency (Kiwi) has declined to the most in three weeks, and extended its loss versus greenback to the longest losing streak since May 2010, after commodity prices declined.

On the other hand, Asian stocks fell, with the regional index revisiting levels from last week’s global stocks rout, amid signs the world economy is slowing and Europe’s debt crisis will damage the banking system.

The New Zealand currency slumped to the lowest level in two weeks, affected by the bad outlook for the global economic recovery, while started its sharp downside movement after the Standard & Poor’s 500 index posted its biggest loss since February 2009.

On Monday, the NZ economy won’t release any fundamental data, but theU.S.economy will issue the Chicago Fed Nat Activity Index for July at 12:30 GMT, where it’s expected to drop by 0.48 from the previous fall of 0.46.

GBP/USD Daily Fundamental Analysis for August 22, 2011

Both economies lack economic fundamentals which propose that there would be calm trading on the pair which is predicted to follow the general trend in market as it will not able to get direction from data.

If the negative general negative sentiment seen last week continued, it is more likely that the pair will move to the downside as the dollar is predicted to benefit from being a safe have currency.

The main focus this week will be on growth data from both economies as investors will be eager to see whether there will be revisions to the second quarter readings to assess the extent of the slowdown. In theU.S., the annualized GDP for the second quarter is predicted to be downwardly revised which may increase worries that the slowdown would lead theU.S.to another recession, whileU.K.growth is estimated to remain unrevised.

EUR/USD Daily Fundamental Analysis for August 22, 2011

The EUR/USD continues to fluctuate heavily with the prevailing tension and pressure in the market from the worsening growth outlook and deepening debt crisis in the euro area.

On Monday the pair is expected to start another week with the same bearish and weak sentiment with the lingering pressure and fear over the outlook, especially with the expected flow of weak data and contraction to be reported in the euro area manufacturing.

The lack of major data on Monday will leave the focus on the faltering sentiment and any chances for action from central banks and finance chiefs after Japan states the necessary for coordinated G7 steps to contain the crisis.

Eyes remain on the weekend as well and whether any surprise move from policy makers alter the outlook for the start of the week which remains pessimistic and focused on the rising downside pressure over the recovery.

EUR/CHF Daily Fundamental Analysis for August 22, 2011

Eyes are still on the Swiss National Bank as the franc remains favored in this time of uncertainty which is keeping the EUR/CHF biased to the upside with the risk aversion and fear of recession.

We ended last week on Friday with the same pessimistic sentiment that is mostly to continue with us this week with the downbeat growth signals expected from major economies, confirming further the fears of another recession.

This downbeat sentiment keeps the franc favored for gains on the back of have demand and likely to be the trend with the start of the week unless policy makers and the SNB surprise us again with an unexpected weekend move, which so far is unlikely, yet we will still keep an eye on the SNB for any unexpected moves.

The volatility will prevail on Monday with the lack of major news, where the data will start only from Switzerland at 07:00 GMT with the M3 Money Supply for the year ending in July after the reported previous 5.2%.

AUD/USD Daily Fundamental Analysis for August 22, 2011

Asian stock markets added to heavy losses acrossAsiaon Friday, as risk appetite evaporated on a fresh wave of concerns about global growth, with exporters among the worst performers.

The Australian currency, nicknamed Aussie, fell for a second day versus its U.S. counterpart as Asian stocks extended the global decline in equities, curbing appetite for higher-yielding assets.

Moreover, the investors moved to the low yielding currencies after the Citigroup Inc. cut its forecasts forU.S.growth amid concern about a global economic slowdown, damping demand for higher-yielding investments.

On the other hand, Aussie declined versus all majors after the RBA minutes noted that the Bank won’t increase the interest rates until the end of the year to continue supporting economic recovery amid the European debt crisis that it will pressure growth.

The U.S. economy will issue the Chicago Fed Activity Index for July at 12:30 GMT, where it’s expected to drop by 0.48 from the previous fall of 0.46.

Spain’s Budget Cuts Ease Some of the Fears in Markets, but Jitters Continue to Dominate

Jitters remained spread across global financial markets, where traders were worried over the outlook for global growth amid signs the U.S. economy is slowing down, while a looming liquidity crisis in Europe kept investors on their toes, as the European debt crisis continues to weigh down on confidence levels in financial markets.

Traders were feeling pessimistic on Friday after data released from the United States on Thursday signaled activities in the manufacturing sector contracted in August, while data from the labor and housing markets signaled deteriorating activities as well, which put higher yielding assets under huge selling pressure, while boosting demand for safety assets including gold, which rose to a new record high on Friday above $1870 an ounce. Nonetheless, fears eased in markets after Spain announced it approved more spending cuts in order to help solve the country’s swelling deficit, which provided investors with some optimism.

Stocks in the United States dropped by opening on Friday, where the Dow Jones Industrial Average was down by nearly 0.80% to trade around 10,905, while the S&P 500 index was down by nearly 0.50% to trade around 1135. European stock indexes were also lower before closing on Friday, where FTSE 100 was down by nearly 1.40% to trade at 5020 and the DAX was down by nearly 2.80% to trade around 5445.

The U.S. dollar fell against a basket of major currencies on Friday, where the U.S. dollar index was trading at 73.82, compared with the opening level at 74.27. The Euro rose back against the Dollar, where the EUR/USD pair gained to trade at $1.4418, compared with the opening level at $1.4297, and the British Pound rose against the Dollar for the sixth time in seven days, where the GBP/USD pair traded around $1.6581, compared with the opening level at $1.6477.

Gold prices extended the gains earlier on Friday to set a new record high above $1870 an ounce, but eased slightly to trade around $1855 an ounce, and crude oil prices rose to trade around $82 a barrel.

USD/CAD Daily Fundamental Analysis for August 19, 2011

The USD/CAD pair rose back on Thursday, where rising risk aversion around global financial markets supported demand for lower yielding assets, as equity index and commodities including crude oil prices fell sharply on Thursday, which put negative pressure on the CAD, and sent the USD/CAD pair racing to the upside, as investors shunned risky assets.

The uncertainty that continues to dominate global financial markets should continue to boost demand for lower yielding and more safe assets, and accordingly, we preserve our bullish outlook for the USD/CAD pair, and any downside movements are not expected to prevail for long, since risk aversion will provide the USD/CAD pair with the needed bullish momentum.

Friday August 19:

At 11:00 GMT, Canada will release the consumer price index for July, where CPI is expected to rise by 0.2% on monthly basis and 2.8% on yearly basis, compared with June’s -0.7% and 3.1% on monthly and yearly basis respectively, while core CPI is expected to rise by 0.2% in July, compared with -0.6% back in June, while compared with a year earlier, Core CPI is expected to rise by 1.6% up from 1.3% reported in the prior estimate.

Contraction Fears Preserve Demand on Safe Haven

Fears from Europe’s debt crisis, the challenging conditions in the U.S. and the slowing global economy, is preserving demand on safe haven and fuels risk aversion as sentiment continues to be fragile.

Asian and European stock markets sank today although there will be no significant data today from Europe or the U.S. Crude oil fell below $80.00 and now is trading near $80.70 on fears a possible global contraction will lower demand for crude.

Gold climbed to a new record high at $1868.52 per ounce and as of this writing is trading around $1862.00, highlighting that investors are pushing their money towards safe haven vehicles instead of seeking profits.

The Japanese yen and the Swiss Franck continue to attract buyers as markets are straggling with fears that a new recession in the U.S. is around the corner. The JPY is trading near 76.40 while the CHF is trading around 0.7905.

Renewed worries over the health of Europe’s banks due to their exposure to the region’s debt crisis and the fears from a possible U.S. recession due to the downbeat economic data, will keep broad markets volatile and cautious.

The euro is losing ground against the dollar today and as of this writing is trading near 1.4315. The GBP is almost unchanged trading around 1.6515 after U.K. released a better than expected public finances and borrowing report.

The dollar index is trading near 74.25, while the Australian dollar is trading around 1.0370 on risk aversion. The “confidence game” will continue to be played while investors are no longer believing in what officials are trying to display.

USD/JPY Technical Analysis August 19, 2011

The USD/JPY continues its slow march south as the trading world tentatively tests the patience of the Bank of Japan. The central bank intervened just two weeks ago, and at levels just above where we presently sit. Because of this, it is almost a given that they will get involved again, and as such we don’t sell this pair. We know the chart looks poor, but the truth is that you do not want to be on the other side of a central bank intervention. It can go against you 300 pips in a blink of the eye.

We are waiting for a buy signal as it goes with the CB’s wishes. The biggest problem – we haven’t seen one, and don’t expect to anytime soon.

USD/CHF Technical Analysis August 19, 2011

The USD/CHF pair remains somewhat stagnant as the trading community currently fears whatever means the Swiss National Bank are willing to take in order to keep the value of the Franc down. The pair has risen quite a bit recently, and as such could be taking a bit of a rest before the next big move, but the 0.8000 level seems to be a massive barrier. Because of this, we see this mark as vital and will be watching it for further hints of direction. The trend is certainly down, and we have to keep that in mind.

The next couple of weeks could be very important for the future of this pair, but we feel that the markets will be very quiet for a while, until that one big move that will be very obvious. With the SNB involved, we aren’t as sure as we once were about the direction, and can only wait for that obvious and massive candle that will certainly appear sooner or later.

USD/CAD Technical Analysis August 19, 2011

The USD/CAD pair rose on Thursday as the oil markets sold off in a violent manner. The weak Philly Fed numbers out of the US only stoked the fires that were burning after a massive sell off in European equity markets. With oil falling, there is much less demand for the Canadian dollar.

The pair is still in a downtrend technically, and is far from changing that. However, the oil markets seem to be the most important indicator that you can use in order to determine the likely move in this pair. If we can break below the 0.98 on a daily level – this pair continues the fall. If we break above the 1.0000 level – we could get a massive pop in this pair. However, the most important numbers – $80 as support in the CL contract. (Light Sweet Crude) If that gives, this pair will skyrocket. If CL can break $90, this pair falls hard.

NZD/USD Technical Analysis August 19, 2011

The NZD/USD pair fell rapidly during the Thursday session as traders shunned anything risk-related in the markets. The slowdown that seems to be indicated by the Philly Fed numbers out of the US doesn’t bode well for commodities as it showed manufacturing slowing down. Less manufacturing, less commodities used – it’s that simple. Being a commodity currency, the Kiwi dollar suffered as a result.

Technically, the pair looks like it is entering a minor support area in the 0.82 range, and could bounce from this area. However, the fall was significant, and these moves almost never happen in a vacuum. The 0.8000 level will be vital to the future direction of this pair. We are willing to let this pair do whatever it wants over the next couple of sessions as the readiness to fall certainly has us doubting the bullishness of the buyers. Look for a bounce from 0.80, or at least a calming of the pair in order to buy. If we close on the daily chart below 0.80 – this could change many things about our analysis and none of them to the bullish side of the argument.

GBP/USD Technical Analysis August 19, 2011

GBP/USD fell as the world got spooked by fears coming out of Europe involving the debt crisis, and the Philly Fed numbers came in very poor. The reality is that the world could be slipping into recession, and if that is the case – the USD normally gains as a safe haven play. The GBP has been strong recently, and the bounce later in the day shows that it might remain so.

The technical signal is simple: If we break the highs of Thursday, (and the highs of Wednesday for good measure) we should see a run to 1.68 before it is all over. If we break below the bottom of the hammer from Thursday, it would be a confirmed hanging man formation – a very bearish signal indeed. If we break below that, it looks like 1.61 could be our initial target.

EUR/USD Technical Analysis August 19, 2011

Thursday saw a selloff in the EUR/USD again. The 1.45 area seems to be an area that sellers are willing to step in and get involved, and this past time has been no different. The biggest problem with trading this pair at the moment is that it has formed a bullish flag, a downtrend channel, and a consolidation area all at the same time. This chart is a mess.

However, if you think about it – you should expect this. The pair involves two currencies that presently have a ton of bad economic factors behind them. The Philly Fed number came out at a negative 30.7 on Thursday, when it was expected to be 4! The slowdown in manufacturing is somewhat staggering, and could lead us into recession. The Euro zone’s problems, well…..they are too many to list at this point.

We see this as a scalper’s market until we can close on a daily candle above 1.45, or below the 1.40 area. Until then, we are not willing to put on any positions of significant size.