USD/JPY Daily Fundamental Analysis for August 18, 2011

The USD/JPY pair retreated early Wednesday reaching its pre-intervention levels, as market jitters remain which drove investors to increase demand for low yielding currencies.

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

The USD/JPY pair remained aggressively bearish as the pair is near the post-war lows, where the Japanese yen had the strongest performance against the majority of its major counterparts on concerns over the global economic outlook.

On Thursday at 23:50 GMT (Wednesday), Japan will release the merchandise trade balance for July, where it’s expected to show a surplus of 71.0 billion yen from the previous surplus of 70.7 billion yen.

The adjusted merchandise trade balance for July had a previous deficit of 191.2 billion yen and expected to show a deficit of 152.5 billion yen.

At 05:00 GMT, Japan will release coincident index for June, where it had a previous reading of 108.6, while the leading index for June had a previous reading of 103.2.

The U.S. economy is to release the consumer price index for July at 12:30 GMT, where it is expected to rise by 0.2% following 0.2% drop, and on the year expected at 3.3% from the prior reading of 3.6%.

At 12:30 GMT, U.S. economy will release the weekly initial claims numbers, where the number of people filing for first-time claims for the state unemployment insurance eased to 395 thousand last week.

The U.S. leading indicators for July will be released at 14:00 GMT and expected with 0.2% rise following 0.3%. The Philadelphia Fed for August is expected to come at 4 from the prior reading of 3.2.

At 14:00 GMT, the U.S. economy will release the existing home sales for July, where it’s expected to come at 4.94 million rising 3.5% from the previous 4.77 million.

NZD/USD Daily Fundamental Analysis for August 18, 2011

The New Zealand currency, nicknamed Kiwi, declined to the most level in two days against the dollar after the nation reported that the producer input prices declined at a slower pace, output costs rose.

The nation witnessed some improvement in the second three months after the natural disasters that hit the economy. Further, the European crisis along with the sluggish U.S. economy growth had affected the recovery outlook.

The New Zealand economy is on track, where higher consumer spending and employment add to evidence the nation’s economy grew modestly in the first quarter, buoyed by record-low interest rates and a surge in commodity prices. Continued growth in domestic demand this year may prompt central bank Governor Alan Bollard to raise interest rates as early as the fourth quarter.

On Thursday the U.S. economy will release the consumer price index for July at 12:30 GMT, where it is expected to rise by 0.2% following 0.2% drop, and on the year expected at 3.3% from the prior reading of 3.6%.

At 12:30 GMT, U.S. economy will release the weekly initial claims numbers, where the number of people filing for first-time claims for the state unemployment insurance eased to 395 thousand last week.

The U.S. leading indicators for July will be released at 14:00 GMT and expected with 0.2% rise following 0.3%. The Philadelphia Fed for August is expected to come at 4 from the prior reading of 3.2.

At 14:00 GMT, the U.S. economy will release the existing home sales for July, where it’s expected to come at 4.94 million rising 3.5% from the previous 4.77 million.

AUD/USD Daily Fundamental Analysis for August 18, 2011

The Asian stock markets continued their downside movements which had a negative impact on the Australian dollar (Aussie) that dropped against the U.S. dollar for a second day in a row.

Moreover, major Asian currencies move in a narrow range, while the Australian dollar dropped versus its U.S. counterpart as the global economic recovery is losing momentum pressing investors to abandon higher yielding investments.

Aussie curbed its losses after the nation reported its wage price index (which measures hourly pay rates excluding bonuses) rose in line with economists’ expectations in the second quarter and a leading economic index was little changed in June.

On Thursday, Australia will end the week with its average weekly wages (QoQ) due at 01:30 GMT and expected to hold at 1.0% in line with the previous.

The U.S. economy is to release the consumer price index for July at 12:30 GMT, where it is expected to rise by 0.2% following 0.2% drop, and on the year expected at 3.3% from the prior reading of 3.6%.

At 12:30 GMT, U.S. economy will release the weekly initial claims numbers, where the number of people filing for first-time claims for the state unemployment insurance eased to 395 thousand last week.

The U.S. leading indicators for July will be released at 14:00 GMT and expected with 0.2% rise following 0.3%. The Philadelphia Fed for August is expected to come at 4 from the prior reading of 3.2.

At 14:00 GMT, the U.S. economy will release the existing home sales for July, where it’s expected to come at 4.94 million rising 3.5% from the previous 4.77 million.

EUR/USD Technical Analysis August 17, 2011

The EUR/USD held up surprisingly well on Tuesday, even though French leader Sarkozy and German leader Merkel didn’t accomplish much with their meeting. One would have thought with the debt crisis taking center stage that the meeting would have been more important. However, the idea of a Euro bond has already been scoffed at by the Germans, so that did let some of the air out of the meeting.

The pair still looks like it wants to break to the upside as it fell on Tuesday, only to rise again to form a hammer. The breaking of the 1.45 level on a daily chart confirms that we are header much higher. Otherwise, a break of the low on Tuesday sends this pair back towards 1.40 or so.

USD/JPY Technical Analysis August 17, 2011

The USD/JPY pair continues to sit in a stagnant fashion as the psychological game between the trading world and the Bank of Japan continues. The threat of intervention by the BoJ continues to keep this pair from falling much farther than the 76 handle, but few are willing to buy the Dollar against the Yen either. Because of this, the pair looks “stuck” to us as the traders have simply left this market. Because of this, we are waiting for a large candle in order to pick a direction. Until then, there are going to be better pairs to trade.

GBP/USD Technical Analysis August 17, 2011

The GBP/USD pair continued to climb on Tuesday as traders were pleasantly surprised by a slightly higher than expected inflation report out of the UK this week. The pair still is stuck between the 1.65 and 1.60 levels, but pressure is increasing to the upside in general, and it might only be a matter of time before the level gives way. The real fight then would be fought between 1.65 and 1.70, which is a much more formidable area to deal with. We would advise letting the Wednesday candle print before making any decisions in this pair although it looks like 1.65 would more than likely hold, it has to be noted the latest fall only went as low as 1.61, and not the bottom of the range. This can often signal a break out coming. At the close on Wednesday, we should have more clarity.

USD/CHF Technical Analysis August 17, 2011

The USD/CHF pair had a bullish day on Tuesday as session saw a retest of the bullishness on Monday. The Swiss National Bank is set to make an announcement on Wednesday as to their intentions to devalue the Franc. This has the markets on edge, and traders are simply not willing to buy the Franc because of this. The truth is that this pair needed a pullback from the massive downtrend, and this move makes a lot of sense. Of course, the announcement on Wednesday will be crucial, so any positions before seeing that and more importantly the reaction – would be foolish as this is likely to rock the markets back and forth.

EUR/CHF Technical Analysis August 17, 2011

The EUR/CHF pair is without a doubt one of the most interesting pairs in the FX markets right now. Tuesday saw this pair fall slightly, but rise in the end, testing the 1.15 area again. The 1.15 area seems to be relatively resistive, and might be the key for further upside.

The Swiss National Bank is expected to announce measures to stem the rise of the Franc against the Euro (and other currencies) on Wednesday, and as such – we think this market will be very volatile and dangerous during the Wednesday session. If the announcement is made, and the pair cannot rally above 1.15 for any significant amount of time – this becomes a screaming sell. If it does rise above that level – the pair is best left alone in our opinion.

AUD/USD Technical Analysis August 17, 2011

The AUD/USD pair fell on Tuesday as the markets in general did, but then found a bid late in the day to form a bit of a hammer. Although it is at the top of the recent range, the candle means the same thing – potential bullishness. One of two things can happen here: Either the candle breaks to the upside, and we see that as a bullish move up to about 1.0750 or so, or we get a break to the downside, making that candle a “hanging man”, a very bearish signal indeed. The trend is up, so knowing that – you know which direction is more likely. However, waiting until one of the ends of the candle gets broken is the wise thing to do.

USD/CAD Technical Analysis August 17, 2011

The USD/CAD pair initially rose during the Tuesday session, but then fell to form a shooting star of sorts just above the 0.98 level. This crucial support level needs to give way for this candle to be a confirmed sell signal, but the trend is in that direction so one has to like the odds. However, we are waiting to see if the pair can close below that level on the 4 hour chart before committing to new shorts. Buying isn’t an option until we break well above parity at this point. Watching oil markets will be crucial as it will more than likely be the catalyst to push this pair. If oil rises, the CAD will strengthen, driving this pair lower.

NZD/USD Technical Analysis August 17, 2011

NZD/USD had a slightly confusing day on Tuesday as traders shunned risk for a large part of the session. However, the pair did manage a bounce in the latter hours to form a hammer. This is the second one in a row from the minor area at 0.83, and this could signal further strength ahead – at least until we see 0.85, which is the next major resistance area. We are buyers on a break of the Monday and Tuesday highs. We don’t sell this pair as the Kiwi has been far too bullish lately.

USD/CAD Daily Fundamental Analysis for August 17, 2011

The USD/CAD pair rose back on Tuesday, where rising risk aversion around global financial markets after growth figures from Germany and the Euro Zone disappointed investors, while data from the U.S. housing market showed activities eased in July, which spread concerns in markets and boosted demand for lower yielding assets, which put downside pressure on the CAD, and pushed the USD/CAD pair to the upside.

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.

Wednesday August 17:

At 12:30 GMT, the U.S. July Producer Price Index is due and expected to rebound with 0.1% rise on the month following 0.4% drop. Core annual PPI is expected at 2.3% following 2.4%.

Pessimism Dominates Markets again on Euro Zone Growth and U.S. Housing

Another wave of pessimism dominated markets on Tuesday after data from the U.S. housing market showed deteriorating activities in July, while growth in Germany and the Euro Zone disappointed investors, which spread fears over the outlook for global growth and pushed equity indexes lower, as traders targeted lower yielding and more safe assets.

The U.S. released the housing starts and building permits for the month of July, where both housing starts and building permits showed easing activities, as elevated unemployment, tightened credit conditions, and elevated foreclosures continued to weigh down on housing market activities.

Meanwhile, Germany reported growth that failed to meet estimates, while the Euro Zone also reported growth eased in the second quarter, which raised concerns over the outlook for global growth.

Stocks in the United States fell by opening on Tuesday, where the Dow Jones Industrial Average was down by nearly 0.70% to trade around 11,405, while the S&P 500 index was down by nearly 0.90% to trade around 1194. European stock indexes were lower as well before closing on Tuesday, where FTSE 100 was down by nearly 0.70% to trade at 5311 and the DAX was down by nearly 1.50% to trade around 5932.

The U.S. dollar rose slightly against a basket of major currencies on Tuesday, where the U.S. dollar index was trading at 74.00, compared with the opening level at 73.93. The Euro fell against the Dollar, where the EUR/USD pair rose to trade at $1.4391, compared with the opening level at $1.4436, and the British Pound rose against the Dollar for a fourth day, where the GBP/USD pair traded around $1.6389, compared with the opening level at $1.6377.

Gold prices gained on Tuesday amid rising concerns in markets, as gold rose to trade around $1774 an ounce, and crude oil prices dropped to trade around $86 a barrel.

EUR/CHF Daily Fundamental Analysis for August 17, 2011

The EUR/CHF was biased to the downside on Tuesday after the weak growth figures from the euro area which pressured the pair to the downside once again despite fears of intervention.

The pair moved to the downside after Germany and the euro area reported less than expected growth in the second quarter which slowed strongly after an explosive first quarter start.

With the opening bullish gap for the pair the downside tendency is also seen to cover the gap, and surely with the prevailing tension over the Franco-German meeting which investors will eye into Wednesday.

The optimism over the meeting between Merkel and Sarkozy was dismissed as Germany said that a common bond proposal was still not the topic to discuss and that the meeting will concentrate on means to support fiscal balance and enforce strict fiscal consolidation rules.

On Wednesday, we expect the pair to continue to fluctuate on the back of the late comments from the leaders meeting, though the gains will be limited for swissy still amid the fear of any sudden moves by the Swiss National Bank.

In other data, at 08:00 GMT the current account for June will be released after the recorded deficit of 5.2 billion in May.

At 09:00 GMT the euro zone CPI is due and expected to hold at 2.5% on the year with 0.6% drop on the month and the core CPI to rise an annual 1.7%.

EUR/USD Daily Fundamental Analysis for August 17, 2011

The EUR/USD continues to trade under downside pressures and extended the bearishness on Tuesday after the weaker than expected GDP from the euro area fueled fears further over the area’s stability.

After the French economy stagnated in the second quarter, the biggest economy, Germany, barely expanded by a sluggish 0.1% and the euro area expanded only 0.2% which fueled the fear over the outlook for the recovery.

The optimism also started to disappear ahead of comments from the Franco-German summit on the crisis, after Merkel aids dismissed comments that common bonds are of the topics to be discussed.

On Wednesday, the euro will still be affected by remaining pressure from the GDP and also from the late Tuesday comments from the meeting between Merkel and Sarkozy and whether they will give any details on how they intend to contain the contagion.

As for the data at 08:00 GMT the current account for June will be released after the recorded deficit of 5.2 billion in May.

At 09:00 GMT the euro zone CPI is due and expected to hold at 2.5% on the year with 0.6% drop on the month and the core CPI to rise an annual 1.7%.

At 12:30 GMT, the U.S. July Producer Price Index is due and expected to rebound with 0.1% rise on the month following 0.4% drop. Core annual PPI is expected at 2.3% following 2.4%.

GBP/USD Daily Fundamental Analysis for August 17, 2011

On Tuesday, U.K. CPI and RPI data did not have much effect on the pair which followed the general sentiment that was fueled with fears, thereby sparking demand on low-yielding currencies, as global economies are showing a sluggish growth pace.  Worries increased after the ease in euro area expansion to 0.2% in the second quarter from 0.8% recorded in the first quarter, below analysts’ expectations of 0.3%. The grim report offset the slight optimist engulfed markets on Monday after the Japanese economy recorded better-than-estimated contraction in the second quarter. Also, in theU.S., the housing data showed weakness, according to building permits and housing starts which showed decline in July, adding to worries theU.S.would lead global econmeis to a double dip recession.

On Wednesday, unemployment data from the British economy will be out at 08:30 GMT, where ILO unemployment for the three months ended June will linger at 7.7% while jobless claims will decline to 20.0 thousands in July from 24.5 thousands a month earlier. At the same time, the BoE minutes for August’s rate decision will be under scrutiny as investors aim to know how was the last voting for keeping both interest rate and APF unchanged.

The UK data is predicted to have effect on the pair as the slowdown in the British economy is expected to be followed by a rise in unemployment and jobless benefits which may ad to concerns, especially after the BoE had lowered growth and inflation outlook for the British economy last week. On the other hand, the minutes are expected to show the same split as the previous month.

Thereafter, U.S. MBA mortgage applications for August 12 will be available at 11:00 GMT, while the main focus will also be on inflation data with the release of PPI at 12:30 GMT, where the annual reading excluding food and energy will inch down to 2.3% from 2.4%, according to median forecasts, yet the news may not have a remarkable impact on the pair.     

 

USD/CHF Daily Fundamental Analysis for August 17, 2011

On Tuesday, the dollar fell against the franc, where concerns in markets that global economies are slowing down enhanced demand on the franc as a favorable refuge amid the progress seen by the Swiss economy. Worries increased after the ease in euro area expansion to 0.2% in the second quarter from 0.8% recorded in the first quarter, below analysts’ expectations of 0.3%. The grim report offset the slight optimist that engulfed markets on Monday after the Japanese economy recorded better-than-estimated contraction in the second quarter. In the U.S., the housing data showed weakness, according to building permits and housing starts reports which showed decline in July, adding to worries the U.S. would lead global econmeis to a double dip recession. On Wednesday, U.S. MBA mortgage applications for August 12 will be available at 11:00 GMT, while the main focus will also be on inflation data with the release of PPI at 12:30 GMT, where the annual reading excluding food and energy will inch down to 2.3% from 2.4%, according to median forecasts. However, the news may not have a remarkable impact on the pair; thus, with the strong intention from the SNB to halt the franc’s rally, the pair is predicted to move further to the upside.

Weak German GDP Increased Demand on Safe Haven

Although some optimism was seen within the financial markets this morning after Google agreed to buy Motorola Mobility for $12.5 billion in its largest acquisition while Warren Buffett said “I like buying on sale”, the release of the German and EU’s GDP managed to increase demand on safe haven once again.

Germany released a worse than expected GDP report today. Growth slowed in the second quarter to 0.1% from 0.5% expected and 1.5% previous, sparking concerns about a possible slowdown in the region. Growth also slowed in the EU to 0.2% from 0.3% expected, confirming those fears.

This data is adding pressures on the policymakers to act fast and solve the region’s debt problems. Thereby the leaders of Germany and France, Chancellor Angela Merkel and President Nicolas Sarkozy, will meet today in Paris to discuss potential solutions to Europe’s debt crisis.

No concrete solution are expected, thereby investors started looking for safe haven. Meanwhile the yen continues to trade within the strongest parts of its range around 76.77. The CHF strengthened today trading around 0.7805 despite a possible invention by the Swiss National Bank.

Gold continues to trade near its highs around $1777.00 per ounce, while oil fell slightly trading around $86.90. The dollar index is trading near today’s highest of 74.16 although the empire manufacturing index was very disappointing yesterday which puts the manufacturing sector in an alarming position.

Today the U.S. will release its building permits and housing starts numbers along with the industrial production for the month of July, yet eyes will be Europe today, since the global conditions are deteriorating and a possible recession started being discussed.

The euro fell today from a three-week high versus the dollar trading as of this writing around the 1.4395 level. The GBP however saw some limited losses, trading around the 1.6375 as of this writing, after a report showed than inflation rose more than expected during July to 4.4% from 4.2% previous, adding pressures on BoE to increase rates.

USD/JPY Daily Fundamental Analysis for August 17, 2011

The USD/JPY pair traded in a narrow range early Tuesday, as the Japanese yen and the dollar gained more momentum against their major counterparts, where investors abandoned higher yielding currencies after the uncertainty about the global recovery.

The Japanese economy contracted by 0.3% during the second quarter better than the expected reading, where domestic demand and the recovery efforts from the Japanese government and the BOJ helped the economy slow the contraction.

Investors increased demand for the Japanese currency as a safe haven, after risk aversion returned to control the market increasing pressure on the yen to soar to the danger zone against greenback.

The USD/JPY pair is now trading near the pre-intervention levels, which fueled fears of another intervention from the BOJ, especially with the ongoing drop in the global bourses which increased demand for safe haven currencies like the green back and the Japanese yen.

On Wednesday, the U.S. economy will release the PPI index for July at 12:30 GMT, where the previous reading was down by 0.4% and expected at 0.1%, while the annual reading is expected to come at 7.0% in line with the previous.

NZD/USD Daily Fundamental Analysis for August 17, 2011

The NZD/USD pair dropped for the second day after the US dollar regained momentum against most of its major counterparts; on the other hand the disappointing manufacturing figures from the U.S. encouraged investors to abandon higher yielding currencies.

The risk aversion is paramount in the FX market, as investors increase demand for the greenback over other higher yielding currencies. Financial and economic problems are still causing fears between market participants, which translated to a negative market sentiment for currencies.

The New Zealand economy witnessed some improvement in the second quarter after the natural disaster that hit the economy. Further, the European crisis with the sluggish U.S. economy is still affecting the global economy, where New Zealand economy is one of the countries that are affected by this crisis.

On Wednesday, the U.S. economy will release the PPI index for July at 12:30 GMT, where the previous reading was down by 0.4% and expected at 0.1%, while the annual reading is expected to come at 7.0% in line with the previous.