FOMC Teases Start of Taper “soon”

The actions, which were included in the Fed’s latest policy statement and separate economic projections, represent a hawkish tilt by a central bank that sees inflation running this year at 4.2%, more than double its target rate, and is positioning itself to act against it.

The current target interest rate was held steady in a range of 0% to 0.25%.

In a press conference after the statement Fed Chair Jerome Powell elaborated that if the economy continues to improve the FOMC could easily move ahead with tapering at the next meeting in November. The bar for lifting rates from zero is much higher than for tapering, he said.

STOCKS: The S&P 500 briefly extended a rally and was last unchanged from before the statement up 0.95%

BONDS: The 10-year U.S. Treasury note yield seesawed and was last up at 1.3226% and the 2-year yield firmed to 0.2342%

FOREX: The dollar index turned 0.2% firmer

COMMENTS

LAWRENCE GILLUM, FIXED INCOME STRATEGIST, LPL FINANCIAL, FORT MILL, SOUTH CAROLINA

“There are some notable takeaways. The divergence of views within the committee is interesting. We’re seeing a 50-50 split in terms of rate hikes in 2022. There’s just a big divergence of opinions on rate hikes and even further into 2023, a big range of potential Fed Fund target rates.

“The Fed did talk about potentially moderating its asset purchases soon, that’s setting up the committee to announce tapering in November, with a decision to actually taper coming in December. The Fed has made progress in that taper timeline and we think that will likely take place this year.”

“The other takeaways were the adjustments to the summary of economic projections. Inflation expectations have move higher for a touch longer than they originally thought, and then those growth expectations have come down a touch as well.”

JOE MANIMBO, SENIOR MARKET ANALYST, WESTERN UNION BUSINESS SOLUTIONS, WASHINGTON

“Very mixed signals from the Fed, resulting in the dollar’s choppy performance. Once the dust settles it seems that there are enough hawkish signals to keep the dollar biased higher, as the market pencils in a sooner-than-expected rate hike. Inflation also continues to trend higher. And although the Fed marked down its forecasts for growth and unemployment, it still has robust expectations for the economy.”

KARL SCHAMOTTA, CHIEF MARKET STRATEGIST, CAMBRIDGE GLOBAL PAYMENTS, TORONTO

“Markets initially read the statement as hawkish, but that reaction is fading out as traders read more deeply into the Statement of Economic Projections. Fed officials acknowledged making ‘substantial further progress’ toward the central bank’s inflation goal, and demonstrated confidence in the labor market meeting that test by the end of the year.

“The FOMC warned markets of an imminent tapering decision, saying that a ‘moderation in the pace of asset purchases may soon be warranted’ if  economic conditions continue to evolve as expected.

“A record number of participants are worried about upside risks on the inflation front, suggesting that the central bank could move aggressively if price growth remains elevated into the early part of next year.”

“Officials are now deadlocked on raising rates in 2022, but the median forecast is for a 1% Fed funds rate in 2023, and only 1.8% by the end of 2024. This is not rapid tightening by any means – it’s slightly slower than the 25-basis-point-per-quarter pace seen in previous cycles.

“This could also mean that estimates of the ‘terminal rate’ at the end of the cycle have been lowered. This is dovish, and will be welcomed in financial markets. The dollar could tumble from here, particularly if Powell follows prior patterns and tramples on the dot plot during the presser.”

SAM STOVALL, CHIEF INVESTMENT STRATEGIST, CFRA Research, NEW YORK

“It’s probably a little bit more hawkish than many would have anticipated basically acknowledging that should the economy continue to grow as we have seen it would warrant a tapering to occur. You could say it’s a tentative tapering announcement even though they did lower their 2021 GDP forecast.”

“The reason the Fed is tapering is because the economy and corporate earnings are strong enough to withstand it. So investors are basically saying let’s buy equities because the economy is strong and the Fed won’t be raising rates until a year plus from now.”

“The Fed is not going to get behind the curve and won’t have to end up surprising us by raising rates much more quickly than currently anticipated.”

JOHN CANAVAN, LEAD ANALYST, OXFORD ECONOMICS, NEW YORK

“Basically what we’re seeing here is a (U.S. Treasury yield) curve flattening shift in response to the summary of economic projections pulling forward Fed rate hikes. The Fed is now projecting a rate hike in 2022 as their median forecast, which is up from steady in the July summary of economic projections. As a result, what we’re seeing is a little bit of pressure on the front end (of the curve), while the long end views the slightly more hawkish Fed as a positive sign for keeping inflation in check along with some potential risk of the Fed moving too quickly and acting to slow the economy in the coming years.”

“We have seen a bit of an acceleration in the curve flattening based on the view that we’ve seen peak inflation and some of the risks related to the slowing economy in the third quarter.”

STEVEN VIOLIN, PORTFOLIO MANAGER, F.L.PUTNAM INVESTMENT MANAGEMENT COMPANY, WELLESLEY, MASSACHUSETTS

“It is an interesting point in time here, the tapering of quantitative easing seems very likely now in November but this was something of a given and remains couched in a lot of qualifying criteria in the event that various risks emerge, whether it is the debt ceiling debate, COVID outlook, the China property market intervening. The increase in the Fed’s projections in future interest rates though seems to be more what has caught the market by surprise at the margin, it is still consistent with our view that the Fed is likely to continue allowing inflation to run hot and remain anchored in the same measured pace as prior cycles. It really only increases the inflation risk that we have been taking seriously as we see some of the supply chain and labor shortages clearly not resolving with the end of unemployment benefits. Longer-term there is a lot of powerful disinflationary forces but for the moment they are clearly being offset and the risk is that becomes entrenched in consumer expectations.”

“For the moment, the markets seem to be taking this in stride with a relatively positive reaction from the stock market and from longer-term bonds, as far as the inflation outlook goes, I’m not sure this is a positive development.”

“It is also the measured pace, some increase in the dots was expected by the market and priced in to some extent but there wasn’t any acceleration, in fact there is a deceleration, which indicates perhaps some members of the committee have revised lower their terminal rate, it is hard to know, but the current dots as they are showing fewer increases in the out years and this is the first look we have gotten in the 2024 projections. So that is a notable development that perhaps is what is driving the positive response in longer-term interest rates and the shifts in currency markets.”

TOM GARRETSON, SENIOR PORTFOLIO STRATEGIST, RBC WEALTH MANAGEMENT, MINNEAPOLIS

“Across the board it’s exactly what we were expecting, the Fed took another step towards a formal taper announcement, and that’s probably going to come at the next meeting or two.

“The key behind the potential rate hike was the upgrade to their inflation outlook. There are signs inflationary pressures are going to be transitory, but they are more persistent than expected. That’s the key driver as to why the balance has shifted to a potential rate hike in 2022 as opposed to 2023.

“We’re watching yield curves flatten. The Treasury market’s interpreting it as a hawkish surprise.

“It was very inline with expectations. Powell will use the press conference to reiterate to the idea that tapering is coming in the several months. It’s what I expected, not too hawkish and not too dovish.”

JOSEPH LAVORGNA, AMERICAS CHIEF ECONOMIST, NATIXIS, NEW YORK

“Unless we know who is who, which we don’t, I’m not sure the dot-plot accurately reflects the Fed’s thinking. I don’t think the Fed’s tightening is going to be anywhere near as hawkish as they anticipate. It’s going to be hard for them to execute on this plan as the economy slows next year.”

For a look at all of today’s economic events, check out our economic calendar.

(Compiled by the U.S. Finance & Markets Breaking News team)

Dollar Choppy After Fed Statement, Evergrande Exhale Lifts Risk-Sensitive Currencies

The Federal Reserve on Wednesday cleared the way to reduce its monthly bond purchases “soon” and signaled interest rate increases may follow more quickly than expected, with half of the 18 U.S. central bank policymakers projecting borrowing costs will need to rise in 2022.

“The tapering of quantitative easing seems very likely now in November but this was something of a given and remains couched in a lot of qualifying criteria in the event that various risks emerge, whether it is the debt ceiling debate, COVID outlook, the China property market intervening,” said Steven Violin, portfolio manager at F.L.Putnam Investment Management Company in Wellesley, Massachusetts.

The dollar index rose 0.094%, alternating between gains and declines after the announcement, with the euro down 0.1% to $1.1711.

Property giant and Asia’s biggest junk bond issuer Evergrande said it “resolved” one payment due on Thursday via a private negotiation, easing concerns of default and possible contagion risk, while the People’s Bank of China injected 90 billion yuan into the banking system to support markets.

“Being able to make tomorrow’s bond coupon payment, that definitely lifted risk sentiment overnight and you saw a typical follow-through reaction in risk currencies, so Canadian dollar high, Aussie dollar higher, Kiwi dollar higher – that was kind of an understandable reaction,” said Erik Bregar, an independent FX analyst in Toronto.

Still, uncertainty remains whether the developer will be able to pay the coupon on its offshore dollar bonds, due on Thursday.

The Australian dollar rose 0.33% versus the greenback to $0.726 after rising as much as 0.49% to $0.7268 while the Canadian dollar rose 0.58% versus the greenback to 1.27 per dollar.

The offshore Chinese yuan strengthened versus the greenback to 6.4628 per dollar.

The safe-haven Japanese yen weakened 0.50% versus the greenback to 109.78 per dollar in the wake of the Bank of Japan’s decision to keep policy on hold.

Sterling was last trading at $1.3637, down 0.16% on the day ahead of a policy announcement by the Bank of England on Thursday, with expectations for a rate hike being pushed down the road by investors.

In cryptocurrencies, Bitcoin last rose 6.93% to $43,409.48 following three straight days of declines.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Chuck Mikolajczak; Editing by Will Dunham and Andrea Ricci)

USD/JPY Price Forecast – US Dollar Recovers From Extreme Lows of Range

The US dollar has rallied a bit during the course of the trading session on Wednesday as the ¥109 level continues to offer significant support. The support level has been very reliable multiple times, and therefore you should also look at this as a potential return towards the ¥110 level. The ¥110 level has been a bit of a major magnet for price, and that of course is something that you need to keep in the back of your mind. All things being equal, this is a market that I think does in fact continue to show the same back-and-forth attitude that we have seen for some time.

USD/JPY Video 23.09.21

Looking at this chart, if we were to break down below the 200 day EMA underneath, that could open up massive selling pressure to the downside, perhaps reaching towards the ¥107.50 level. On the other hand, if we were to turn around a break above the ¥110.75 level, then the market goes looking towards the ¥111.50 level. With that being the case, the market continues to see a lot of noisy behavior, and therefore I think you need to be cautious with your position size, but if you are a short-term trader this might be a nice range bound market to be involved in.

There is a certain amount of risk appetite that goes into the thought process of this market, so keep that in mind as well. The Japanese yen being the ultimate safety currency is going to attract attention every time there is a certain amount of concern when it comes to financial markets around the world.

For a look at all of today’s economic events, check out our economic calendar.

USD/JPY Fundamental Daily Forecast – Hawkish Fed Could Spike Dollar/Yen Higher

The Dollar/Yen is trading higher early Wednesday after surviving an earlier attempt to drive it through a key support area. The Forex pair is being supported by a somewhat hawkish outlook for the Federal Reserve’s monetary policy decisions to be released later in the day, an easing of concerns over an Evergrande default in China and a dovish outlook for the Japanese economy by the Bank of Japan.

At 07:10 GMT, the USD/JPY is trading 109.567, up 0.350 or +0.32%.

Key Technical Area Holding as Support

The main range is formed by the April 23 main bottom at 107.479 and the July 2 main top at 111.659. The USD/JPY is currently trading inside its 50% to 61.8% retracement zone at 109.569 to 109.076.

Earlier in the session buyers came in at 109.122 to stop a price slide. This area has been tested successfully four times since Mid-July.

Overtaking 109.569 will indicate the presence of buyers. A failure to hold 109.076 will indicate the selling pressure is getting stronger.

Federal Reserve Could Surprise Markets with Hawkish Shift

The Federal Reserve is expected to drop more hints on its future policy path, including when to start tapering its bond buying and when to start raising interest rates.

There are also rising expectations the central bank will signal its plans to start reducing its massive bond purchases in November if incoming data holds up.

The so-called “dot plot”, which charts policymakers economic and rates projections, will attract attention for clues on when the Fed will hike its interest rate hikes from the current near zero level.

Investors will interpret a change in the first expected rate hike from 2023 to 2022 as hawkish.

Easing Concerns over Contagion from an Evergrande Default Driving Risk Sentiment

Investors are seeing a shift in sentiment to “risk on” which is pressuring safe-haven demand for the Japanese Yen. Investors are drawing some relief in news embattled Chinese property developer Evergrande would make a coupon payment on its domestic bonds on September 23, calming fears of an imminent default.

BOJ Keeps Policy Steady, Offers Bleaker View on Exports, Output

The Bank of Japan (BOJ) kept monetary policy steady on Wednesday but offered a bleaker view on exports and output, reinforcing expectations the bank will maintain its massive stimulus even as major counterparts eye a withdrawal of crisis-mode support.

Daily Outlook

The price action will be dictated by the movement in U.S. Government bonds. If the Fed moves up the timeline for its first rate hike from 2023 to 2022 then Treasury yields could spike higher. This would widen the spread between U.S. Government bond yields and Japanese Government bond yields, making the U.S. Dollar a more attractive asset.

Gains in the USD/JPY could be capped, however, if risk sentiment turns negative due to renewed fears over an Evergrande default on its interest rate payment scheduled for Thursday.

For a look at all of today’s economic events, check out our economic calendar.

Marketmind: Some Relief – But How Long Will it Last?

A look at the day ahead from Dhara Ranasinghe.

U.S. stock futures, the yuan and the risk-sensitive Australian dollar are riding high, while the safe-haven yen and U.S. Treasuries are on the back foot.

Don’t get too comfortable — even if Evergrande makes its Sept. 23 onshore bond payment, it has not indicated whether it can pay $83.5 million in interest due on its March 2022 bond on Thursday. Nor is there any sign the Chinese government plans to mount a last-minute rescue.

And with the U.S. Federal Reserve set to conclude its two-day meeting later on Wednesday, perhaps this week’s market excitement is not over yet.

After all gas prices are at lofty levels, threatening to hurt consumption, which means central banks meeting across the globe this week are likely to be challenged on the message that inflation is transitory.

For the Fed, weaker-than-anticipated jobs numbers have already dampened expectations it will announce an imminent start to tapering bond-buying stimulus.

It might however clear the way for tapering later this year and show in updated projections whether higher-than-expected inflation or a resurgent coronavirus pandemic is weighing more on the economic outlook.

The Bank of Japan just kept monetary policy steady but offered a bleaker view on exports and output, reinforcing expectations it won’t join peers mulling a withdrawal of crisis-mode support.

Elsewhere, Democrats in the House of Representatives passed a bill on Tuesday to fund the U.S. government through Dec. 3 and suspend a borrowing limit until end-2022. Senate Republicans however have vowed to block it.

Key developments that should provide more direction to markets on Wednesday:

– Macy’s to hire 76,000 workers for holiday shopping season

– China keeps lending benchmark LPR unchanged

– DraftKings makes $22.4 bln offer for UK’s Entain

– Euro zone flash consumer confidence

– U.S. existing home sales data

– U.S. sells 2 year FRNs

– Deputy Bank of England governor Sam Woods speaks

– Brazil may raise interest rates by 100 basis points.

– European earnings: Playtech, IG Group

– U.S. earnings: Nike

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Dhara Ranasinghe; editing by Sujata Rao)

September 22nd 2021: Dollar Movement Unchanged Ahead of FOMC Meeting

Charts: Trading View

EUR/USD:

(Italics: previous analysis)

Dollar movement Tuesday—according to the US dollar index—finished considerably off session lows (93.05), forming what many technicians label a hammer candlestick pattern on the daily timeframe (bullish signal). EUR/USD, given its negative correlation with the DXY, concluded in the shape of a shooting star candle pattern on the daily chart (bearish signal).

The economic calendar offered thin pickings, though US housing starts (number of residential buildings that begun construction) came in at a little over $1.6 million (seasonally adjusted), beating economists’ forecasts of $1.55 million. On tap today, of course, is the much-awaited FOMC meeting.

Through the lens of a technical trader, EUR/USD charts are interesting.

While the H4 timeframe discovered resistance from $1.1742, a previous Quasimodo support base, lower on the curve the H1 timeframe exhibits scope to approach prime resistance coming in at $1.1767-1.1776 (joined by supply at $1.1762-1.1774 and H4 Quasimodo resistance at $1.1771).

An additional technical observation out of the H1, supposing $1.1715 intraday lows maintain grip, is the prospect of a bearish AB=CD pattern forming at $1.1762 (marked by way of a 100% Fibonacci projection). Fibonacci fans will also note a neighbouring Fib cluster around $1.1756 (61.8% and 38.2% Fibonacci retracements).

Technical studies on the bigger picture reveal price movement hovering north of prime support at $1.1473-1.1583 on the weekly timeframe. Gleaning additional technical confluence through a 100% Fib projection at $1.1613 and 1.27% Fib extension at $1.1550, this base remains a key watch, long term. With respect to trend on the weekly chart, the market has largely been bullish since the early 2020.

Meanwhile, the daily timeframe shines the technical spotlight on Quasimodo support at $1.1689. Albeit sponsoring a late August bid (black arrow), action from $1.1689 failed to find approval north of late July tops at $1.1909; therefore, this ranks $1.1689 as perhaps frail support. Assuming bearish leadership on the daily, the $1.1612 and $1.1602 (September/November 2020) lows signify downside support targets, followed by Fibonacci support between $1.1420 and $1.1522 (glued to the lower side of the weekly timeframe’s prime support at $1.1473-1.1583).

Observed Technical Levels:

Should H4 resistance at $1.1742 continue to command position, a test of the H1 timeframe’s $1.17 figure could be in the offing. However, as highlighted in our previous technical briefing, a whipsaw south of $1.17 on the H1 to daily Quasimodo support parked at $1.1689 is a potential scenario. $1.1689 bids feeding off sell-stops below $1.17 could be enough to chalk up a bullish wave.

Alternatively, if $1.1715 intraday lows hold on the H1, an AB=CD bearish pullback to prime resistance at $1.1767-1.1776 may be welcomed by sellers. This, nonetheless, implies a breach of H4 resistance mentioned above at $1.1742.

AUD/USD:

(Italics: previous analysis)

The Australian dollar eked out a fourth consecutive daily loss against the US dollar on Tuesday. Renewed AUD/USD downside emerged mid-way through London hours, weighed by the US dollar index defending 93.05.

Earlier in the session, the Reserve Bank of Australia (RBA) policy meeting minutes reiterated a similar theme: the surroundings for an increase in interest rates will not be met until 2024[1]. Ultimately, limited price movement followed.

The technical landscape watched AUD/USD’s H1 candles level off from a 61.8% Fibonacci retracement at $0.7283—a touch south of trendline resistance, taken from the high $0.7469, and neighbouring Quasimodo support-turned resistance at $0.7288. Support is present at $0.7221, placed a handful of pips above the H4 timeframe’s decision point coming in at $0.7200-0.7218. Note also this H4 base houses $0.72.

Against the backdrop of shorter-term flow, the weekly timeframe has the currency pair touching gloves with prime support at $0.6968-0.7242. Since printing a two-week recovery in late August, the pair has been fighting to entice fresh bullish interest. Failure to command position from $0.6968-0.7242 opens up support at $0.6673. Buyers regaining consciousness, nevertheless, has prime resistance at $0.7849-0.7599 to target. Trend studies on the weekly scale show we’ve been higher since early 2020. Consequently, the response from $0.6968-0.7242 could STILL be the beginnings of a dip-buying attempt to merge with the current trend.

Interestingly, the daily timeframe’s technical landscape informs traders bids are perhaps thin within weekly prime support, at least until price shakes hands with Fibonacci support at $0.7057-0.7126. Those who follow the relative strength index (RSI) will acknowledge the value journeyed through the 50.00 centreline last week and recently dipped a toe below 40.00. This highlights a bearish atmosphere until making contact with oversold territory.

Observed Technical Levels:

According to chart studies on the higher timeframes right now, sellers are in the driving seat, and unlikely to give way until daily Fibonacci support at $0.7057-0.7126.

This echoes a bearish vibe and consequently places a question mark on the H4 decision point at $0.7200-0.7218 and, by extension, the H1 timeframe’s support at $0.7221 and $0.72.

Bearish themes sub $0.7221 and $0.72?

USD/JPY:

(Italics: previous analysis)

Ahead of key Bank of Japan (BoJ) and FOMC meetings, market sentiment echoed an indecisive tone on Tuesday: global equity indexes closed higher on the session, yet safe-haven currencies also voyaged to the upside.

According to the technicals, H1 Quasimodo support at ¥109.31 relinquished position yesterday and turned the spotlight on H1 support at ¥109.11 and the ¥109 figure. This also calls attention to the H4 chart’s framework, swinging the pendulum in favour of a possible decline to the H4 double-top pattern’s (¥110.44) profit target around ¥108.71—sharing space with a 1.618% Fibonacci projection at ¥108.86 and a 1.272% Fibonacci projection at ¥108.72.

Considering the weekly timeframe, since mid-July, ¥108.40-109.41 demand has failed to stir much bullish energy. Nevertheless, recognising the area derives additional backing from neighbouring descending resistance-turned support, extended from the high ¥118.61, an advance could eventually emerge to familiar supply at ¥113.81-112.22.

The uninspiring vibe out of weekly demand is demonstrated by way of a consolidation on the daily timeframe between prime support at ¥108.96-109.34 and resistance from ¥110.86-110.27. Range support, as you can see, is currently under pressure, with a breach underscoring potential downside to a concealed Quasimodo support at ¥108.43. Based on the relative strength index (RSI), the value is confined to a similar consolidation (between 40.87 and 56.85) and the indicator is testing the mettle of the lower range limit, as we write.

Observed Technical Levels:

Recognising H1 Quasimodo support at ¥109.31 was taken, and the daily timeframe’s range support at ¥108.96-109.34 displays little sign of bullish life, further selling additional losses is possible, targeting the H4 double-top pattern’s (¥110.44) profit target around ¥108.71. Still, to reach the aforementioned profit target, sellers must marginally defeat the daily timeframe’s range support and take on any bullish interest from weekly demand at ¥108.40-109.41.

GBP/USD:

(Italics: previous analysis)

Sterling gripped four-week lows against the buck on Tuesday, pressured amidst a USD recovery phase, as market participants look towards today’s FOMC meeting and also the outcome of tomorrow’s Bank of England (BoE) meet. Many desks forecast the Fed is likely to wait until later this year regarding a taper announcement.

Settling a touch higher on Tuesday, technical observations on GBP/USD show H4 Quasimodo support-turned resistance made an entrance at $1.3693, a level organised a short distance beneath a H4 decision point at $1.3750-1.3721. Seeing buyers and seller squaring off around $1.3643 lows, probing $1.3693 and facing $1.3750-1.3721 is still on the table.

What’s technically interesting about $1.3750-1.3721 is its location on the H1 timeframe: directly above the $1.37 figure. Any technical trader worth their salt appreciates the attention a round number attracts. For that reason, a whipsaw above $1.37, movement stabbing buy-stops, could welcome robust selling from $1.3750-1.3721.

In terms of the higher timeframes, supply-turned demand at $1.3629-1.3456 on the weekly timeframe stepped forward in July. Yet, pattern traders will also note that the $1.3629-1.3456 test simultaneously closed below a double-top pattern’s neckline at $1.3669, broadcasting a relatively long-term sell signal. Conservative pattern sellers, however, are likely to pursue a candle close beneath $1.3629-1.3456 before pulling the trigger.

Behind the weekly timeframe, a closer examination of price action on the daily timeframe reveals Quasimodo support at $1.3609. It’s important to note, nevertheless, the previous $1.3609 reaction (20th August) failed to find acceptance above the 200-day simple moving average at $1.3833, suggesting $1.3609 weakness. Sub $1.3609, limited support is visible until around $1.3168. Momentum studies, on the authority of the relative strength index (RSI), shows the value below 40.00, with subsequent downside pressure to perhaps take in an oversold reading.

Observed Technical Levels:

With the daily timeframe a stone’s throw from testing Quasimodo support at $1.3609, a whipsaw through $1.37 on the H1 scale to bring in willing offers around the H4 decision point at $1.3750-1.3721 could stir a bearish theme.

A $1.3750-1.3721 reaction may witness price action zero in on H1 Quasimodo support at $1.3618, arranged north of the noted Quasimodo support on the daily timeframe.

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.

  1. https://www.rba.gov.au/monetary-policy/rba-board-minutes/2021/2021-09-07.html

It’s all Eyes on the FOMC, the Economic and Interest Rate Projections…

Earlier in the Day:

It was a particularly quiet start to the day on the economic calendar this morning. There were no major stats from the Asian session to provide the markets with direction.

While there were no stats, the BoJ is in action later this morning. The markets are not expecting any surprises, however, leaving the FOMC policy decision and projections in focus.

For the Majors

At the time of writing, the Japanese Yen was down by 0.02% to ¥109.250 against the U.S Dollar, with the Aussie Dollar up by 0.04% to $0.7234. The Kiwi Dollar was up by 0.01% to $0.7006.

The Day Ahead

For the EUR

It’s another particularly quiet day ahead on the economic calendar. There are no material stats due out of the Eurozone to provide the EUR with direction.

The lack of stats will leave the EUR in the hands of market risk appetite and sentiment towards FED monetary policy and projections due late in the day.

At the time of writing, the EUR was down by 0.01% to $1.1725.

For the Pound

It’s also a particularly quiet day ahead on the economic calendar. There are no material stats due out of the UK to provide the Pound with direction.

The lack of stats will leave the Pound in the hands of market risk sentiment, though there will be some consideration of Thursday’s MPC policy decision. Ahead of the disappointing retail sales figures, economic data had pointed towards a more hawkish MPC…

At the time of writing, the Pound was up by 0.02% to $1.3662.

Across the Pond

It’s also a relatively quiet day ahead. Housing sector numbers for August are due out later in the day.

We don’t expect the numbers to influence, however. The market focus will be on the FOMC monetary policy decision, projections, and the press conference.

Key areas of focus will include the timing and size of a tapering of the asset purchasing program and interest rate projections. Will the FED be looking to lift cash rates earlier than previously expected?

On Tuesday, the U.S Dollar Spot Index fell by 0.08% to end the day at $93.204.

For the Loonie

It’s a quiet day ahead for the Loonie. There are no material stats due out of Canada to provide the Loonie with direction.

Crude oil inventories and market risk sentiment will remain the key drivers on the day.

Political uncertainty, following the early election, appeared to be of little concern as Trudeau fell short of a majority.

At the time of writing, the Loonie was up by 0.05% to C$1.2814 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

Dollar Eases From Near 1-Month High as Fed, Evergrande Eyed

After reaching its highest level since Aug. 23 on Monday, the dollar straddled around the unchanged mark on the day, briefly moving higher as early gains on Wall Street’s benchmark equity indexes faded.

Investors are looking toward the Fed’s policy announcement on Wednesday for any signs of when the central bank will begin to scale back its massive bond-buying program, in a week filled with policy statements expected from a host of central banks around the globe.

“The market was trying to get a sense of was this turnaround Tuesday going to last, and if we had that continued improvement of risk appetite the dollar was going to pull back even more here,” said Edward Moya, senior market analyst at OANDA in New York.

“But there is just a lot of wait-and-see as far as what is going to happen with the Fed, what is going to happen with Evergrande. And right now if you are trying to make a dollar bet you really just want to wait until you get a better sense of what is going to happen with Evergrande and what the Chinese government is going to do.”

The dollar index fell 0.019% after reaching a high of 93.455 on Monday, while the euro was down 0.01% to $1.1724.

The greenback strengthened on Monday, along with other safe-havens such as the yen and Swiss franc, as concerns about the fallout from the possible default of China Evergrande unnerved financial markets.

Those concerns overshadowed efforts by Evergrande’s chairman to lift confidence in the embattled firm on Tuesday, as Beijing showed no signs it would intervene to stem any domino effects across the global economy.

The offshore Chinese yuan weakened versus the greenback to 6.4817 per dollar.

Before Evergrande’s debt crisis rattled markets, the dollar had been supported ahead of the Fed meeting this week, with economists surveyed in a Reuters poll expecting policymakers to signal expectations of a tapering plan to be pushed back to November.

The Japanese yen strengthened 0.13% versus the greenback, to 109.23 per dollar, while Sterling was last trading at $1.3658, up 0.01% on the day.

The Canadian dollar was poised to halt three straight days of declines against the greenback, after Canadian Prime Minister Justin Trudeau was re-elected to a third term but failed to win a majority in the parliamentary elections.

The Canadian dollar rose 0.06% versus the greenback at 1.28 per dollar.

In cryptocurrencies, bitcoin last fell 2.01% to $42,172.11.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Chuck Mikolajczak; Editing by Andrea Ricci and Leslie Adler)

USD/JPY Price Forecast – US Dollar Gives Up Early Gains Against Yen

The US dollar initially rallied during the trading session on Tuesday but has given back the early gains as we approached the 50 day EMA. By doing so, the market looks as if it is going to pull back towards the ¥109 level, which is an area where we have seen a bit of support previously. The market continues to see a lot of noise, as we have been going back and forth based upon the idea of potential tapering and of course concerns in China when it comes to the Evergrande situation and of course contagion in the real estate market.

USD/JPY Video 22.09.21

The Japanese yen continues to be thought of as a safety currency, even against the US dollar. With this being the case, it makes a certain amount of sense that we would see the ¥109 level tested yet again, especially as the 200 day EMA is sitting in that general vicinity. With that being the case, I think the market is likely to see a lot of choppy volatility, but if we were to break down at this point in time, it could open up a flood of selling. In that scenario, we would probably see a major “risk off move” around the world.

This is one of those times when you will see concern around the world if we kick this move off. On the other hand, if we break higher, expect the next fight to be at the 110.75 area, as it has been significant resistance previously.

For a look at all of today’s economic events, check out our economic calendar.

USD/JPY Fundamental Daily Forecast – More Downside Pressure Likely as Financial Markets Remain Unsettled

The Dollar/Yen is trading higher on Tuesday after posting a sharp sell-off the previous session due the safe-haven buying of the Japanese Yen. The Forex pair is being supported early in today’s session by a technical bounce in global equity markets and slight rise in U.S. Treasury yields. Despite the rebound, traders remain cautious due to contagion fears in the Asia-Pacific region and general uncertainty ahead of the start of the Federal Reserve’s two-day meeting on Tuesday.

At 01:40 GMT, the USD/JPY is trading 109.552, up 0.172 or +0.16%. This is up from Monday’s low at 103.324.

Safe-Haven Buying Drives Demand for Japanese Yen

The USD/JPY retreated on Monday as worries about the fallout from property developer Evergrande’s solvency issues spooked financial markets and lifted safe-haven currencies like the Japanese Yen.

Market sentiment is being rattled by the potential contagion from Evergrande, which is trying to raise funds to pay a host of lenders, suppliers and investors. A deadline for an $83.5 million interest payment on one of its bonds is due on Thursday, and the company has $305 billion in liabilities.

Evergrande’s woes worsened on Monday after warnings from Chinese regulators that the company’s insolvency could fuel broader risks in the country’s financial system if not stabilized.

Fed Meeting on the Radar

Ahead of Monday’s turmoil, the U.S. Dollar had been pushing higher against the Japanese Yen and a basket of other major currencies on expectations the Federal Reserve will begin reducing its monthly bond purchases this year, with the central bank’s policy announcement due on Wednesday.

Daily Forecast

Despite the early strength, the USD/JPY could still face some downside pressure because the financial markets remain unsettled. Some traders are getting their first taste of a classic flight to safety move into the U.S. Dollar and the Japanese Yen until we get some sense of clarity on whether or not Evergrande’s assets will be liquidated in an orderly fashion or just dumped on the open market.

Australia, for example, is facing huge risks because Evergrande is one of the major property owners in the country. Evergrande is expected to be forced to liquidate large amounts of property to fulfil their debt obligations and that will really hurt property and property-related commodities and stocks.

Global debt and equity markets are especially at risk. If they continue to tumble then investors will flock to the Japanese Yen for protection.

For a look at all of today’s economic events, check out our economic calendar.

Another Quiet Day on the Economic Calendar Leaves the FED and Risk Sentiment in the Driving Seat

Earlier in the Day:

It was a relatively quiet start to the day on the economic calendar this morning, with the China markets closed today. The Kiwi Dollar was in action in the early hours, however.

Later this morning, the RBA meeting minutes will also draw interest as the markets look to assess the impact of the latest lockdown measures on policy.

For the Kiwi Dollar

Consumer sentiment figures were in focus.

In the 3rd quarter, the Westpac Consumer Sentiment Index fell from 107.1 to 102.7.

According to the Westpac survey,

  • Confidence took a hit, with the index falling by 4.4 points as a result of the latest nationwide lockdown.
  • The decline was more modest, however, than the fall seen back in 2020.
  • While households remain secure about their personal financial situation, global supply chain disruption weighed on spending appetites.

The sub-components:

  • The Present Conditions Index fell by 2.7 points to 95.6, with the Expected Conditions Index down 5.5 points to 107.4.
  • 1-year economic outlook tumbled by 10.0 points to -5.6, with the “Good time to buy” sub-index falling by 7.2 points to -5.2.
  • 5-year economic outlook fell by 6.2 points to 11.5, while the current financial situation sub-index rose by 1.8 points to -3.6.
  • Expected financial situation saw a modest 0.6 point decline to 16.1.

The Kiwi Dollar moved from $0.70293 to $0.70260 upon release of the figures. At the time of writing, the Kiwi Dollar was down by 0.26% to $0.7009.

Elsewhere

At the time of writing, the Japanese Yen was up by 0.05% to ¥109.390 against the U.S Dollar, with the Aussie Dollar up by 0.06% to $0.7256.

The Day Ahead

For the EUR

It’s a particularly quiet day ahead on the economic calendar. There are no material stats due out of the Eurozone to provide the EUR with direction.

The lack of stats will leave the EUR in the hands of market risk appetite and sentiment towards FED monetary policy.

At the time of writing, the EUR was flat at $1.1726.

For the Pound

It’s a relatively quiet day ahead on the economic calendar. CBI Industrial Trend Orders for September are due out later today. With little else for the markets to consider, we can expect influence. The impact will be limited, however, with the Pound on the defensive ahead of Thursday’s policy decision.

At the time of writing, the Pound was up by 0.01% to $1.3658.

Across the Pond

It’s also a relatively quiet day ahead. Housing sector numbers for August are due out later in the day. With the markets focused on the FED, however, the stats are unlikely to have an impact on the day.

On Monday, the U.S Dollar Spot Index rose by 0.09% to end the day at $93.276.

For the Loonie

It’s a quiet day ahead for the Loonie. House price figures for August are due out later in the day.

We don’t expect the numbers to provide the Loonie with direction, however. Market risk sentiment will and crude oil prices will remain the key drivers on the day.

At the time of writing, the Loonie was up by 0.05% to C$1.2815 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

September 21st 2021: EUR/USD Eyes H1 Prime Resistance at $1.1767-1.1776 After $1.17 Support

Charts: Trading View

EUR/USD:

(Italics: previous analysis)

Technical studies reveal movement hovering north of prime support at $1.1473-1.1583 on the weekly timeframe. Gleaning additional technical confluence through a 100% Fib projection at $1.1613 and 1.27% Fib extension at $1.1550, this base remains a key watch, long term. With respect to trend on the weekly chart, the market has largely been bullish since the early 2020.

Meanwhile, a closer reading of price on the daily timeframe reveals Monday spiked to within a stone’s throw of Quasimodo support at $1.1689. Albeit sponsoring a late August bid (black arrow), action from $1.1689 failed to find approval north of late July tops at $1.1909; therefore, this ranks $1.1689 as perhaps frail support. Assuming bearish leadership on the daily, the $1.1612 and $1.1602 (September/November 2020) lows signify downside support targets, followed by Fibonacci support between $1.1420 and $1.1522 (glued to the lower side of the weekly timeframe’s prime support at $1.1473-1.1583).

Charted a pip ahead of the daily Quasimodo, the $1.1690-1.1705 decision point put in an appearance on Monday, encouraging H4 sellers to dial back and hand the baton to buyers. Quasimodo support-turned resistance at $1.1742 is now in range on this timeframe, with subsequent bullish interest to perhaps take aim at Quasimodo resistance from $1.1771.

Intraday action on Monday was interesting. The US dollar, in addition to other safe-haven currencies such as the Japanese yen and Swiss franc, gained traction Monday, elevated amidst clear-cut risk-off sentiment. Europe’s single currency, however, reclaimed a large slice of lost ground, aided (technically) not only by the H4 decision point mentioned above at $1.1690-1.1705, but also $1.17 on the H1. At the time of writing, H1 resistance at $1.1728 is active; rupturing the latter paves the way to $1.1742 on the H4, a level shadowed by H1 prime resistance coming in at $1.1767-1.1776, joined by supply at $1.1762-1.1774.

Observed Levels:

Extending recovery gains on short-term charts may have sellers move in on prime resistance at $1.1767-1.1776 on the H1 and supply from $1.1762-1.1774, which dovetails with H4 Quasimodo resistance at $1.1771. However, prior to this, sellers might engage with Quasimodo support-turned resistance at $1.1742 on the H4.

An alternative scenario to be mindful of is a whipsaw south of $1.17 on the H1 to daily Quasimodo support parked at $1.1689. $1.1689 bids feeding off sell-stops below $1.17 could be enough to chalk up a bullish wave.

AUD/USD:

(Italics: previous analysis)

Latest out of the weekly timeframe has AUD/USD touching gloves with prime support at $0.6968-0.7242. Since printing a two-week recovery in late August, the currency pair has been fighting to entice fresh bullish interest. Failure to command position from $0.6968-0.7242 opens up support at $0.6673. Buyers regaining consciousness, nevertheless, has prime resistance at $0.7849-0.7599 to target. Trend studies on the weekly scale show we’ve been higher since early 2020. Consequently, the response from $0.6968-0.7242 could STILL be the beginnings of a dip-buying attempt to merge with the current trend.

The daily timeframe’s technical landscape informs traders bids are perhaps thin within weekly prime support, at least until price shakes hands with Fibonacci support at $0.7057-0.7126. Those who follow the relative strength index (RSI) will note the value journeyed through the 50.00 centreline last week and had Monday dip a toe below 40.00. This highlights a bearish atmosphere until making contact with oversold territory.

Price action on the H4 timeframe came within touching distance of a half-hearted decision point at $0.7200-0.7218 on Monday. To the upside, two resistances are on the radar at $0.7281 and $0.7317.

Lower on the curve, a H1 decision point at $0.7269-0.7259 elbowed into the spotlight, an area formed in the early hours of Monday which saw price tunnel through demand at $0.7248-$0.7259. Continued interest to the downside has $0.72 to target.

Observed Levels:

Each timeframe analysed underlines a bearish energy.

Weekly prime support at $0.6968-0.7242 appears vulnerable due to the daily timeframe exhibiting scope to approach Fibonacci support at $0.7057-0.7126. This, on top of the H1 timeframe’s decision point at $0.7269-0.7259 making a show, implies a short term move to $0.72 (H1) could be in the offing (note $0.72 aligns with the lower band of the H4 decision point at $0.7200-0.7218).

USD/JPY:

(Italics: previous analysis)

Since mid-July, ¥108.40-109.41 demand has failed to stir much bullish energy on the weekly timeframe. Nevertheless, recognising the area derives additional backing from neighbouring descending resistance-turned support, extended from the high ¥118.61, an advance could eventually emerge to familiar supply at ¥113.81-112.22.

The uninspiring vibe out of weekly demand is demonstrated by way of a consolidation on the daily timeframe between prime support at ¥108.96-109.34 and resistance from ¥110.86-110.27. Range support, as you can see, is currently in the frame. In the event price deviates from range extremes, Quasimodo resistance at ¥111.11 is seen, along with a concealed Quasimodo support at ¥108.43. Based on the relative strength index (RSI), the value is confined to a consolidation surrounding the 50.00 centreline, between 40.87 and 56.85.

Broad declines observed in major US equity indexes elevated demand for the safe-haven JPY Monday. USD/JPY downside swings technical curiosity to the H4 double-top pattern’s (¥110.44) profit target around ¥108.71—sharing chart space with a 1.618% Fibonacci projection at ¥108.86 and a 1.272% Fibonacci projection at ¥108.72. However, in order to reach the aforesaid pattern target, the lower edge of the daily range support highlighted above at ¥108.96-109.34 must be taken.

Heading into early US trading on Monday, H1 crossed swords with Quasimodo resistance-turned support at ¥109.45, and clocked a ¥109.65 top before changing gears and heading towards Quasimodo support at ¥109.31. Territory below the latter reveals support at ¥109.11.

Observed Levels:

In keeping with the H4 timeframe, booking additional losses is possibly on the cards until the double-top pattern’s (¥110.44) profit target around ¥108.71. Still, to reach the aforementioned profit target, sellers must marginally defeat the daily timeframe’s range support at ¥108.96-109.34 and take on any bullish interest from weekly demand at ¥108.40-109.41.

Should we nudge through H1 Quasimodo support at ¥109.31, this could be an early sign of bearish muscle making an entrance, and with this, additional selling might take shape.

GBP/USD:

(Italics: previous analysis)

In the shape of a hammer candlestick formation (bullish signal), supply-turned demand at $1.3629-1.3456 on the weekly timeframe stepped forward in July. The aforementioned zone remains active, welcoming an additional test mid-August. Yet, pattern traders will also note August’s move closed south of a double-top pattern’s neckline at $1.3669, broadcasting a bearish vibe. Conservative pattern sellers, however, are likely to pursue a candle close beneath $1.3629-1.3456 before pulling the trigger.

Sterling kicked off the week on the ropes, clocking one-month lows versus the US dollar. GBP/USD remains comfortable beneath the 200-day simple moving average at $1.3831 and is within reach of Quasimodo support at $1.3609. Previous analysis underlined the daily chart has communicated a rangebound environment since late June between a 61.8% Fib retracement at $1.3991 and the noted Quasimodo support. Momentum, according to the relative strength index (RSI) value, extended position below the 50.00 centreline and scraped through 40.00 on Monday. This informs traders that momentum to the downside is increasing in the form of average losses exceeding average gains.

Yesterday’s bearish presence established a decision point at $1.3750-1.3721, an area forming a decision to tunnel through Quasimodo support from $1.3693 (currently serving as resistance). Daily Quasimodo support mentioned above at $1.3609 calls for attention as a downside objective also on the H4 scale.

From the H1 timeframe, mid-way through London on Monday clipped the lower side of $1.37 and also brought in resistance at $1.3689—a previous Quasimodo support level drawn from 26th August. Further softening places Quasimodo support at $1.3618 and the $1.36 figure in sight.

Observed Levels:

Having noted scope for the daily timeframe to test Quasimodo support at $1.3609, retesting either H4 resistance at $1.3693 or the H4 decision point at $1.3750-1.3721 could stir a bearish theme. Adding weight to $1.3693 is H1 resistance coming in at $1.3689 and the $1.37 figure.

The H1 Quasimodo support at $1.3618 forms a reasonable downside target, arranged just north of the noted Quasimodo support on the daily timeframe.

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Analysis: Why the Fed Might Welcome a Bond Market Tantrum

Persistently low yields are a feature of bond markets across the developed world, with central banks mostly in no hurry to raise interest rates and a global savings glut that keeps debt securities in constant demand.

But it is in the United States that the contradiction between economic recovery and bond yields is starkest.

Even with growth tipped to surpass 6% this year and a “taper” in sight for the Fed’s bond-buying programme at the end of this year, 10-year yields are still stuck at just above 1.3%..

The Fed probably rejoiced at low yields in the initial stages of the economic recovery, but now needs bonds to respond to the end of pandemic-linked recession, said Padhraic Garvey, head of research for the Americas at ING Bank.

Current pricing, analysts say, looks more consistent with heightened economic uncertainty, whereas higher yields would align markets more with the signals coming from central banks.

“To facilitate that, we argue that there needs to be a tantrum. If the Fed has a taper announcement … and there is no tantrum at all, that in fact is a problem for the Fed,” ING’s Garvey said.

Analysts say a bond market tantrum would involve yields rising 75-100 basis points (bps) within a couple of months.

The original “taper tantrum” in 2013 boosted U.S. yields just over 100 bps in the four months after then Fed boss Ben Bernanke hinted at an unwinding of stimulus measures.

But that kind of sudden jump in yields looks unlikely right now, given how clearly the Fed has telegraphed its plans to taper its bond-buying. And as 2013 showed, bond market tantrums carry nasty side-effects including equity sell-offs and higher borrowing costs worldwide.

A happy medium, analysts say, might be for benchmark yields to rise 30-40 bps to 1.6-1.8%

FED AND BANKS NEED AMMUNITION

Besides wanting higher yields to better reflect the pace of economic growth, the Fed also needs to recoup some ammunition to counter future economic reversals.

The Fed funds rate – the overnight rate which guides U.S. borrowing costs – is at zero to 0.25%, and U.S. policymakers, unlike the Bank of Japan and the European Central Bank, are disinclined to take interest rates negative.

The Fed won’t want to find itself in the position of the ECB and BOJ, whose stimulus options at the moment are limited to cutting rates further into negative territory or buying more bonds to underwrite government spending.

Jim Leaviss, chief investment officer at M&G Investments for public fixed income, said policymakers would probably like the Fed fund rate to be at 2%, “so, when we end up in the next downturn, the Fed will have some space to cut interest rates without hitting the lower bound of zero quickly”.

Another reason higher yields might be welcomed is because banks would like steeper yield curves to boost the attractiveness of making longer-term loans funded with short-term borrowing from depositors or markets.

Thomas Costerg, senior economist at Pictet Wealth Management, notes that the gap between the Fed funds rate and 10-year yields of about 125 bps now is well below the average 200 bps seen during previous peaks in economic expansion.

He believes the Fed would favour a 200 bps yield slope, “not only because it would validate their view that the economic cycle is fine but also because a slope of 200 bps is healthy for the banking sector’s maturity transformation.”

GRAVITATIONAL FORCE

But even a tantrum might not bring a lasting rise in yields.

First, while the Fed may look with envy at Norway and New Zealand where yields have risen in expectation of rate rises, it has stressed that its own official rates won’t rise for a while.

Structural factors are at play too, not least global demand for the only large AAA-rated bond market with positive yields.

The Fed also, in theory at least, guides rates towards the natural rate of interest, the level where full employment coincides with stable inflation.

But this rate has shrunk steadily. Adjusted for projected inflation, the “longer-run” funds rate – the Fed’s proxy for the natural rate – has fallen to 0.5% from 2.4% in 2007. If correct, it leaves the Fed with little leeway.

Demographics and slower trend growth are cited as reasons for the decline in the natural rate though a paper https://bit.ly/3nVMxMv presented last month at the Jackson Hole symposium also blamed a rise in income inequality since the 1980s.

The paper said the rich, who are more likely to save, were taking a bigger slice of overall income and the resulting savings glut was weighing on the natural rate of interest.

“One lesson from this year is that there is massive gravitational force, a price-insensitive demand which is pressing down on Treasury yields,” Pictet’s Costerg said.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Stefano Rebaudo; Additional reporting by Dhara Ranasinghe in London and Dan Burns in New York; Editing by Sujata Rao and David Clarke)

 

USD/JPY Price Forecast – US Dollar Gives Up Early Gains

The US dollar initially tried to rally during the trading session on Monday but gave back gains near the ¥110 level. The market continues to look at the ¥110 level as an area of importance, so it should not surprise you at all to see that we have rolled over again. At this point in time, the ¥109 level underneath continues to be an area of support, right along with the ¥110.75 offering a significant amount of resistance. With the ¥110 level in the middle being a bit of a magnet for price, it looks as if nothing has really happened quite yet to discern where we are going longer term.

USD/JPY Video 21.09.21

That being said, it is worth noting that the market is currently looking at the 200 day EMA underneath as significant support, although it should also be noted that the 50 day EMA has gone sideways for quite some time, meaning that we are still stuck in the same meaningless range. Eventually we will break out, but until then it simply going to be a short-term range bound type of situation. With this being the case, the market is going to continue to be very noisy, so you will have to be somewhat nimble to take advantage of a well-defined range.

I do believe that it is only a matter of time before we get a bigger move, probably coinciding with the overall risk appetite of the markets. The pair does tend to favor the Japanese yen it in times of concern, so that of course could be something worth paying attention to as the Chinese credit situation continues to become headline news.

For a look at all of today’s economic events, check out our economic calendar.

Say Bye-Bye to Major Supports. We May Not See Those Levels for a While

And it happened! The bears were talking about this for a long time and it finally happened; a bearish correction. The price broke the long-term up trendline on the SP500 and is aiming lower. The target for the drop is still far away, so it might be nice to buckle up.

The DAX also dropped like a rock after the breakout of the long-term up trendline and the neckline of the triple top formation. The next target: 14100 points.

Although indices are sliding, gold is not climbing higher. A stronger dollar is definitely not helping.

The GBPUSD came back inside the falling wedge pattern. That’s definitely negative.

The CADJPY is aiming for the 38,2% Fibonacci to test it as a crucial support.

The EURNZD is inside a small sideways trend. A breakout from it, will show us a direction.

The EURJPY has failed to create the inverse head and shoulders pattern and dropped lower.

The USDJPY bounced from the upper line of the triangle and brought us a sell signal with the target being on the lower line of this pattern.

For a look at all of today’s economic events, check out our economic calendar.

A Quiet Economic Calendar Leaves the Dollar in the Spotlight

Earlier in the Day:

It was a quiet start to the day on the economic calendar this morning. With the China and Japan markets closed today, there were no material stats for the markets to consider in the early hours.

The lack of stats left the markets to respond to moves through the U.S session on Friday, which had left riskier assets in the red.

For the Majors

At the time of writing, the Japanese Yen was down by 0.05% to ¥109.990 against the U.S Dollar, with the Aussie Dollar down by 0.25% to $0.7261. The Kiwi Dollar was down by 0.17% to $0.7028.

The Day Ahead

For the EUR

It’s a relatively quiet day ahead on the economic calendar. Wholesale inflation figures for Germany are due out later today.

Barring a marked spike, however, we don’t expect the August figures to have a material impact on the EUR.

At the time of writing, the EUR was down by 0.01% to $1.1724.

For the Pound

It’s a particularly quiet day ahead on the economic calendar. There are no material stats due out of the UK to provide the Pound with direction.

The lack of stats will leave the Pound in the hands of market risk sentiment as the markets look ahead to Thursday’s MPC decision.

At the time of writing, the Pound was down by 0.12% to $1.3725.

Across the Pond

It’s also particularly quiet day ahead. There are no material stats due out to provide the Dollar and the broader markets with direction.

The lack of stats will leave the markets to continue to focus on the FOMC and what to expect on Wednesday.

The U.S Dollar Spot Index ended Friday up 0.28% to $93.195.

For the Loonie

It’s a particularly quiet day ahead for the Loonie, however. There are no major stats due out of Canada to provide the Loonie with direction.

The lack of stats will leave the Loonie in the hands of crude oil prices and market risk sentiment.

At the time of writing, the Loonie was down by 0.06% to C$1.2774 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

USD/JPY Forex Technical Analysis – Strengthens Over 109.938, Weakens Under 109.781

The Dollar/Yen closed higher on Friday as investors continued to bet on a reduction of asset purchases by the Federal Reserve before the end of the year. The Fed holds a two-day monetary policy meeting on September 21-22 and is expected to open discussions on reducing its monthly bond purchases, while tying any actual change to U.S. job growth in September and beyond.

On Friday, the USD/JPY settled at 109.975, up 0.233 or +0.21%.

Speculation about a Fed taper this year gathered pace after U.S. retail sales unexpectedly increased in August, data showed Thursday, rising 0.7% from the previous month despite expectations of a 0.8% fall. A business survey also showed a big improvement.

In other news, the yen has shown limited reaction to the ruling Liberal Democratic Party’s leadership race, which formally kicks off on Friday ahead of a September 29 vote. The LDP’s parliamentary dominance means the party’s new leader will become prime minister.

Daily USD/JPY

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through 109.113 will signal a resumption of the downtrend. A move through 110.448 will change the main trend to up.

The main range is 107.479 to 111.659. Its retracement zone at 109.569 to 109.076 is support. This zone stopped the selling on September 15 at 109.113.

The minor range is 110.448 to 109.113. The USD/JPY closed slightly above its retracement zone at 109.938 to 109.781, making it new support.

The short-term range is 111.650 to 108.722. Its retracement zone at 110.191 to 110.537 is the next upside target zone and potential resistance. The last main top at 110.448 falls inside this zone, increasing its importance.

Daily Swing Chart Technical Forecast

The early direction of the USD/JPY on Monday is likely to be determined by trader reaction to 109.938.

Bullish Scenario

A sustained move over 109.938 will indicate the presence of buyers. The first upside target is 110.191. Look for sellers on the first test. They are going to be defending the trend and the main top at 110.448. Taking out this top will change the main trend to up, likely extending the rally into 110.537.

Bearish Scenario

A sustained move under 109.938 will signal the presence of sellers. The first downside target is 109.781, followed closely by 109.569.

The downside pressure could increase if 109.569 fails as support. The first downside target is 109.596, followed by the main bottom at 109.113.

For a look at all of today’s economic events, check out our economic calendar.

The Week Ahead – Central Banks back in Focus with the BoE and the FED in Action

On the Macro

It’s a quiet week ahead on the economic calendar, with 37 stats in focus in the week ending 17th September. In the week prior, 62 stats had also been in focus.

For the Dollar:

Prelim private sector PMIs for September will be in focus on Thursday.

Expect the services PMI to be the key stat of the week.

Other stats include housing sector data that will likely have a muted impact on the Dollar and the broader market.

The main event of the week, however, is the FOMC monetary policy decision on Wednesday.

With the markets expecting the FED to stand pat, the economic and interest rate projections and press conference will be pivotal. FED Chair Powell prepped the markets for the tapering to begin this year. The markets are not expecting any hint of a shift in policy on interest rates, however…

In the week ending 17th September, the Dollar Spot Index rose by 0.66% to 93.195.

For the EUR:

It’s a relatively busy week on the economic data front.

Prelim September private sector PMIs for France, Germany, and the Eurozone will draw plenty of interest on Thursday.

While Germany’s manufacturing PMI is key, expect influence from the entire data set. Market concerns over the economic recovery have tested support for riskier assets. Softer PMI numbers would test EUR support on the day.

For the week, the EUR fell by 0.75% to $1.1725.

For the Pound:

It’s a relatively busy week ahead on the economic calendar.

On the economic data front, CBI Industrial Trend Orders and prelim private sector PMIs are due out.

Expect the services PMI for September to be the key stat on Thursday.

While the stats will influence, the BoE’s monetary policy decision on Thursday will be the main event.

Persistent inflationary pressure has raised the prospects of a sooner rather than later move by the BoE. Weak retail sales figures have made things less clear, however.

Expect any dissent to drive the Pound towards $1.40 levels.

The Pound ended the week down by 0.71% to $1.3741.

For the Loonie:

It’s another quiet week ahead on the economic calendar.

Early in the week, house price figures for August are due out. The numbers are not expected to have a material impact on the Loonie, however.

Retail sales figures for July, due out on Thursday, will influence, however. Another sharp increase in spending would deliver the Loonie with much-needed support.

The Loonie ended the week down 0.57% to C$1.2764 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

There are no major stats to provide the Aussie Dollar with direction.

While there are no major stats, the RBA monetary policy meeting minutes on Tuesday will influence. The markets will be looking for forward guidance following the latest lockdown measures.

The Aussie Dollar ended the week down by 1.05% to $0.7279.

For the Kiwi Dollar:

It’s another quiet week ahead.

Early in the week, consumer sentiment figures for the 3rd quarter will be in focus.

Trade data, due out on Friday, will be the key numbers for the week, however.

Away from the economic calendar, however, COVID-19 news updates will also be key.

The Kiwi Dollar ended the week down by 1.03% to $0.7040.

For the Japanese Yen:

It’s a relatively busy week on the economic calendar.

Inflation and prelim private sector PMIs are due out on Friday. We don’t expect the numbers to influence the Yen, however.

On the monetary policy front, the BoJ is in action on Wednesday. We aren’t expecting any surprises, however, as the Delta variant continues to deliver economic uncertainty.

The Japanese Yen rose by 0.01% to ¥109.93 against the U.S Dollar.

Out of China

There are also no major stats due out of China for the markets to consider, with the Chinese markets closed early in the week.

On the monetary policy front, the PBoC is in action. We don’t expect any changes to the Loan Prime Rates, however.

The Chinese Yuan ended the week down by 0.34% to CNY6.4661 against the U.S Dollar.

Geo-Politics

Iran, China, and Russia remain the main areas of interest for the markets. News updates from the Middle East, in particular, will need continued monitoring following recent events in Afghanistan.

Weekly Technical Market Insight: 20th – 24th September 2021

Charts: Trading View

US Dollar Index (Daily Timeframe):

Deprived of resistance, the US dollar pencilled in a second consecutive gain last week, adding 0.7 percent, according to the US dollar index.

Support from 91.78-91.96 has proved persistent since the beginning of July, withstanding three successive downside attempts—the latest being early September.

Dollar bulls, as you can see, entered an offensive phase at the tail end of the week. While it’d be unwise to rule out a retracement at current levels, further buying could emerge as Quasimodo resistance calls for attention at 93.90. Strategically placed north of the 93.73 20th August high, and sharing space with 100% and 1.618% Fibonacci projections at 93.88 and 93.82, respectively, 93.90 delivers reasonably weighty confluence.

With respect to trend, 2020 was disappointing. 2021, nonetheless, has observed a defence off support at 89.69 and, year on year, is 3.7 percent higher.

The relative strength index (RSI), a popular gauge of momentum, retested the 50.00 centreline over the week and is now on the doorstep of trendline resistance (taken from the high 92.41), pinned a short distance below overbought territory.

  • While chart studies, in particular the relative strength index, suggests upside momentum may flatten out this week, Quasimodo resistance at 93.90 delivers technical confluence traders might be drawn to should further buying take shape.

EUR/USD:

(Italics: previous analysis)

Europe’s common currency shed 0.7 percent versus a broadly-bid dollar last week, seating price action within range of prime support on the weekly timeframe at $1.1473-1.1583. Fibonacci enthusiasts will note the 100% Fib projection at $1.1613 and 1.27% Fib extension at $1.1550 circling the upper range of the aforesaid support. Interestingly, long-term stops likely rest south of the $1.1640ish lows, perhaps accommodating enough energy to fill $1.1473-1.1583 bids. With respect to trend on the weekly chart, the market has largely been bullish since the early months of 2020.

The second half of the week witnessed an acceleration to the downside, throwing light on Quasimodo support at $1.1689 from the daily timeframe. Albeit sponsoring a late August bid (black arrow), action from $1.1689 failed to find approval north of late July tops at $1.1909; therefore, this ranks $1.1689 as perhaps frail support this week.

Assuming a bearish leadership on the daily, the $1.1612 and $1.1602 (September/November 2020) lows signify downside support targets, followed by Fibonacci support between $1.1420 and $1.1522 (glued to the lower side of the weekly timeframe’s prime support at $1.1473-1.1583).

Against the backdrop of higher timeframes, price action on the H4 chart passed through Quasimodo support at $1.1742 in strong fashion Friday. With $1.1742 likely to serve as resistance, the $1.1690-1.1705 decision point putting in an appearance should not surprise. Statistically, though, decision points left untested following the immediate move out of the base tend to offer unreliable structure. $1.1690-1.1705 also teams up closely with daily Quasimodo support mentioned above at $1.1689, which you may recall chart studies have labelled fragile.

Through the lens of a simple technical trader, limited support is also evident on the H1 scale until $1.17 (sat within the walls of the H4 timeframe’s decision point at $1.1690-1.1705). Stacked demand is present between $1.1706 and $1.1744 (23rd August), with little inside of this formation revealing that active buyers will show interest. For that reason, $1.17 is a key downside objective this week. However, buyers entertaining the idea of bouncing from August 24th lows around $1.1728 shines the spotlight on a pullback to prime resistance coming in at $1.1767-1.1776, joined by supply at $1.1762-1.1774.

Observed Levels:

Long term:

Weekly prime support at $1.1473-1.1583, coupled with a 100% Fib projection at $1.1613 and 1.27% Fib extension at $1.1550, might welcome price action this week. As underlined above, $1.1473-1.1583 is in a reasonably privileged location: below the $1.1640ish lows. Overturning daily Quasimodo support at $1.1689, therefore, is a possible scenario, targeting daily Fibonacci support at $1.1420-1.1522.

Short term:

In conjunction with the longer-term picture, a bearish energy is present on the lower timeframes this week.

Any pullback, therefore, would be viewed as a sell-on-rally scenario, either from H4 resistance at $1.1742 (previous Quasimodo support) or H1 prime resistance at $1.1767-1.1776 (and supply at $1.1762-1.1774).

The combination of $1.17 on the H1 and its surrounding decision point on the H4 at $1.1690-1.1705 offers a clear downside target.

AUD/USD:

(Italics: previous analysis)

Prime support at $0.6968-0.7242 on the weekly timeframe has been fighting to entice fresh bullish interest since the area powered a two-week recovery in late August. Failure to command position from $0.6968-0.7242 opens up support at $0.6673. Buyers regaining consciousness, nevertheless, has prime resistance at $0.7849-0.7599 to target. Trend studies on the weekly scale show we’ve been higher since early 2020. Consequently, the response from $0.6968-0.7242 could STILL be the beginnings of a dip-buying attempt to merge with the current trend.

The daily timeframe scraping through prime support at $0.7286-0.7355 in the latter part of the week broadcasts weakness. This delivers free rein to Fibonacci support at $0.7057-0.7126, set within the parapets of weekly prime support at $0.6968-0.7242. With the relative strength index (RSI) cementing position below the 50.00 centreline—telling traders that average losses over the 14-day lookback period surpass average gains—this adds weight to a bearish atmosphere.

Although the higher timeframe canvas favours sellers, the H4 timeframe touched gloves with prime support at $0.7236-0.7266 (glued to the upper edge of weekly prime support at $0.6968-0.7242). You may recall this area was made reference to throughout the week—see below from previous writing (italics):

Sellers assuming leadership yesterday hauled the currency pair through stacked demand on the H4 timeframe between $0.7282 and $0.7343, dropping to within a stone’s throw from prime support at $0.7236-0.7266. The latter may interest bullish eyes—a base arranged to receive downside momentum derived from sell-stops below stacked demand.

Recognising $0.7236-0.7266 welcomed price action late Friday, $0.7310 stands in as an initial target early week should buyers stage a recovery.

Meanwhile, out of the H1 chart, early London on Friday responded to trendline resistance, extended from the high $0.7469, hardened by the 61.8% Fibonacci retracement at $0.7319 and a 1.272% Fibonacci projection at similar levels. This led movement under $0.73 heading into US trading hours and concluded within reach of $0.7248-$0.7259 demand (a zone placed within H4 prime support at $0.7236-0.7266).

Observed Levels:

Long term:

Weekly prime support at $0.6968-0.7242 is a key base on the bigger picture, though having noted the daily timeframe’s prime support giving up position at $0.7286-0.7355, a deep dive into the aforementioned weekly zone is a possibility.

Short term:

Focus is on the H4 timeframe’s prime support at $0.7236-0.7266, as buyers potentially gear up to take advantage of selling pressure (sell-stops) below stacked demand. As underlined above, the initial upside goal north of $0.7236-0.7266 sits at $0.7310.

$0.7248-$0.7259 demand on the H1, therefore, could be brought into the fight before a short-term bid arises.

USD/JPY:

(Italics: previous analysis)

Since mid-July, ¥108.40-109.41 demand has failed to stir much bullish energy on the weekly timeframe. Nevertheless, recognising the area derives additional backing from neighbouring descending resistance-turned support, extended from the high ¥118.61, an advance could eventually emerge to familiar supply at ¥113.81-112.22.

The uninspiring vibe out of weekly demand is demonstrated by way of a consolidation on the daily timeframe between prime support at ¥108.96-109.34 and resistance from ¥110.86-110.27. Reluctance to commit outside of these areas toughens the consolidation; range limits, therefore, are likely to remain on the watchlist this week. In the event price deviates from range extremes, Quasimodo resistance at ¥111.11 is seen, along with a concealed Quasimodo support at ¥108.43. Based on the relative strength index (RSI), the value is confined to a consolidation surrounding the 50.00 centreline, between 40.87 and 56.85.

A three-day recovery in the 10-year yield and a muscular USD bid, together with technical support derived from the 1.272% Fibonacci projection on the H4 timeframe at ¥109.14, aided USD/JPY at the tail end of the week. This, as you can see, left the double-top pattern’s (¥110.44) profit target around ¥108.71 (plotted alongside a 1.618% Fibonacci projection at ¥108.86) unchallenged. Continued interest to the upside this week is likely to close in on supply at ¥110.82-110.39 (entertains the noted double-top configuration and shares a connection with daily prime resistance at ¥110.86-110.27).

Price action on the H1 timeframe accommodated ¥110 on Friday, though momentarily explored ground north of the figure ahead of Quasimodo resistance at ¥110.11. Prime support coming in from ¥109.74-109.80 is particularly interesting, stationed beneath intraday lows around ¥109.81.

Observed Levels:

Long term:

Recognising weekly demand is in play at ¥108.40-109.41, joined by the end-of-week rebound from range support on the daily timeframe at ¥108.96-109.34, points to a test of daily range resistance at ¥110.86-110.27 this week.

Short term:

In harmony with the longer-term bullish image, any bearish attempt from ¥110 on the H1 could feed buyer interest from prime support at ¥109.74-109.80. This sets the stage for an initial upside objective at approximately ¥109.90ish.

GBP/USD:

(Italics: previous analysis)

In the shape of a hammer candlestick formation (bullish signal), supply-turned demand at $1.3629-1.3456 on the weekly timeframe stepped forward in July. The aforementioned zone remains active, welcoming an additional test mid-August. Yet, pattern traders will also note August’s move closed south of a double-top pattern’s neckline at $1.3669, broadcasting a bearish vibe. Conservative pattern sellers, however, are likely to pursue a candle close beneath $1.3629-1.3456 before pulling the trigger.

Sterling extended its underperformance against a spirited USD on Friday; the currency pair finished the week lower by 0.7 percent. Despite many desks forecasting an interest rate rise in the UK as early as May, candle action discovered deeper water below the 200-day simple moving average at $1.3829. This raises the possibility of Quasimodo support at $1.3609 presenting itself this week.

It was also aired in recent writing that the daily chart communicates a rangebound environment. Since late June, buyers and sellers have been squaring off between a 61.8% Fib retracement at $1.3991 and the noted Quasimodo support. Momentum, according to the relative strength index (RSI) value, however, is below the 50.00 centreline and on the doorstep of 40.00. This informs traders that momentum to the downside is increasing in the form of average losses exceeding average gains.

Interestingly, H4 prime support at $1.3689-1.3724 was acknowledged heading into Friday’s close. This area may interest those looking at price taking out stops beneath lows around $1.3730 (blue oval), with a primary profit objective set at $1.3765.

For those who read Friday’s technical briefing you may recall the following H1 analysis (italics):

Elsewhere, short-term action based on the H1 chart has the pair circling the lower side of $1.38, as we write. Interestingly, supply at $1.3837-1.3812 lurks directly overhead and could help facilitate what many traders will recognise as a stop-run after the event. Chart space below $1.38 shifts attention to Quasimodo support from $1.3751.

As evident from the H1 timeframe, we can see price did indeed slice through $1.38 and tag supply at $1.3837-1.3812 before plunging lower. Two key Quasimodo supports were taken in the process at $1.3759 and $1.3751 (both now potential resistances), and punctured the $1.3726 8th September low. What’s interesting from a Fibonacci perspective is $1.3726 is accompanied by Fibonacci support between $1.3715 and $1.3732.

Observed Levels:

Long term:

Scope to unearth lower price levels this week is a possibility, both on the weekly and daily timeframes. A reasonable downside target rests with the daily timeframe’s Quasimodo support at $1.3609, which sits within weekly supply-turned demand at $1.3629-1.3456.

Short term:

While higher timeframes eye lower ground, H4 and H1 timeframes imply a pullback could be in the offing early week from H4 prime support at $1.3689-1.3724 and H1 Fibonacci support between $1.3715 and $1.3732. H1 resistances are seen at $1.3759 and $1.3751, though the H4 target resistance is a touch higher at $1.3765.

DISCLAIMER:

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The Weekly Wrap – Economic Data and Policy Jitters Delivered a Boost for the Greenback

The Stats

It was a busier week on the economic calendar, in the week ending 17th September.

A total of 61 stats were monitored, which was up from 42 stats in the week prior.

Of the 61 stats, 21 came in ahead forecasts, with 27 economic indicators coming up short of forecasts. There were 13 stats that were in line with forecasts in the week.

Looking at the numbers, 29 of the stats reflected an upward trend from previous figures. Of the remaining 32 stats, 30 reflected a deterioration from previous.

For the Greenback, upbeat economic data and sentiment towards monetary policy delivered support in the week. In the week ending 17th September, the Dollar Spot Index rose by 0.66% to 93.195. In the previous week, the Dollar had risen by 0.59% to 92.582.

Out of the U.S

Early in the week, inflation figures were in focus.

In August, the annual rate of core inflation softened from 4.3% to 4.0% versus a forecasted 4.2%. While softer than expected, 4% continued to sit well above the FED’s 2% target, leaving tapering on the table.

Mid-week, industrial production and NY Empire State manufacturing figures were market positive.

On Thursday, retail sales, Philly FED Manufacturing PMI, and jobless claims figures were of greater interest, however.

In August, retail sales increased by 0.7% versus a forecasted 0.2% decline. Core retail sales jumped by 1.8% versus a 0.1% decline. In July retail sales had fallen by 1.1% and core retail sales by 0.4%.

Manufacturing numbers were also upbeat, with the Philly FED Manufacturing PMI increasing from 19.4 to 30.7 in September.

Jobless claims figures failed to impress, however, with sub-300k remaining elusive. In the week ending 10th September, initial jobless claims rose from 312k to 332k. Economists had forecast an increase to 330k.

At the end of the week, consumer sentiment improved, albeit moderately. In September, the Michigan Consumer Sentiment Index rose from 70.3 to 71.0, falling short of a forecasted 72.0.

Out of the UK

It was also a busy week. Employment, inflation, and retail sales figures were in focus. The stats were skewed to the positive.

In August, claimant counts fell by a further 58.6k after having fallen by 48.9k in July. In July, the unemployment rate fell from 4.7% to 4.6%.

The UK’s annual rate of inflation accelerated from 2.0% to 3.25 in August, also delivering Pound support.

At the end of the week, retail sales disappointed, however. Month-on-month, core retail sales fell by 1.2% in August, following a 3.2% slide in July. Retail sales fell by 0.9% after having fallen by 2.8% in July. Economists had forecast a pickup in spending.

In the week, the Pound fell by 0.71% to end the week at $1.3741. In the week prior, the Pound had fallen by 0.23% to $1.3839.

The FTSE100 ended the week down by 0.93%, following a 1.53% loss from the previous week.

Out of the Eurozone

Economic data included wage growth, industrial production, trade, and finalized inflation figures for the Eurozone.

Finalized inflation figures for Spain, France, and Italy were also out but had a muted impact on the EUR.

In the 2nd quarter, wage fell by 0.4%, year-on-year, partially reversing a 2.1% increase recorded in the previous quarter.

Industrial production and trade data were positive, however.

Production increased by 1.5%, reversing a 0.1% fall from June, with the Eurozone’s trade surplus widening from €17.7bn to €20.7bn.

At the end of the week, finalized inflation figures for the Eurozone were in line with prelim figures. The Eurozone’s annual rate of inflation accelerated from 2.2% to 3.0% in August.

For the week, the EUR fell by 0.75% to $1.1725. In the week prior, the EUR had fallen by 0.56% to $1.1814.

The CAC40 slid by 1.40%, with the DAX30 and the EuroStoxx600 ending the week with losses of 0.77% and 0.96% respectively.

For the Loonie

Economic data included manufacturing sales, inflation, and wholesale sales figures.

The stats were mixed in the week.

In July, both manufacturing sales and wholesale sales disappointed with falls of 1.5% and 2.1% respectively.

Providing support, however, was a pickup in the annual rate of inflation from 3.3% to 3.5%.

The pickup in inflationary pressure and rising oil prices were not enough to support the Loonie against the Greenback.

In the week ending 17th September, the Loonie fell by 0.57% to C$1.2764. In the week prior, the Loonie had fallen by 1.34% to C$1.2692.

Elsewhere

It was another bearish week for the Aussie Dollar and the Kiwi Dollar.

The Aussie Dollar fell by 1.05% to $0.7279, with the Kiwi Dollar ending the week down by 1.03% to $0.7040.

For the Aussie Dollar

Business and consumer confidence figures were in focus in the 1st half of the week.

In spite of the latest lockdown measures, the stats were skewed to the positive.

The NAB Business Confidence Index rose from -8 to -5 in August.

More significantly, the Westpac Consumer Sentiment Index increased by 2.0% in September. The index had fallen by 4.4% in August.

On Thursday, employment figures disappointed, however.

In August, full employment fell by 68k following a 4.2k decline in July. Employment tumbled by 146.3k, however, versus a forecasted 90.0k decline. In July, employment had risen by 2.2k.

According to the ABS,

  • The unemployment rate fell from 4.6% to 4.5%, with the participation rate declining from 66.0% to 65.2%.
  • Year-on-year, the number of unemployed was down by 298,000.

For the Kiwi Dollar

It was also a mixed week on the economic data front.

2nd quarter GDP numbers impressed, with the NZ economy expanding by 2.8%, quarter-on-quarter. The economy had expanded by a more modest 1.4% in the previous quarter.

On the negative, however, was a slide in the Business PMI from 62.6 to 40.1 in August. The figures reflected the impact of the latest lockdown measures on production, justifying the RBNZ’s decision to leave the cash rate unchanged.

For the Japanese Yen

It was a relatively quiet week, with the numbers skewed to the negative.

According to finalized figures, industrial production fell by 1.5% in July. While in line with prelim figures, this was a partial reversal of a 6.5% jump from June.

In August, Japan’s trade balance fell from a ¥439.4bn surplus to a ¥635.4bn deficit. Exports rose by 26.2%, year-on-year, after having been up by 37% in July.

The Japanese Yen rose by 0.01% to ¥109.93 against the U.S Dollar. In the week prior, the Yen had fallen by 0.21% to ¥109.94.

Out of China

Fixed asset investment and industrial production figures were in focus mid-week.

There were yet more disappointing numbers from China for the markets to consider.

In August, fixed asset investment increased by 8.9%, year-on-year. This was softer than a 10.3% increase in July.

More significantly, industrial production was up by 5.3% in August versus 6.4% in July.

In the week ending 17th September, the Chinese Yuan fell by 0.34% to CNY6.4661. In the week prior, the Yuan had ended the week up by 0.18% to CNY6.4443.

The CSI300 and the Hang Seng ended the week down by 3.14% and by 4.90% respectively.