الثلاثاء، 25 سبتمبر، 2012

AUD, EUR, GBP, JPY Stall at Key Resistance versus USD Post-Fed


Market participation rates picked up slightly yesterday, but this was expected around such an important news event. The Federal Reserve’s Minutes from its July 31 to August 1 meeting were expected to be market moving, but not in the way they presented themselves: whereas the US Dollar fell, we were expecting a more bullish reaction from the world’s reserve currency.
Mainly, the reason why the US Dollar fell back was that the Federal Reserve came across as more dovish than most – including myself – were expecting. Some strong language within the Minutes prompted the moves: “the Committee decided that the statement should conclude by indicating that it will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.”
Now, these Minutes must be taken in context: as noted in the Top 5 Key Events piece, “Thin Docket Makes Federal Reserve Minutes Increasingly Important,” the better labor market data that we’ve seen in the intermeeting period (since August 1) is obviously not reflected in these Minutes; and we thus expect the September Federal Open Market Committee decision, should the August Nonfarm Payrolls report (released on September 7) maintain recent gains, to be more balanced, reflecting a lower likelihood of more quantitative easing. If there is no easing in September, it will certainly be absent in October, just before the crucial November Presidential Election.
Any follow-through has been tempered against the US Dollar, and in part that has to do with a rise in peripheral European bond yields. The Italian 2-year note yield has gained to 3.110% (+12.5-bps) while the Spanish 2-year note yield has rallied to 3.666% (+17.3-bps). Likewise, the Italian 10-year note yield has eased to 5.667% (+3.2-bps) while the Spanish 10-year note yield has jumped to 6.370% (+15.0-bps); higher yields imply lower prices.
RELATIVE PERFORMANCE (versus USD): 10:25 GMT
NZD: +0.28%
CHF:+0.26%
EUR:+0.26%
CAD:+0.05%
GBP:-0.04%
JPY:-0.05%
AUD: -0.18%
Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): 0.00% (-0.79% past 5-days)
ECONOMIC CALENDAR
The docket is lighter today than yesterday, though there still remains some significant event risk on the docket. At 08:30 EDT / 12:30 GMT, the USD Initial Jobless Claims report for the week ended August 18 is due, which is forecasted to show that claims held near their four-week average. At 10:00 EDT / 14:00 GMT, the USD New Home Sales report for July will be released, and it appears that the housing market may have made some modest gains in the prior month. It is worth noting that housing releases, over the past few months, have missed to the downside more often than ‘beats’ have come across. Also released at the same time, the initial EUR Euro-zone Consumer Confidence reading for August will show that sentiment continued to drop.
TECHNICAL OUTLOOK
BB represents Bollinger Bands ®
EURUSD: The EURUSD’s gains continue, as anticipated, at least on a technical basis, and have been aided by the Federal Reserve’s more dovish than anticipated Minutes. Nevertheless, gains should persist, though we have slightly altered our outlook: while the ascending channel off of the July 24 and August 2 lows remains, it is possible that it a Wedge has formed. Resistance was hit today at 1.2560 (a level noted yesterday for the first time), and a daily close above said level will be necessary for further gains. Similarly, the Inverse Head & Shoulders pattern off of the low is in play. Given the Head at 1.2040/45, this would draw into focus 1.2760 as long as price holds above 1.2405. Interim resistance comes in at 1.2560, 1.2615/20 (channel resistance, 100-DMA), and 1.2680 (long-term descending channel resistance). Near-term support comes in at 1.2500, 1.2440/45 (former swing highs), 1.2405 (Neckline), 1.2310/30, 1.2250/65, and 1.2155/70.
USDJPY: The USDJPY continues to come off the recent highs, as expected, given the short-term technical congestion that materialized. The pair has trended to fresh weekly lows on the Federal Reserve’s Minutes, and now a base needs to be formed before more gains come. The key level today is 78.60, former June swing lows and a level of resistance during most of July. A drop below 78.60 today puts 78.10/20 (former lows) in focus.
GBPUSD: Yesterday I wrote “resistance has broken in the short-term channel at 1.5770, opening up room for a run towards 1.5880/1.5900.” Indeed, this was the case, with failure coming at said level today; a pullback has materialized. Our key levels for the near-term are 1.5880/1.5900 to the upside and 1.5770 to the downside; we are also becoming overextended on shorter-term charts, suggesting that another failure at 1.5900 could lead to profit taking before further bullish price action. A daily close below 1.5770 should lead to a drop into 1.5700/20. Beyond that, support comes in at 1.5635/40 (last week’s low), and 1.5625 (ascending trendline support off of August 6 and August 10 lows).
AUDUSD: The Federal Reserve’s Minutes propelled this pair back into the key 1.0530/45 zone, which was rejected firmly today. Prices are now caught between 1.0530/45 and 1.0480. The former channel that is threatening to break comes in at 1.0460 today, meaning a daily close below said level should result in a reversal failure and all but confirm the top. At current price, daily support comes in at 1.0460/80, 1.0435/45 1.0400/10 (channel support dating back to June, 200-SMA on 4-hour chart) and 1.0380/85. Near-term resistance comes in at 1.0535/45 (former swing highs), 1.0580, 1.0600/15 (August high) and 1.0630. Should we see a rally up towards 1.0600 again, another failure would market a Double Top and signal a push for a test of 1.0195/1.0200 (100-DMA).

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