Analys från DailyFX
Dollar Inches Back After Post-Philly Fed Beatdown
INTRADAY PERFORMANCE UPDATE: 09:30 GMT
Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): 0.00% (+0.12%prior 5-days)
ASIA/EUROPE FOREX NEWS WRAP
The US Dollar wiped out the week’s gains over the course of a few hours yesterday after a batch of mixed yet important data. I believe that the aggregate impact of the improved weekly Initial Jobless Claims figure, the solid July US Consumer Price Index, and the the weak Philadelphia Fed Index created a nightmare scenario for investors in a thin market yesterday.
With the Fed’s stated goal for the QE3 circuit breakers either the Unemployment Rate falling to 6.5% or yearly inflation holding +2.5%, any incremental efforts towards these goals has tended to have a more dramatic impact on QE3 “taper trade” components – US Treasuries, US stocks, the US Dollar, and precious metals.
So with the weekly jobs data and the monthly inflation reading clearly pro-taper, it is the Philly Fed Index’s fault for the sharp selloff in US equity markets and the US Dollar. The Philly Fed Index is widely considered to be a top leading indicator for growth in the US, with Goldman Sachs recently anointing it (next to the weekly Initial Jobless Claims) as the best proxy for growth.
Thus: yesterday’s data said that the Fed is going to taper in a weak growth environment. This is the worst case scenario for investors: the economy isn’t strong enough to withstand a drawdown in stimulative efforts; yet the Fed is going to do so anyway. This would also explain the flock to safety yesterday – the Japanese Yen, the Swiss Franc, and Gold were all top performers against the US Dollar.
USDJPY 5-min Chart: Friday, August 16, 2013 Intraday
If the sentiment surrounding the US Dollar is going to be revived this week, overnight price action has already been constructive, though the upcoming data today will truly be necessary. Of note, July US housing data is expected to rebound, after the June figures showed that the uptick in interest rates in the prior two months had reduced the appeal of buying a home.
Read more: Point, Taper: Improved July Retail Sales Report Lifts US Dollar as Yields Jump
ECONOMIC CALENDAR – UPCOMING NORTH AMERICAN SESSION
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— Written by Christopher Vecchio, Currency Analyst
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
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What’s inside:
- EURUSD broke the ‘neckline’ of a bearish ‘head-and-shoulders’ pattern, April trend-line
- Resistance in vicinity of 11825/80 likely to keep a lid on further strength
- Targeting the low to mid-11600s with more selling
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Coming into last week we pointed out the likelihood of finally seeing a resolution of the range EURUSD had been stuck in for the past few weeks, and one of the outcomes we made note of as a possibility was for the triggering of a ’head-and-shoulders’ pattern. Indeed, we saw a break of the ’neckline’ along with a drop below the April trend-line. This led to decent selling before a minor bounce took shape during the latter part of last week.
Looking ahead to next week the euro is set up for further losses as the path of least resistance has turned lower. Looking to a capper on any further strength there is resistance in the 11825-11880 area (old support becomes new resistance). As long as the euro stays below this area a downward bias will remain firmly intact.
Looking lower towards support eyes will be on the August low at 11662 and the 2016 high of 11616, of which the latter just happens to align almost precisely with the measured move target of the ‘head-and-shoulders’ pattern (determined by subtracting the height of the pattern from the neckline).
Bottom line: Shorts look set to have the upperhand as a fresh month gets underway as long as the euro remains capped by resistance. On weakness, we’ll be watching how the euro responds to a drop into support levels.
For a longer-term outlook on EURUSD, check out the just released Q4 Forecast.
EURUSD: Daily
—Written by Paul Robinson, Market Analyst
You can receive Paul’s analysis directly via email bysigning up here.
You can follow Paul on Twitter at@PaulRobinonFX.
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
EURUSD: Retail trader data shows 37.3% of traders are net-long with the ratio of traders short to long at 1.68 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.07831; price has moved 9.6% higher since then. The number of traders net-long is 15.4% lower than yesterday and 16.4% higher from last week, while the number of traders net-short is 0.4% higher than yesterday and 10.5% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
GBPUSD: Retail trader data shows 38.2% of traders are net-long with the ratio of traders short to long at 1.62 to 1. In fact, traders have remained net-short since Sep 05 when GBPUSD traded near 1.29615; price has moved 3.4% higher since then. The number of traders net-long is 0.1% higher than yesterday and 13.4% higher from last week, while the number of traders net-short is 10.6% lower than yesterday and 18.3% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current GBPUSD price trend may soon reverse lower despite the fact traders remain net-short.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
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