Analys från DailyFX
Dollar Starts Week Mixed as Taper Speculation Becomes Data-Centric
INTRADAY PERFORMANCE UPDATE: 09:50 GMT
Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): -0.04% (+0.47%prior 5-days)
ASIA/EUROPE FOREX NEWS WRAP
After a strong midweek performance, the US Dollar slumped on Friday and its woes have continued into the last week of August. Sparked by a slew of weak housing figures on Friday, the buck’s downturn has begun at a curious time for markets, given the fact that last week produced not only the July FOMC Minutes but also the Jackson Hole Economic Policy Symposium.
Indeed, there is one main takeaway from the fireworks (or lack thereof) last week: between now and September 19, the next FOMC meeting, only US economic data will drive market sentiment. Dovish or hawkish, the commentary was more or less the same from Fed officials this past week: ‘September would be an appropriate time to taper if the economic data is strong.’
The first such opportunity to see if US data is moving in the right direction is today in the form of the Durable Goods Orders report for July. Durable goods are products with lifespans of three years or longer (appliances, automobiles, etc), and therefore the report is viewed as a proxy to consumer confidence and credit.
In light of the recent upswing in financing costs, purchases that would be aided by lower rates have taken a hit in recent months (as seen on Friday, housing). We find that the July report should show no difference from the general trend. The weakness seen in the US Dollar to start the week reflects positioning for a weaker report; and a beat here would go a long way to ease sentiment and put favor back in the buck’s court.
EURUSD 5-minute Chart: August 26, 2013 Intraday
Taking a look at European credit, higher peripheral yields and lower core yields illustrates a slight risk-off sentiment in the market, which has led to a modest response by the Euro. The Italian 2-year note yield has increased to 1.913% (+6.0-bps) while the Spanish 2-year note yield has increased to 1.709% (+0.8-bps). Likewise, the Italian 10-year note yield has increased to 4.380% (+5.9-bps) while the Spanish 10-year note yield has increased to 4.452% (+1.2-bps); higher yields imply lower prices.
Read more: Pressure on Yen Could Rise if Inflation Slows amid Weaker Growth
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.
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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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