Analys från DailyFX
Euro Weakness Ensues Despite Stronger 2Q’13 GDP; Pound up on BoE, Jobs
INTRADAY PERFORMANCE UPDATE: 09:40 GMT
Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): 0.00% (+0.33%prior 5-days)
ASIA/EUROPE FOREX NEWS WRAP
The European currencies, praised late last week for their ability to hold onto recent excess gains versus the US Dollar, have hit a wall so to speak. Whereas the British Pound continues to benefit from recent data and commentary from policymakers – and rightfully so – neither the Euro nor the Swiss Franc can benefit from what has been a steady stream of positive data from continental Europe.
Today is the perfect example of this new, near-term paradigm. The British Pound took back all of its losses after the July UK labor market update showed that while the Unemployment Rate was steady at 7.8%, first time claims figures dropped, a sign that hiring is outpacing firing.
This report was important because of what the Bank of England said last week with respect to “forward guidance,” insofar as to say that the BoE’s main interest rate would be kept at 0.50% through 2016, barring the CPI staying elevated above +2.5% y/y or the Unemployment Rate dropping below 7.0%.
The combination of an improved UK labor outlook and an optimistic BoE (per the August meeting Minutes) puts the British Pound back on top among the European currencies; and I would expect Sterling outperformance relative to its European peers to continue.
Mainly, the Sterling should outperform the Euro simply because the Euro can’t catch a break. Today’s improvements in 2Q’13 GDP across the board – French, German, and broader Euro-Zone figures all beat expectations – failed to produce a positive reaction in the Euro despite the implications of a rebounding Europe. Certainly, failure by the Euro to appreciate on strong data may be a warning sign that further weakness is due.
EURUSD 1-min Chart: Wednesday, August 14, 2013 Intraday
With the Euro weaker against the US Dollar in the wake of the improved growth figures, focus shifts to the North American calendar for potential event risk catalysts. Unfortunately, there are none, despite the July US Producer Price Index due (which hasn’t been market moving in recent months/years, at least in FX). As such, more technical trading conditions should dictate price action on Wednesday.
Read more: Point, Taper: Improved July Retail Sales Report Lifts US Dollar as Yields Jump
ECONOMIC CALENDAR – UPCOMING NORTH AMERICAN SESSION
See the DailyFX Economic Calendar for a full list, timetable, and consensus forecasts for upcoming economic indicators. Want the forecasts to appear right on your charts? Download the DailyFX News App.
TECHNICAL ANALYSIS – CHART OF THE DAY
EURUSD – A look at the H4 chart shows that the channel off of the July 10 and August 2 lows (parallel drawn to the July 16 high) has broken to the downside, with the daily RSI and Slow Stochastics (5,3,3) confirming the move lower. Accordingly, a close and hold below $1.3255 today should put pressure to the weekly low near 1.3230; though a more concerted level of support should come in at 1.3180/200. The bearish bias is warranted intraweek so long as 1.3315/20 holds to the upside.
— Written by Christopher Vecchio, Currency Analyst
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
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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