Analys från DailyFX
US Dollar Picks Up Ahead of GDP, Fed; GBP/USD Falls to Key Support
ASIA/EUROPE FOREX NEWS WRAP
The US Dollar is a top performer so far this week, but the next few days are guaranteed to bring about volatility that could see the world’s reserve currency fall from near-first to last. Today, there are numerous important US data and events on the calendar, with two stalwarts in their own right: the 2Q’13 GDP report; and the Federal Reserve’s July policy announcement.
Ahead of the Fed, the US Dollar may be set up for further weakness as the 2Q’13 GDP report is expected to come in soft at +1.0% from +1.8% annualized. The report, however, isn’t an accurate indicator of the strides made in recent months in consumption trends, the housing sector, and the labor market; there was a material impact of the government’s austerity measures on overall growth.
However, with the major chunk of tax hikes and spending cuts in the rearview mirror, these fiscal headwinds should fade, paving the way for a stronger 2H’13 – a trend that the Fed will note later today. Fed policymakers are debating when to taper QE3, but also want to differentiate “tapering” from “tightening” – higher US yields have proven to be negative for the fragile housing market recovery.
The taper talk has been mostly positive for the US Dollar as it has stoked higher US Treasury yields, but currencies like the Euro and the Japanese Yen have been rather resilient in recent weeks; these two currencies should benefit should the Fed strike a dovish tone. On the other hand, with the Bank of England meeting tomorrow, a hawkish-tilted Fed could see the GBPUSD be a leader to the downside.
Read more: Aussie, Euro, Sterling, and US Dollar Primed for Big Moves This Week
Taking a look at European credit, peripheral yields are softer in the wake of this morning’s Euro-Zone inflation data. The Italian 2-year note yield has increased to 1.553% (+1.1-bps) while the Spanish 2-year note yield has decreased to 1.878% (-1.0-bps). Similarly, the Italian 10-year note yield has decreased to 4.391% (-0.6-bps) while the Spanish 10-year note yield has decreased to 4.633% (-1.1-bps); lower yields imply higher prices.
RELATIVE PERFORMANCE (versus USD): 10:30 GMT
JPY: +0.41%
CHF: +0.14%
CAD: +0.02%
NZD:-0.04%
EUR:-0.05%
GBP: -0.31%
AUD:-0.38%
Dow Jones FXCM Dollar Index (Ticker: USDOLLAR): +0.35% (+0.24%prior 5-days)
ECONOMIC CALENDAR
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TECHNICAL ANALYSIS – CHART OF THE DAY
GBPUSD – The pair is trading back to channel support that guided the pair off of the March lows, coinciding with the 23.6% Fibonacci retracement of the yearly high/low move; $1.5150/75 is eyed. A break below eyes a move to 1.5000 as former daily RSI trend support comes under pressure. Overall, the big picture calls for a move lower into 1.4225/40, the 100% extension off of the yearly high to the March low, extension drawn to the June high; the 61.8% extension at 1.4816 held as support on July 9 (low was 1.4815).
— 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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