Dollar Ready to Break 10,555 if the Dow Relinquishes 16,325

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Talking Points:

• Dollar Ready to Break 10,555 if the Dow Relinquishes 16,325
• British Pound: Next Week’s Docket Can Offer Driver Where the BoE Decision Couldn’t
• Euro Traders Hear Threats and Forecasts from the ECB

Dollar Ready to Break 10,555 if the Dow Relinquishes 16,325

The Dow Jones Industrial Average has affixed itself to multi-year support, FX volatility measures are rising and haven demand is showing through in Treasuries. Yet, that doesn’t seem to be enough to drive the US Dollar to the next stage of its progressive advance…yet. Whether we reference the Dow Jones FXCM Dollar Index (ticker = USDollar), the ICE DXY or even individual pairs like EURUSD; we see the hesitation. For the USDollar, that is a tight range below 10,555. And, if we consider that the bull’s holdout – US equities – has yet to turnover, it makes sense that this last resort safe haven currency hasn’t put in for a preemptive break. Through the coming session, ‘risk aversion’ will remain the market’s undisguised trigger phrase for the dollar. That will be the case through next week as well. Alternatively, interest rate speculation will take a backseat through releases like the 2Q labor costs, TICs flows and retail sales data. Rate speculation is naturally tempered by fading speculative appetite, but it may seem unnaturally exaggerated if we use US yields as a guide as they play double duty as haven assets.

British Pound: Next Week’s Docket Can Offer Driver Where the BoE Decision Couldn’t

Short-end Gilt yields and swaps hit eight-week lows Thursday. That means expectations built on the Bank of England’s timing and pace for the triumphant return to a hawkish rate regime are tempering. Once again, the tangible event risk to breed doubt was rather light this past session. The only item on the docket was the BoE rate decision which doesn’t offer up any guidance when rates or stimulus go unchanged (which they were). However, once the pendulum starts to swing the other way for rate speculation, it is difficult to stop. For Friday event risk, trade and construction statistics cover important areas of the economy. The real market fodder however comes next Wednesday though when the central bank releases its Quarterly Inflation Report (QIR) and the market recalibrates its rate timetable all at once.

Euro Traders Hear Threats and Forecasts from the ECB

Having already pulled out most stops in its meeting just a few months back (rate cuts, negative deposit rates, Targeted-LTRO programs, etc), there was little chance of a new policy implementation from the ECB. However, after events like the failure of Portugal’s Banco Espirito Santo and Italy tipping back into recession, the market was looking more intensely for cues of intent. President Draghi seems to be whipping the doves forward by suggesting there is unanimous support for nonstandard tools if/when necessary and they were looking at procedure for an asset purchase program. It may be some ways down the line, but even Draghi noted the diverging paths and potential between EZ and US.

Yen Crosses Slipping Supports, Threatening Full-Scale Bear Trend

The Yen crosses are in varying degrees of deterioration. USDJPY is still well off of its range low from 2014 (100.75) while EURJPY is this morning slipping to new lows. Yet, one thing is proving universal this morning: a persistence of bearish volatility. Through much of Thursday, the market spent the day atoning for its erratic tumble the previous day. Yet, the calm didn’t last long. With each pair that clear serious levels of support (EURJPY 136.25, GBPJPY 171.50, NZDJPY 86.30, etc) the more definitive conviction becomes. For drive, US actions in Iraq, reports of a possible break in the Gaza seize fire, and escalating sanctions over Ukraine add a geopolitical tone to an already-tangible shift in sentiment amongst market participants. Keep an eye on Nikkei 225 moment and USDJPY’s proximity to 100.

Canadian Dollar Traders Prepared for an Aussie-Level Jobs Reaction

Top event risk through the final trading day of the week goes to Canada’s trading statistics for July. Historically, deviations from consensus from this data generate hefty market swings. And, divergences are relatively common. What makes this data particularly interesting for traders though is the recent rise in volatility measures (the one-month expected volatility level for USDCAD has risen from 4.00 to 5.17 percent in less than two months) and the impact of yesterday’s Australian jobs data. A meaningful disappointment in the Aussie report triggered heavy selling for the local currency. Could a miss or beat around the 20,000-net increase and 7.1 percent jobless rate consensus do the same?

Emerging Markets: The Sanctions Increase and Russia Prepares 2Q GDP Data

Fresh monthly lows for the MSCI Emerging Market ETF tracks the risk inherent in this otherwise high-return market segment. Thursday’s performance was a 0.4 percent decline on another trend of increasing volume. The Bloomberg Index of sovereign bond interest behind EM dropped to a 7-week low and the EM volatility index rose to levels last seen in early June – when it was still in the midst of a 10-month decline. In the currency ranks, very nearly the entire list was lower against the dollar. The top story – though its 0.4 percent decline didn’t make it top mover – remains the Russian Ruble. Building on reports that Russian troops were building on the Ukrainian border, Russia announced an increase in sanctions – on US fruit imports. If the market is already nervous about ‘risk’ assets, disconcerting news will become selling news.

Gold Responding to Financial Fear, Stimulus Upgrades, Dollar Hesitation…But Where the Volume?

Though its momentum was notably tempered this past session, gold nevertheless advanced for a third consecutive session. Fundamentally, it seems to have all the right reasons to find a bid. The retreat in equity markets continues with volatility readings finding permanent buoyancy to fulfill a ‘safe haven’ demand. Meanwhile, the ECB’s policy decision shows that one of the world’s largest central banks is contemplating upgrading its stimulus effort, thereby leveraging the alternative-store-of-wealth appeal of the metal. Through this fundamental push, though, something is noticeably missing – volume. Neither futures nor ETF markets see a growing appetite. The question here is whether traders want the dollar as an alternative to the Euro and as a safe haven or the gold for the same role.**Bring the economic calendar to your charts with the DailyFX News App.

ECONOMIC DATA

GMT	Currency	Release	Survey	Previous	Comments
--:--	JPY	BoJ Rate Decision	¥270T	¥270T	BoJ is trying to prevent deflation
--:--	CNY	Trade Balance (JUL)	$26.00B	$31.56B	Chinese trade balance decreased for the first time in June after seeing an uptrend from March to May
--:--	CNY	Exports (YoY) (JUL)	7.5%	7.2%
--:--	CNY	Imports (YoY) (JUL)	3.0%	5.5%
01:30	AUD	Home Loans (JUN)	0.6%	0.0%	A pickup in loans and investment lending boosts interests rate expectations as traders observe better consumer sentiment and business spending
01:30	AUD	Investment Lending (JUN)		-0.9%
01:30	AUD	Value of Loans (MoM) (JUN)		-0.7%
04:30	JPY	Bankruptcies (YoY) (JUL)		-3.6%	Japan has usually reported a drop in bankruptcies since late 2009
05:00	JPY	Eco Watchers Survey: Current (JUL)	48.5	47.7	The outlook for the economy has significantly improved during the year, from a low of 34.7 in March
05:00	JPY	Eco Watchers Survey: Outlook (JUL)		53.3
05:45	CHF	Unemployment Rate (JUL)	3.0%	2.9%	Has been on a downtrend since hitting 3.5% earlier this year
05:45	CHF	Unemployment Rate s.a. (JUL)	3.2%	3.2%
06:00	EUR	German Current Account (euros) (JUN)	18.5B	13.2B	Fallen from YTD high of 19.7 in March
06:00	EUR	German Trade Balance (euros) (JUN)	18.9B	17.8B	Germany has seen an incremental trend in its trade balance since the beginning of the year, rising from 15.0B in January
06:00	EUR	German Exports s.a. (MoM) (JUN)	0.8%	-1.1%
06:00	EUR	German Imports s.a. (MoM) (JUN)	1.0%	-3.4%
06:30	AUD	Foreign Reserves (Australian dollar) (JUL)		A$62.9B	Higher reserves are better for the local currencies value, reflecting ability to pay debt
08:30	GBP	Visible Trade Balance (Pounds)	-£8900	-£9204	Higher than expected trade balances or lower than expected deficits are positive for a currency because they signal higher than expected demand
08:30	GBP	Trade Balance Non EU (Pounds)	-£3700	-£3961
08:30	GBP	Total Trade Balance (Pounds)	-£2050	-£2418
08:30	GBP	Construction Output s.a. (MoM) (JUL)	1.0%	-1.1%	The YoY construction output in the UK has been falling since April this year
08:30	GBP	Construction Output s.a. (YoY) (JUL)	4.7%	3.5%
12:30	CAD	Net Change in Employment (JUL)	24.0K	-9.4K	A significant increase in unemployment usually drives expectations of a rate cut from the central bank. Employment, however is not a major agenda for the Bank of Canada and only a very large jump in unemployment will cause interest rate speculations.
12:30	CAD	Unemployment Rate (JUL)	7.1%	7.1%
12:30	CAD	Full Time Employment Change (JUL)		33.5
12:30	CAD	Participation Rate (JUL)		66.1
12:30	USD	Non-Farm Productivity (2Q P)	1.5%	-3.2%	Output has been falling since 4Q 2013
12:30	USD	Unit Labor Costs (2Q P)	1.2%	5.7%	Costs have been increasing from 4Q 2013
14:00	USD	Wholesale Inventories (JUN)	0.7%	0.5%	Wholesale inventories have fallen from a high of 1.1% in March this year
14:00	USD	Wholesale Trade Sales (MoM) (JUN)	0.8%	0.7%

GMT	Currency	Upcoming Events & Speeches
00:00	NZD	Finance Minister English to Speak in Hamilton
01:30	AUD	RBA Statement on Monetary Policy
06:30	JPY	Bank of Japan’s Kuroda Delivers Monetary Policy Statement

SUPPORT AND RESISTANCE LEVELS

To see updated SUPPORT AND RESISTANCE LEVELS for the Majors, visit Technical Analysis Portal

To see updated PIVOT POINT LEVELS for the Majors and Crosses, visit our Pivot Point Table

CLASSIC SUPPORT AND RESISTANCE

EMERGING MARKETS 18:00 GMT							SCANDIES CURRENCIES 18:00 GMT
Currency	USD/MXN	USD/TRY	USD/ZAR	USD/HKD	USD/SGD		Currency	USD/SEK	USD/DKK	USD/NOK
Resist 2	13.5800	2.3800	12.7000	7.8165	1.3650		Resist 2	7.5800	5.8950	6.5135
Resist 1	13.3250	2.3000	11.8750	7.8075	1.3250		Resist 1	7.3285	5.8475	6.3145
Spot	13.2247	2.1418	10.7169	7.7500	1.2479		Spot	6.8969	5.5678	6.2834
Support 1	12.8350	2.0700	10.2500	7.7490	1.2000		Support 1	6.7750	5.3350	5.7450
Support 2	12.6000	1.7500	9.3700	7.7450	1.1800		Support 2	6.0800	5.2715	5.5655

INTRA-DAY PROBABILITY BANDS 18:00 GMT

CCY	EUR/USD	GBP/USD	USD/JPY	USD/CHF	USD/CAD	AUD/USD	NZD/USD	EUR/JPY	Gold
Res 3	1.3468	1.6986	103.53	0.9144	1.0977	0.9377	0.8580	138.62	1304.30
Res 2	1.3449	1.6960	103.35	0.9130	1.0960	0.9359	0.8562	138.38	1299.11
Res 1	1.3429	1.6935	103.18	0.9116	1.0944	0.9342	0.8544	138.15	1293.92
Spot	1.3391	1.6884	102.82	0.9088	1.0911	0.9306	0.8507	137.68	1283.53
Supp 1	1.3353	1.6833	102.46	0.9060	1.0878	0.9270	0.8470	137.21	1273.14
Supp 2	1.3333	1.6808	102.29	0.9046	1.0862	0.9253	0.8452	136.98	1267.95
Supp 3	1.3314	1.6782	102.11	0.9032	1.0845	0.9235	0.8434	136.74	1262.76

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--- Written by: John Kicklighter, Chief Strategist for DailyFX.com

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