Talking Points:
- Dollar Traders Await Policy, Growth Comments from Fed’s Yellen
- British Pound Drops after BoE Report Pushes Back Market’s View of First Hike
- Euro: The International Protest for More European Stimulus Grows
Dollar Traders Await Policy, Growth Comments from Fed’s Yellen
With the BoE taking a more dovish tack while the BoJ and ECB vow to pursue their unconventional policies, the US Dollar stands to be benefit even if its fundamental backdrop remains ‘status quo’. A modest gain by the Dow Jones FXCM Dollar Index (ticker = USDollar) Wednesday was no doubt inspired by just such an indirect appeal. Locally, the event risk was less than motivating. Data improved modestly but it carried less reach. Meanwhile, the calls from Philly Fed President Plosser to raise rates in the near future and Minneapolis Fed President Kocherlakota’s comments that low inflation demands an extended zero interest rate policy don’t stray from their respective scripts, so there is little to reprice. Perhaps Fed Chairwoman Janet Yellen will offer a more significant shift in views in her opening remarks at the Fed-ECB Global Markets meet.
British Pound Drops after BoE Report Pushes Back Market’s View of First Hike
A drop between 0.6 and 1.8 percent against its major counterparts this past session signals a dovish turn for the British Pound. The impetus for this slide was the Bank of England’s (BoE) Quarterly Inflation Report. In its most detailed evaluation on economic and financial conditions since the last QIR, the group struck a more dovish tone than even the more moderate shift in August. Of particular interest, Governor Mark Carney pushed out the time frame for which inflation would return to the target rate of 2 percent from approximately 18 months to 3 years. He also suggested he may have to send a letter to the Chancellor of the Exchequer in the coming months – customary when inflation is 1 percentage point above or below target. According to Sterling Futures, the market isn’t pricing in the first full hike until after the June 2015 meeting.
Euro: The International Protest for More European Stimulus Grows
ECB President Mario Draghi spoke in Rome this past session, and his comments were familiar. The central banker remarked that the unemployment level in the region is ‘unacceptably’ high, private investment was at its worst levels since 1990 and the economic outlook was troubled. He would further vow to pursue the unconventional policy they have executed in a shot-gun fashion – negative deposit rates, TLTROs, ending bond sterilization, covered-bond purchases. Yet, Draghi also acknowledged that a recovery could not be central bank managed alone. He called on fiscal policy for support. That same plea has been made by the US Treasury, Fed Chair, IMF and OECD the past week.
Australian Dollar Drops after RBA Member Mentions Intervention
Monetary policy that is increasingly attempting to compensate for fiscal and economic shortfalls is being pushed further and further to extremes. The RBA for its part abandoned its warning on the need for further rate cuts earlier this year, but their assessment that the currency was still overvalued has been a mantra. The markets don’t often take central bank’s evaluations of fair value on exchange rate too seriously unless there is a reasonable probability that they could use policy to realize the valuation. RBA Assistant Governor Christopher Kent changed that threat assessment this morning when he remarked alongside the standard ‘Aussie is too high’ comment that direct intervention hasn’t be ruled out. While served in a noncommittal way, the recent efforts of the RBNZ put the markets more quickly on the defensive.
US Oil Sanguine After the EIA Lowers 2015 Price Forecast Sharply
A global economic forecast that is coming off the tracks of recovery continues to weigh the price of oil. US-based WTI crude dropped 1.0 percent Wednesday but managed to hold its losses to a recent structure of congestion. Rather than reassure though, hallmarks of an impending breakout are likely causing energy traders some degree of anxiety. The 20-day average (equivalent to 1 trading month) of the CBOE’s Oil Volatility Index is the highest we’ve seen in two years. A vote for a medium-term bearish resolution was offered up by the US Energy Information Agency which lowered its 2015 price average price forecast from $94.58 predicted in October to $77.75.
Emerging Market: Ruble’s Range is Volatility and Not Inspiring Confidence
Emerging Market capital measures were little changed on the session. The MSCI ETF slipped a modest 0.2 percent to 41.21, the Bloomberg EM sovereign index nudged higher to 145.71 and the JPMorgan volatility index for the segment dropped back 2.6 vols to 8.0 percent. Once again, the FX ranks showed more capital flow. Amongst the most liquid currencies, the Brazilian Real and Korean Won tallied the biggest losses versus the Dollar (0.5 and 0.4 percent respectively). Outshining a few modest gains though was the ever-volatile Russian Ruble which surged 2.4 percent. This jump, however, should not be taken as a sign of recovery. USDRUB is developing some congestion just off record highs, but it isn’t seeing that dampen its volatility. The longer the Ruble lingers near record lows, the greater the risk of a forceful intervention.
Gold Winding Up for Next Break, Will the SNB Vote Prove Bulls’ Salvation
What some would take to be signs of a stabilizing market is more likely evidence that gold is heading towards its next breakout. In terms of price action, the commodity is working itself into yet another diminishing – and ‘terminal’ range that will ultimately have to decide a direction. Adding to this picture, volume behind ETFs and futures show a steady decline in turnover that many consider the calm before a storm. Given the time frame of this setup, the next meaningful thrust the commodity takes will likely be decided on one of the more dynamic rolls – likely a Dollar move. However, not far in the future, we have a G20 meeting that could stray onto the topic of currency manipulation (a theme that generally favors the metal). Further out, the interest surrounding the ‘Save Our Swiss Gold’ vote set for November 30 that would require the SNB to hold 20 percent of reserves in the metal is starting to interest metals traders as it does FX participants. Its passage – still up in the air – would require the central bank to buy 1,500 tons, but over a 5-year horizon. If growth and rates rise over that same period, it can easily offset the forced bid.
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ECONOMIC DATA
GMT | Currency | Release | Survey | Previous | Comments |
23:50 | JPY | Domestic Corporate Goods Price Index (MoM) (OCT) | -0.40% | -0.10% | Rising on a YoY basis. However, some of the increases might be due to the sales tax increase |
23:50 | JPY | Domestic Corporate Goods Price Index (YoY) (OCT) | 3.30% | 3.50% | |
23:50 | jpy | Machine Orders (MoM) (SEP) | -1.00% | 4.70% | Machine orders have been contracting since September. |
23:50 | jpy | Machine Orders (YoY) (SEP) | -0.30% | -3.30% | |
23:50 | JPY | Japan Buying Foreign Bonds (Yen) (NOV 7) | ¥806.6B | Two Week ago, Japan bought the most amount of foreign bonds since June 2014. Japan’s buying of foreign stocks has been trending upward this year. | |
23:50 | JPY | Japan Buying Foreign Stocks (Yen) (NOV 7) | ¥326.1B | ||
0:00 | NZD | ANZ Consumer Confidence Index (NOV) | 123.4 | Has been trending downward this year. | |
0:00 | NZD | ANZ Consumer Confidence (MoM) (NOV) | -3.40% | ||
0:00 | AUD | Consumer Inflation Expectation (NOV) | 3.40% | Consumer inflation is lower than the peak on May 2014; however it is higher than the beginning of the year. Consumer inflation expectations are just as important as actual inflation for the RBA. | |
4:30 | JPY | Industrial Production (MoM) (SEP F) | 2.70% | Machine Orders on a YoY basis have recently started to contract | |
4:30 | JPY | Industrial Production (YoY) (SEP F) | 0.60% | ||
4:30 | JPY | Capacity Utilization (MoM) (SEP) | -1.70% | Has been Contracting this year | |
5:30 | CNY | Retail Sales YTD (YoY) (OCT) | 12.00% | 12.00% | Has been growing at 12% this year. Important as China’s government is trying to make the economy more dependent on consumption |
5:30 | CNY | Retail Sales (YoY) (OCT) | 11.60% | 11.60% | |
5:30 | CNY | Industrial Production (YoY) (OCT) | 8.00% | 8.00% | Industrial production numbers has been increasing at 8 % which is lower than the rate at the beginning of the year |
5:30 | CNY | Industrial Production YTD (YoY) (OCT) | 8.50% | 8.50% | |
5:30 | CNY | Fixed Assets Ex Rural YTD (YoY) (OCT) | 16.00% | 16.10% | Rate of increase has been trending downward |
7:00 | EUR | German Consumer Price Index (MoM) (OCT F) | -0.30% | -0.30% | Germany’s inflation rate has been declining this year. The decline might show a weakening economy. However, these are final revisions of OCT data. |
7:00 | EUR | German Consumer Price Index (YoY) (OCT F) | 0.80% | 0.80% | |
8:15 | CHF | Producer & Import Prices (MoM) (OCT) | -0.30% | -0.10% | It has been showing contraction this year. |
8:15 | CHF | Producer & Import Prices (YoY) (OCT) | -1.30% | -1.40% | |
13:30 | USD | Initial Jobless Claims (Nov 8) | 280K | 278K | Initial jobless claims and the continuing claims have been declining which might show a strengthening labor market. |
13:30 | USD | Continuing Claims (NOV 1) | 2349K | 2348K | |
15:00 | USD | JOLTS Job Openings (SEP) | 4800 | 4835 | |
19:00 | USD | Monthly Budget Statement (OCT) | -$111.7B |
GMT | Currency | Upcoming Events & Speeches |
8:30 | USD | Fed's Dudley Speaks in Abu Dhabi |
9:00 | EUR | ECB Publishes Monthly Report |
9:00 | EUR | ECB Survey of Professional Forecasters |
17:30 | USD | Fed's Plosser Speaks on 'New Normal' in Philadelphia |
17:45 | USD | Fed Chair Janet Yellen Welcoming Remarks at FED/ECB Event |
20:30 | USD | Fed's Kocherlakota Speaks on the Bakken Oil Boom at Stanford |
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 | 14.0100 | 2.3800 | 12.7000 | 7.8165 | 1.3650 | Resist 2 | 7.5800 | 6.1750 | 7.2900 | |
Resist 1 | 13.6800 | 2.3000 | 11.8750 | 7.8075 | 1.3250 | Resist 1 | 7.5000 | 6.0900 | 7.0000 | |
Spot | 13.6388 | 2.2647 | 11.2617 | 7.7529 | 1.2960 | Spot | 7.4348 | 6.0094 | 6.8655 | |
Support 1 | 13.0300 | 2.0700 | 10.2500 | 7.7490 | 1.2000 | Support 1 | 6.7750 | 5.8000 | 6.3145 | |
Support 2 | 12.8350 | 1.7500 | 9.3700 | 7.7450 | 1.1800 | Support 2 | 6.0800 | 5.7300 | 6.1300 | |
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 | 1.2483 | 1.5947 | 116.41 | 0.9829 | 1.1519 | 0.8652 | 0.7777 | 143.90 | 1170.60 |
Res 2 | 1.2456 | 1.5919 | 116.09 | 0.9805 | 1.1496 | 0.8630 | 0.7755 | 143.55 | 1163.67 |
Res 1 | 1.2429 | 1.5891 | 115.78 | 0.9781 | 1.1474 | 0.8608 | 0.7734 | 143.21 | 1156.74 |
Spot | 1.2376 | 1.5835 | 115.15 | 0.9733 | 1.1429 | 0.8564 | 0.7690 | 142.51 | 1142.87 |
Supp 1 | 1.2323 | 1.5779 | 114.52 | 0.9685 | 1.1384 | 0.8520 | 0.7646 | 141.81 | 1129.00 |
Supp 2 | 1.2296 | 1.5751 | 114.21 | 0.9661 | 1.1362 | 0.8498 | 0.7625 | 141.47 | 1122.07 |
Supp 3 | 1.2269 | 1.5723 | 113.89 | 0.9637 | 1.1339 | 0.8476 | 0.7603 | 141.12 | 1115.14 |
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--- Written by: John Kicklighter, Chief Strategist for DailyFX.com
To contact John, email jkicklighter@dailyfx.com. Follow me on twitter at http://www.twitter.com/JohnKicklighter
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