Currency chatter - morning edition
FX Chatter - September 3, 2010
EUR
From Helaba: The technicals behind EUR/USD continue to suggest more gains in the pair, says a research note from KBC on Friday. “The euro has firmed above the 1.28 mark and the MACD is on the verge of issuing a buy signal,” says the report. “As the Stochastic is also continuing to rise, the technical outlook remains favorable. If there are no disappointments from the US labor market report, we believe there is a good chance of a test of the resistance at 1.2923. One resistance on the way is at 1.2856. The euro is supported at 1.2770/80 and around 1.7200. Our favored trading range: 1.2770 – 1.2923.”
From TD Securities: EUR/USD should be weaker, argues a research note from TD Securities on Friday. “We remain of the view that risk is more likely to be off than on in the next few weeks and that the USD (and other safer havens) should benefit as a result,” explains the report. “It stands repeating that the USD retains a strong, negative correlation with equity markets and so it should be towards Wall St that our market looks for direction after the data. Intraday, we look for firm EUR/USD resistance in the 1.2900/30 region in the event of an extension of this week’s recovery. We see support at 1.2790/00.”
From Scotia Capital: The euro is looking upbeat against the USD, says a research note from Scotia Capital on Friday. “On the fundamental side, the Eurozone continued its run of posting better than expected data, with an above consensus PMI services, PMI composite and retail sales,” says the report. “This combined with yesterday’s better than expected Q2 GDP (growing 1.9% y/y) and the ECB’s decision to increase its growth forecast have been supportive of EUR. Still much like the US there are some early signs that momentum is slowing into Q3… Support lies at the intraday uptrend of 1.2800 followed by recent congestion at 1.2680; while resistance comes in at recent congestion at 1.2920 followed by the psychological 1.3000.
From KBC: EUR/USD technical remain constructive, says a research note from KBC on Friday. “From a technical point of view, EUR/USD regained the 1.2732 resistance area (neckline H&S) and put in place a ST double bottom formation with neckline at 1.2780,” says the report. “Last week, we turned a bit more positive on EUR/USD even as we were well aware that the global context would remain shaky. Recent price action in EUR/USD was constructive. We hold a ST positive bias/buy-on dips approach. The targets of the short-term double bottom formation with neckline at 1.2780 area at 1.2935/72. However, tight stop loss protection is warranted to protect a ST trend reversal in case of a big surprise of the payrolls and subsequent reaction on the equity markets.”
From Mizuho: EUR/USD is likely to make some headway, according to a technical note from Mizuho on Friday. “Consolidating in a tiny ‘triangle’ just above the top of the daily Ichimoku ‘cloud’ and above the 9-day moving average,” explains the report. “Momentum is just bullish and we are trading at the 20 and 50-day moving averages. Let’s see if the Euro can capitalise on these small bullish Technical points.” The firm recommends “Attempt[ing] small longs at 1.2825/1.2800; stop below 1.2580. First target 1.2855, then 1.2925.”
CAD
From TD Securities: USD/CAD has been very tight, according to a research note from TD Securities. “A quiet overnight session and more range trade for USD/CAD limits the opportunities for incisive comment and analysis from a short-term point of view,” explains the report. “We still favour an eventual upside break in USD/CAD but short-term swings could still see the market slip back (briefly, at least) under support at 1.0474 before rebounding. Even in the event of a more persistent breakdown in USD/CAD, we think that the broader outlook – slowing domestic growth, less interest rate underpinning, limited upside for commodities and the potential for more risk-aversion – still suggests that USD/CAD remains a buy on dips.”
GBP
From RBC Capital Markets: Sterling was under some pressure after a larger than expected decline in the nation’s services PMI, says a research note from RBC Capital Markets. “UK Aug PMI Services fell by more than expected (51.3, cons: 52.9, prior 53.1) putting GBP under pressure on an otherwise quiet day.The PMI number pushed cable back below 1.54. EUR/GBP is above 0.8300 and a sustained hold opens a test of 0.8385/90.”
From Helaba: EUR/GBP is improving, according to a technical note from Helaba on Friday. “The technical setting for the euro versus the sterling has continued to improve,” explains the report. “The downtrend that began in mid-July has been surpassed and the high at 0.8363 is the next resistance. The quantitative indicators are rising and suggest scope for gains. Resistances within reach would be at 0.8386 and 0.8416”
From Mizuho: GBP/USD continues to try putting in a bottom, explains a research note from Mizuho on Friday. “Lets see if Cable can form an interim base against the 38% Fibonacci retracement with help from the large daily Ichimoku ‘cloud’,” explains the report. “A daily close above the 9-day average at 1.5463 might help push bullish momentum higher.” The firm recommends “Attempt[ing] longs at 1.5415; stop below 1.5300. First target 1.5500, then 1.5700.”
AUD
From RBC Capital Markets: The Australian dollar should be under more pressure against the USD given the political situation in the region, says a research note from RBC Capital Markets on Friday. “We do not think AUD is pricing in an adequate political risk premium and favour selling rallies,” begins the report. “The Gillard led centre-left Labor Party now controls 74 seats in the 150-seat lower house of parliament, against 73 seats for Abbott's centre-right coalition. Overnight, one of the 3 remaining kingmakers, Katter, said he could support Labor on issues of supply and confidence, that he is open to negotiations over his trenchant opposition to the mining tax and argued for devaluation of the AUD! It is shaping up to be a potentially very unstable political backdrop for AUD in the next 12 months.”
JPY
From TD Securities: The yen should continue to be strong against the USD, argues a research note from TD Securities on Friday. “Minor USD/JPY short-covering – and interest to buy topside strikes above 85 from hedge fund types – so far today suggest some potential for a squeeze up in USD/JPY and the JPY crosses,” explains the report. “While the long JPY trade has started to look a little crowded and Japanese officials continue to chew over their intervention options (or lack of them) one simple fact remains. US/Japanese long-term interest rate spreads fully endorse USD/JPY at current levels. We think any decent pop is a sell.”
From KBC: USD/JPY is likely in a stalemate, says a research note from KBC on Friday. “The pace of a further rise of the yen will remain the key factor for Japanese authorities to decide whether they will step into the market,” says the report. “As long as the decline in USD/JPY develops in a gradually way, we don’t expect immediate BOJ action. Only a swift move toward/beyond the 80 area, if it were to occur, would change the picture. So, for now we expect the current stalemate in USD/JPY to persist. We wouldn’t be surprised to see USD/JPY being blocked at current levels for some time to come.”
From Scotia Capital: Japan is not likely to attempt intervening to weaken the Japanese currency, says a research note from Scotia Capital on Friday. “One of the reasons we do not think
Japan will attempt intervention without the support of the G3 is because of the sheer size of its market,” explains the report. “Daily turnover in JPY accounts for 19% of the total $4trn FX market (or $760bn per day). The volume of many of the smaller Asian regions pales in comparison, which makes intervention a more plausible plan. Daily turnover in the Singaporean dollar accounts for 1.4% of the market ($56bn), while Korea accounts for 1.5% ($60bn) and Thailand makes up just 0.2% ($8bn). One of the major drivers of the decline in USDJPY has been the drop in US-JN interest rate spreads - see bottom chart on page 1 (due in part to China’s diversification into JGBs and a dovish Fed). However recently we have seen the 2-year spreads begin to stabilize. For USDJPY to move lower we will have to see ongoing downward pressure. We hold a Q310 target of 84.00. Next week the focus will remain on the BoJ, with its interest rate decision expected on Tuesday.”
From RBC Capital Markets: The yen remains unmoved by comments from government officials expressing a reluctance to intervene, says a research note from RBC Capital Markets on Friday. “Sources were reported as saying that the MoF were unlikely to intervene if USD/JPY were to decline graduallyand any such intervention would not aim to turn the market around,” explains the report. “They added they are ready to act against sudden moves if needed, but we think any such action would have limited lasting effect. USD/JPY was unmoved by the comments.”
From Danksebank: The yen is ignoring concerns from Japanese officials that interventions would fail, said a report from Danksebank on Friday. “EUR/USD has remained stable at the 128 level, while USD/JPY continues to trade below 85,” explains the report. “There has been limited reaction to comments from three Japanese officials that yen intervention has to be coordinated with the US, as sales of yen without the backing from the US would be a challenge.”
From Mizuho: The yen continues to look strong against the USD, says a technical note from Miuzho: The pair is “Trading in a tight range around 84.50, waiting for this afternoon’s figures and with very sharp swings at the long end of JGB yields,” says the report. “All aspects of this chart point to a short position and we continue to prepare for a series of cautious downside probes.” The firm recommends “Attempt[ing] shorts at 84.25, adding to 84.55; stop well above 85.00. First target 84.00, then 83.50.”
CHF
From Scotia Capital: EUR/CHF appears to have bottomed, says a technical note from Scotia Capital on Friday. “Technicals are warning that EURCHF has bottomed, with the recent candlestick formation and bullish divergence on the MACD hinting that there could well be a period of retracement that lies ahead,” says the report. “Short EURCHF is also a notably crowded trade, which leaves it vulnerable to a violent period of short covering. From here the first level of resistance is historical congestion at 1.3180/90 followed by the 50-day moving average of 1.3406.”
From RBC Capital Markets: This morning’s Swiss CPI gives little chance of FX interventions from the Swiss National Bank, says a research note from RBC Capital Markets on Friday. “Swiss Aug CPI fell marginally short of expectations, extending the string of downside CPI surprises to four months (on account of stronger CHF),” says the report. “CPI was flat m/m as expected, but prior revisions saw the y/y rate tick down from 0.4% to 0.3%. EUR/CHF made a small jump into the number but saw little reaction on the release. As things stand, today’s release should have little effect on the chances of the SNB returning to intervention.”
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