The fundamental data from the UK failed to support a weakening British pound. Despite the speech by Mark Carney at a trade union conference, the brief rally soon lost steam across the GBP pairs. Carney hinted that rate hike would come in by spring next year and works would have to face higher interest rates before real wage growth. There were not any comments made in reference to the Scottish referendum during his speech.
Greenback gained momentum towards the North American session as a report published by the San Francisco Fed showed that the markets were lax in expecting a slower rate hike. The research has fuelled speculations that the FOMC meeting on September 16-17th could see a sooner than expected rate hike being announced.
The Eurozone is due to announce the sanctions on Russia, which was delayed by a day. Latest news reveals the US is also preparing a new set of sanctions against Russia. Russian media reports that the state authorities would react sharply should the new sanctions aimed at banning the Russian financial sector from raising short term debt in the European capital markets as well as an embargo on the oil and energy sector would be dealt with in a similar response.
Fundamentals Recap – September 09, 2014
· Australia NAB Business Confidence 8 v/s 10 previously
· UK manufacturing production m/m 0.3%, in line with estimates. Industrial production m/m rises to 0.5% above 0.3% estimates and up from 0.3% previous month
· BoE governor Mark Carney delivered his speech at a Trade Union conference in Liverpool. Hints at rate hike in the spring of 2015
· NFIB small business index in the US rises to 96.1 above 95.9 estimates
· Canada housing starts decline to 192k below estimates of 197k
· NIESR GDP estimates puts UK’s GDP at 0.6% for the 3 months ending August 2014
Fundamentals – September 10, 2014
· Japan PPI y/y declines to 3.9%, below estimates of 4.1% and down from 4.3% previously
· French Industrial production m/m expected to decline by -0.4%, down from 1.3% previous month
· BoE inflation report hearing scheduled for today
The bullish Greenback continues to grind higher. The most noticeable factor was the AUD/USD pair which broke below the 0.92 region. The Australian dollar was one of the strongest currencies the past few weeks and seems to have finally succumbed to the Greenback, ahead of the Australian employment data later this week.
EUR/USD Daily Pivots
R3: 1.30
R2: 1.2963
R1: 1.2938
Pivot: 1.2898
S1: 1.2873
S2: 1.2833
S3: 1.28
The EUR/USD continues to move within a tight range just above a long term yearly support level region of 1.283 – 1.277. A break below this region could pave way for further declines to the 1.21 levels. If the support level holds, we could see a rally back to 1.31 levels. The EUR/USD is expected to continue to range in the run up to the FOMC press conference on 17th September. The Stochastics oscillator is well oversold in the Weekly and Daily chart time frames. On the H4 charts, the Stochs is currently rising. An intra-day short opportunity could arise by selling the rallies targeting one of the daily support levels.
USD/JPY Daily Pivots
R3: 107.506
R2: 106.793
R1: 106.411
Pivot: 105.702
S1: 105.318
S2: 104.606
S3: 104.226
The USD/JPY continues to soar, making a fresh intra-day high today at 106.547. Diverging monetary policies of the two regions are supportive of a bullish USD/JPY. With risk aversion fading and with the markets already shrugging off the Russia/Ukraine crisis, the headwinds to the USD/JPY come in the form of the fundamentals, namely the retail sales data due on the 12th of September.
GBP/USD Daily Pivots
R3: 1.6325
R2: 1.6279
R1: 1.619
Pivot: 1.6144
S1: 1.6056
S2: 1.601
S3: 1.5922
The GBP/USD closed yesterday at almost the same levels as it opened, making it a doji During yesterday’s speech by Carney, most of the other GBP crosses managed to fill the gaps that formed during this week. With the doji candlestick representing indecision and a continued weakness of the British pound selling the pair from the gap could be a trading opportunity. The GBP/USD is most likely to continue to well into next week’s results of the Scottish referendum.
