Forex News and Events
The week started with sustained risk appetite in Asia yet European traders failed to follow the equities rally: FTSE is down 0.52% in London, DAX, CAC 40 and IBEX 35 trade 1.0% lower at the time of writing. We are heading into an event-full week in China, the 3Q GDP growth data will be critical to CNY traders from Tuesday. In Canada, the slight cool-down in September should keep the CAD-doves in charge. The BoC meets on October 22nd and is expected to maintain the status quo.
CNY will find direction with 3Q GDP & PBoC
As USD/CNY consolidates at seven-month lows, traders are sidelined before the critical growth data. The release of 3Q GDP combined to September retail sales, industrial production and fixed assets (ex-rural) should give fresh direction to Yuan as soon as Tuesday. The consensus is a slower GDP growth of 7.2% in Q3 (vs. 7.5% in 2Q), sluggish expansion of fixed assets and subdued retail sales in September. The industrial production data is mixed. HSBC’s October preliminary manufacturing PMI is due on October 23rd.
Soft macroeconomic data will likely cap the recent Yuan strength or at least slow down the pace of Yuan appreciation. The PBoC plans for more liquidity injection should favor a higher USD/CNY in the coming weeks, though decent option barriers below 6.18 should be a challenge for upside attempts. A correction towards the descending daily Ichimoku cloud cover (today at 6.1419/6.1720) is not ruled out. We had no official announcement, yet some officials familiar with the matter informed the international media that the PBoC will provide 200 billion Yuan to several national and regional, joint-stock lenders to avoid year-end liquidity necessities. The operation can be seen as complementary to 500 billion Yuan injection to nation’s five biggest banks in September.
The PBoC takes advantage of the soft inflation figures to boost monetary easing. Over the past month, the 14-day repo rate has been cut twice in addition to 500bn Yuan injection. More stimuli are underway as Governor Zhou Xiaochuan pushes the market-based interest rate reforms.
Canada: soft inflation buys time for the BoC
The Canadian inflation figures confirmed the expectations of slight cool-off in September. The headline CPI eased from 2.1% to 2.0% on year to September. The decline in gasoline and automobile prices counterweighted higher food and housing prices. The core CPI y/y – on which the BoC decisions are based – remained stable at 2.1%, slightly exceeding BoC’s 2.0% target for the second consecutive month. The BoC could be obliged to revise its accommodative monetary policy should the overheating in consumer prices continue. According to the BoC however, the recent surge in consumer prices is only temporary. Moreover, the recent drop in oil prices will perhaps push the headline CPI further down before the year-end. Therefore, the central bank is in position to keep its benchmark rate unchanged at 1.0% on October 22nd meeting. Markets do not predict a BoC rate hike anytime earlier than 2Q, 2015. USD/CAD consolidates above 1.1255 this Monday. Trend and momentum indicators are marginally positive, yet the recovery in oil prices help limiting losses in CAD-complex.
Swissquote Sqore Trade Ideas:
G10 Curreny Trend Model: Short EUR/USD at 1.2805
Today's Key Issues (time in GMT)
2014-10-20T10:30:00 CAD Aug Wholesale Trade Sales MoM, last -0.30%
The Risk Today
EURUSD EUR/USD has faded near the resistance at 1.2901. Monitor the hourly support at 1.2706 (16/10/2014 low, see also the rising channel). Another hourly support lies at 1.2625 (15/10/2014 low). An initial resistance can now be found at 1.2845 (16/10/2014 high). In the longer term, EUR/USD is in a downtrend since May 2014. The break of the strong support area between 1.2755 (09/07/2013 low) and 1.2662 (13/11/2012 low) has opened the way for a decline towards the strong support at 1.2043 (24/07/2012 low). As a result, the recent strength in EUR/USD is seen as a countertrend move. A key resistance stands at 1.2995 (16/09/2014 high).
GBPUSD GBP/USD's bounce is approaching the hourly resistance at 1.6127 (13/10/2014 high). Another resistance can be found at 1.6227. Hourly supports lie at 1.6030 (17/10/2014 low) and 1.5942 (16/10/2014 low). In the longer term, the collapse in prices after having reached 4-year highs has created a strong resistance at 1.7192, which is unlikely to be broken in the coming months. Despite the recent short-term bearish momentum, we favour a temporary rebound near the support at 1.5855 (12/11/2013 low). A key resistance lies at 1.6525.
USDJPY USD/JPY has bounced near the strong support at 105.44 (02/01/2014 high). Monitor the resistance at 107.59 (see also the 50% retracement). Another resistance lies at 108.74. Hourly supports can now be found at 106.58 (intraday low) and 106.14 (17/10/2014 low). A long-term bullish bias is favoured as long as the key support 100.76 (04/02/2014 low) holds. Despite the recent decline near the major resistance at 110.66 (15/08/2008 high), a gradual move higher is eventually favoured. Another resistance can be found at 114.66 (27/12/2007 high). A key support lies at 105.44 (02/01/2014 high).
USDCHF USD/CHF is moving towards the high of its declining channel. Monitor the hourly resistance at 0.9491. Another resistance stands at 0.9562. Supports can be found at 0.9400 (16/10/2014 low) and 0.9368. From a longer term perspective, the technical structure favours a full retracement of the large corrective phase that started in July 2012. As a result, the recent weakness is seen as a countertrend move. A key support can be found at 0.9301 (16/09/2014 low). A resistance now lies at 0.9691 (06/10/2014 high).
