Forex News and Events
Chines imports slumped in July
The last trade report from China left little hope of a trend reversal in trade figures. Exports slumped another 4.4%y/y in dollar-denominated terms in July (versus -3.5% median forecast) after contracting 4.8% in the previous month. The main surprise came from imports, which fell 12.5%y/y, well below median forecast of -7% and the previous month’s reading of -8.4%. The slump in imports raised concerns about China’s ability to switch towards a domestic generated growth from an export based one. After an encouraging first quarter, Chinese imports resumed their slide in June and the trend is not set to reverse anytime soon.
The weakening yuan helped to boost exports but severely punished its main trading partner. China remains the largest global growth driver and its demand for external goods has become essential for the global economy. Countries such as Australia, South Korea, the US and Japan heavily rely on Chinese demand and with a weak outlook for Chinese exports, global recovery should remain on the back foot. Further easing from the PBoC and the government is also on the menu.
Fifth day of ruble appreciation
Money is flowing into the ruble. The currency is currently trading 65 versus the dollar, whereas oil is still very low, despite a slight rebound. The correlation between oil and ruble is diminishing. In fact, we believe that oil prices are not even the market’s main focus at present.
In our view, this comes down to a loss of central bank control. The Bank of England, earlier last week cut its rate for the first time in seven years and announced that the asset purchase program target is to be largely increased. Money will continue flowing into the markets and as a result we believe that markets will, more than even, look for yields wherever it can. The structure of the markets is definitely changing. Stocks are now being bought for dividend yields, while bonds are being bought for capital appreciation. This is why we are seeing inflows in RUB.
The key rate is now at 10.50% - a rate that cannot currently be achieved anywhere else in the markets. The RUB is definitely a good carry trade and should continue to appreciate. RUB is now taking on a kind of yields safe haven status.
Silver - Bearish Breakout. 
The Risk Today
EUR/USD continues to weaken. Hourly support at 1.1114 (04/08/2016 low). has been broken. The road is wide open towards another hourly support at 1.1056 (27/07/2016 base). Hourly resistance is given at 1.1234 (02/08/2016 high).. In the longer term, the technical structure favours a very long-term bearish bias as resistance at 1.1714 (24/08/2015 high) holds. The pair is trading in range since the start of 2015. Strong support is given at 1.0458 (16/03/2015 low). However, the current technical structure since last December implies a gradual increase.
GBP/USD continues to weaken. The pair has broken support located at 1.3058 (26/07/2016 low) which confirms deeper selling pressures. Hourly resistance can be located at 1.3175 (05/08/2016 high). Expected to go lower. The long-term technical pattern is negative and favours a further decline as long as prices remain below the resistance at 1.5340/64 (04/11/2015 low see also the 200-day moving average). Key support at 1.3503 (23/01/2009 low) has been broken and the road is wide open for further decline.
USD/JPY's buying pressures are back. The short-term technical structure remains clearly negative as long as prices remain below hourly resistance at 102.83 (02/08/2016 high) which is expected to be monitored. We favour a long-term bearish bias. Support is now given at 96.57 (10/08/2013 low). A gradual rise towards the major resistance at 135.15 (01/02/2002 high) seems absolutely unlikely. Expected to decline further support at 93.79 (13/06/2013 low).
USD/CHF has bounced sharply. Over the medium-term the pair is setting higher lows. Hourly support can be found at 0.9634 (02/08/2016 low) while strong resistance is given at 9956 (30/05/2016 high). In the long-term, the pair is still trading in range since 2011 despite some turmoil when the SNB unpegged the CHF. Key support can be found 0.8986 (30/01/2015 low). The technical structure favours a long term bullish bias since last December.
