Market Brief
It was a quiet session in Asia, with most currency pairs trading range bound. In Japan, equity traders remained stone-faced despite better-than-expected Japan’s preliminary Q2 GDP growth. Data indicate that the Japanese economy contracted 0.4%q/q (s.a.) from April through June compared with -0.5% expected. In annualised terms, the economy shrank -1.6%q/q versus -1.8% median forecast. Final reading for the first quarter was revised upward to 1.1%q/q from 1% a month earlier. Despite the news, USD/JPY edged higher to 124.45 and remains above the support standing at 123.78 (Fib 61.8% on June-July debasement). We expect the pair to hold a bullish tone as policy divergence will remain traders’ favourite topic ahead FOMC minutes due on Wednesday. On the upside, the high from August 12 standing at 125.24 will act as a strong resistance. Nevertheless, it should not last long in case of hawkish minutes.
Data from the US were above expectations last Friday. PPI came in above median forecast at 0.2%m/m in July, while analysts were looking for a lower figure of 0.1%. The core reading was released at 0.3%m/m versus 0.1% median forecast. However, on a year-over-year basis, PPI contracted 0.8%y/y versus 0.9% expected and -0.7% previous month. Industrial production also printed above expectations with a reading of 0.6%m/m compared to 0.3% consensus. However, previous month figure was revised lower from 0.3% to 0.1%. University of Michigan sentiment index came in on the soft side at 92.9 versus 93.5 expected and 93.1 previous read as consumers are concerned about an increase in interest rates and slowing foreign economies. EUR/USD is still trading range bound between 1.1080 and 1.1214 ahead of German parliament’s vote about Greece’s new €86bn rescue package. Angela Merkel is strongly supporting the bail out deal even though she ruled out a haircut on Greek debt on television last Sunday. On the technical side, a strong resistance lies around 1.12 (previous highs and Fibo 61.8% June-July debasement), while on the downside, a key support stands at 1.0809 (low from July 20).
In Brazil, USD/BRL has finally stabilised around 3.50 despite political jitters and mass protests. On Sunday, Brazilians met in the streets to demonstrate against a worsening economy, corruption scandals and to call for President Dilma Rousseff impeachment. On the data front, July unemployment rate is expected to have reached 7.1% from 6.9% a month earlier (due on Thursday), while median forecast sees IBGE mid-month inflation at 0.43%m/m compared to 0.59% a month earlier (due on Friday). On the medium term, we expect the BRL to continue to suffer from the uncertainty surrounding the way fiscal imbalances will be addressed and lower commodity prices, together with weaker global demand.
In Europe, equity futures are broadly lower this morning with German DAX down -0.48%, French CAC down -0.83%, SMI down -0.41% while the Footsie adds 0.44%.
Today traders will be watching unemployment rate from Turkey; retail sales from Switzerland; Empire manufacturing and NAHB housing market index from the US; weekly trade balance, formal job creation and tax collection from Brazil.
Today's Calendar Estimates Previous Country / GMT DE Jul PPI MoM - -1.60% DKK / 07:00 DE Jul PPI YoY - -4.70% DKK / 07:00 TU May Unemployment Rate 9.00% 9.60% TRY / 07:00 SZ Aug 14 Total Sight Deposits - 462.3B CHF / 07:00 SZ Aug 14 Domestic Sight Deposits - 395.8B CHF / 07:00 NO Norway's Finance Minister Receives Report on Tax & Investments - - NOK / 07:00 SZ Jun Retail Sales Real YoY - -1.80% CHF / 07:15 NO Jul Trade Balance NOK - 16.9B NOK / 08:00 EC Jun Trade Balance SA 23.1B 21.2B EUR / 09:00 EC Jun Trade Balance NSA - 18.8B EUR / 09:00 EC Bundesbank Publishes Monthly Report - - EUR / 10:00 BZ Aug 16 FGV CPI IPC-S 0.37% 0.53% BRL / 11:00 BZ Central Bank Weekly Economists Survey - - BRL / 11:25 US Aug Empire Manufacturing 4.5 3.86 USD / 12:30 CA Jun Int'l Securities Transactions -6.00B -5.45B CAD / 12:30 EC ECB Publishes Weekly QE Purchases - - EUR / 13:45 CA Aug 14 Bloomberg Nanos Confidence - 52 CAD / 14:00 US Aug NAHB Housing Market Index 61 60 USD / 14:00 BZ Aug 16 Trade Balance Weekly - $726M BRL / 18:00 US Jun Net Long-term TIC Flows - $93.0B USD / 20:00 US Jun Total Net TIC Flows - $115.0B USD / 20:00 BZ Jul Formal Job Creation Total -113950 -111199 BRL / 22:00 BZ Jul Tax Collections 103300M 97091M BRL / 22:00 BZ Jun Economic Activity MoM -0.55% 0.03% BRL / 22:00 BZ Jun Economic Activity YoY -1.35% -4.75% BRL / 22:00
Currency Tech EUR/USD
R 2: 1.1436
R 1: 1.1278
CURRENT: 1.1071
S 1: 1.0819
S 2: 1.0660
GBP/USD
R 2: 1.5930
R 1: 1.5803
CURRENT: 1.5664
S 1: 1.5330
S 2: 1.5171
USD/JPY
R 2: 135.15
R 1: 125.86
CURRENT: 124.52
S 1: 120.41
S 2: 118.89
USD/CHF
R 2: 1.0129
R 1: 0.9984
CURRENT: 0.9795
S 1: 0.9571
S 2: 0.9072