Forex News and Events:
Geopolitical events dominate
Geopolitical events continued to dominate the news and have marginally weighed on risk appetite. However, there is little sign that risk aversion flows are anything but temporary. Global equity markets were soft while USD rose and yields in Europe’s key safe haven countries dropped to stay near new lows. All indications signaled flight to safe havens but so far the extent has been marginal. Markets have been able to keep risk localized with scant evidence of any contagion. This suggest traders should move away from the numbing stream of abysmal headlines and focus on the global accommodating policy. This backstop should halt any significant sell-off from gaining momentum. From a fundamental standpoint, we should see continued accumulation of risk. Yellen's cautiously dovish testimony last week suggests that there is little threat of a sudden change in Fed path in the next few months. In addition, the real likelihood that the US mid-term elections disrupt investors optimism is improbable given even a double win of republicans over the house and senate will not immediately change FOMC procedure. However, there is plenty of evidence that the ECB and BoJ will stay ultra-accumulating.
MICEX Falls
Traders focus today will remain on events surrounding the Ukraine and Gaza with only 2nd tier data scheduled. EU leader are scheduled to meet to discuss options regarding the Ukraine. Despite today’s risk rally, safe-haven trades are broadly in demand with gold, USD and U.S. 10-Year Treasury yields (hovering around 2.5%) still viewed has hedges against geopolitical risks. In EM markets, verbal pressure and new sanctions on Russia has had a profound effect on Russian equity markets. Russian stocks are near a 3-month low and down over 7% in the last 10 days. However, so far there is scant sign of real contagion with sell-offs being contain to local markets.
Today's Key Issues (time in GMT):
2014-07-22T04:30:00 JPY May All Industry Activity Index MoM, exp 0.60%, last -4.30%, rev -4.60%2014-07-22T05:00:00 JPY Jun Supermarket Sales YoY, last -2.20%
2014-07-22T05:00:00 JPY May F Leading Index CI, last 105.7
2014-07-22T05:00:00 JPY May F Coincident Index, last 111.1
2014-07-22T06:00:00 CHF Jun Trade Balance, exp 2.78B, last 2.77B, rev 2.85B
2014-07-22T06:00:00 CHF Jun Exports Real MoM, last -5.00%, rev -6.40%
2014-07-22T06:00:00 CHF Jun Imports Real MoM, last -2.50%, rev -1.60%
2014-07-22T07:00:00 JPY Jun Convenience Store Sales YoY, last -0.80%
2014-07-22T08:30:00 GBP Jun Public Finances (PSNCR), last 8.5B
2014-07-22T08:30:00 GBP Jun Central Government NCR, last 12.4B
2014-07-22T08:30:00 GBP Jun Public Sector Net Borrowing, exp 9.4B, last 11.5B
2014-07-22T08:30:00 GBP Jun PSNB ex Interventions, exp 10.5B, last 13.3B
2014-07-22T08:30:00 GBP Jun PSNB ex Royal Mail, APF, exp 11.1B, last 13.3B
2014-07-22T09:00:00 EUR Euro Area First Quarter Government Debt
2014-07-22T10:00:00 GBP Jul CBI Trends Total Orders, exp 8, last 11
2014-07-22T10:00:00 GBP Jul CBI Trends Selling Prices, exp 4, last 3
2014-07-22T10:00:00 GBP Jul CBI Business Optimism, exp 30, last 33
2014-07-22T12:30:00 USD Jun CPI MoM, exp 0.30%, last 0.40%
2014-07-22T12:30:00 USD Jun CPI Ex Food and Energy MoM, exp 0.20%, last 0.30%
2014-07-22T12:30:00 USD Jun CPI YoY, exp 2.10%, last 2.10%
2014-07-22T12:30:00 USD Jun CPI Ex Food and Energy YoY, exp 2.00%, last 2.00%
2014-07-22T12:30:00 USD Jun CPI Core Index SA, exp 238.227, last 237.776
2014-07-22T12:30:00 USD Jun CPI Index NSA, exp 238.535, last 237.9
2014-07-22T13:00:00 USD May FHFA House Price Index MoM, exp 0.20%, last 0.00%
2014-07-22T14:00:00 USD Jul Richmond Fed Manufact. Index, exp 5, last 3
2014-07-22T14:00:00 USD Jun Existing Home Sales, exp 4.99M, last 4.89M
2014-07-22T14:00:00 USD Jun Existing Home Sales MoM, exp 1.90%, last 4.90%
2014-07-22T23:30:00 AUD 20.juil. ANZ Roy Morgan Weekly Consumer Confidence Index, last 108.7
The Risk Today:
EUR/USD made an intraday bullish reversal near the key support at 1.3503 (see also the long-term rising trendline from the July 2012 low) on Friday. However, the subsequent bounce is thus far unimpressive. Hourly resistances can be found at 1.3562 (15/07/2014 low) and 1.3581. In the longer term, the break of the long-term rising wedge (see also the support at 1.3673) indicates a clear deterioration of the technical structure. A long-term downside risk at 1.3379 (implied by the double-top formation) is favoured as long as prices remain below the resistance at 1.3700. Key supports can be found at 1.3477 (03/02/2014 low) and 1.3296 (07/11/2013 low).
GBP/USD is in a corrective phase. Hourly supports can be found at 1.7039 and 1.7007 (see also the 38.2% retracement). A break of the hourly resistance at 1.7118 (18/07/2014 high) is needed to improve the short-term technical structure. Another resistance stands at 1.7192. In the longer term, the break of the major resistance at 1.7043 (05/08/2009 high) calls for further strength. Resistances can be found at 1.7332 (see the 50% retracement of the 2008 decline) and 1.7447 (11/09/2008 low). A support lies at 1.6923 (18/06/2014 low).
USD/JPY is moving sideways within the horizontal range defined by the support at 101.07 and the resistance at 101.86. The hourly resistance at 101.58 (intraday high) is challenged. A long-term bullish bias is favoured as long as the key support 99.57 (19/11/2013 low) holds. However, a break to the upside out of the current consolidation phase between 100.76 (04/02/2014 low) and 103.02 is needed to resume the underlying bullish trend. A major resistance stands at 110.66 (15/08/2008 high).
USD/CHF remains well supported as can be seen by the current mild price correction. Monitor the hourly support at 0.8969. A key resistance area stands between 0.9013 (16/06/2014 high) and 0.9037. Another support lies at 0.8938 (09/07/2014 high). From a longer term perspective, the bullish breakout of the key resistance at 0.8953 suggests the end of the large corrective phase that started in July 2012. The long-term upside potential implied by the double-bottom formation is 0.9207. A strong resistance stands at 0.9156 (21/01/2014 high).
