Forex News and Events
Swiss FX reserves hit all-time high (by Arnaud Masset)
Swiss FX reserves hit another all-time high at it reached CHF 615.4bn in July, up 6.4bn compared to June. In the wake of the UK’s vote to leave the European Union the SNB intervened heavily in the FX market to mitigate the franc’s appreciation. The central bank made no secret those interventions but the just didn’t know the scope of the FX purchases. Unfortunately the increase in FX reserves did not reflect entirely the size of the purchase as the Swiss franc strengthened substantially against most currencies in July. FX reserves rose only by 6.4bn, which is the smaller monthly increase since March this year. However, when we look at sight deposits, it is possible to better assess the size of the interventions. Since June 23, domestic sight deposits increase by CHF 18bn - the biggest increase since February this year -- clearly indicating the Brexit vote forced the SNB to act aggressively. Nevertheless, the SNB was able to weather efficiently the post-Brexit turmoil as it scaled down quickly its purchases (sight deposits are relatively stable since mid-July).
EUR/CHF continued to trade within its post-Brexit range at between 1.08 - 1.0950 as the SNB closely monitor the situation. After surging 1.20% on Wednesday, USD/CHF consolidated gains and stayed above the 0.97 threshold.
What to expect from the NFPs (by Yann Quelenn)
A week after the FOMC, the market is scrutinising every morsel of information for hints that monetary policy will be tightened. Today's NFPs will be no different. Earlier this week, the ADP slightly beat expectations with a 179k new jobs’ print vs consensus of 170k. However when it comes to predicting the outcome of NFPs, the ADP has missed the mark for the last two releases. Indeed May and June NFP releases were very volatile and strong deviations have been experienced from consensus forecasts and on top of that in negative directions. May's data was one the weakest NFPs since 2010 with 38k vs 170 expected while June data was amazingly good with 287k vs 175 expected.
Today expectations remain high with consensus betting on the creation of 180k new jobs. Markets are still assessing a 37.3% probability of a rate increase for this year. We maintain our position that the Fed is dovish and not ready to take further action that would weigh on the American economy.
The US election will provide the Fed with its next excuse for not raising rates. Tightening monetary policy is way more than just having strong jobs data and an inflation that is headed towards the target. The reality is that 15% of the US population is on food stamps which represent nearly 50 million Americans. The Fed wants to appear hawkish but is actually dovish. Currency-wise, we maintain our long-term view that the dollar should continue dropping on the back of continued failed expectations that a rate hike will happen.
AUD/USD - Bullish. 
The Risk Today
Yann Quelenn
EUR/USD is consolidating below 1.1200 suggesting that selling pressures are decreasing. Hourly support can be located at 1.1114 (04/08/2016 low). Another hourly support lies at 1.1056 (27/07/2016 base). The technical structure suggests a short-term reverse momentum towards 1.1200. 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 has exited symmetrical triangle. Yet, the pair needs to break support located at 1.3058 (26/07/2016 low) to confirm deeper selling pressures. Hourly resistance can be located at 1.3371 (03/08/2016 high). Expected to consolidate for the time being. 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 is consolidating in its way towards psychological support at 100. The short-term technical structure is clearly negative as long as prices remain below the hourly resistance at 103.91 (13/07/2016 low). Expected to further weaken. 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 hourly resistance is given at 0.9750 (04/08/2016 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.
