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Japan trade balance for June is due at 2350GMT
Japan trade balance for June
•Expected is Y -155.7bn,
•Prior Y -996.4bn
Adjusted trade balance,
•Expected is Y -594.7bn,
•Prior Y -821.0bn
Exports:
•Expected +10.0% y/y, prior +10.1%
Imports
•Expected +13.8% y/y, prior +10.1%
HSBC - What Next For GBP/USD?: The One Chart That Says It All
Given the close correlation between movements in GBP/USD and shifts in relative interest rate expectations, the simplest assumption would be that the better UK growth is relative to the US, the higher GBP/USD would be, and vice versa. Right?
Not really, "it is not that straight-forward", says HSBC.
In the chart below, HSBC illustrates what they believe would be the likely reaction to developing economic news in the UK and US. HSBC examines various combinations of “good”, “bad”, “terrible” and “excellent” data releases. So they have the cyclical considerations, which are shown in our diagram with each quadrant given a lower case a,b,c,d.
Here are HSBC's findings:
a) Good US data, Bad UK data – GBP negative
b) Good US data, Good UK data – GBP negative
c) Bad US data, Good UK data – Neutral
d) Bad US data, Bad UK data – GBP positive .
"So in our inner cyclical quadrant of a, b, c, d we have GBP doing well in one out of the four cases. In other words even in a cyclical environment the odds seem stacked against GBP," HSBC finds outs.
Then HSBC moves to the more extreme outcomes where growth is not simply bad or good, but terrible or excellent: Here are those findings as well:
A) Excellent US data, Terrible UK data – GBP negative
B) Excellent US data, Excellent UK data – GBP positive
C) Terrible US data, Excellent UK data – GBP negative
D) Terrible US data, Terrible UK data – GBP negative
"In fact, our interpretation of different possible outcomes is that most of them point to downside risks for GBP-USD, with only a couple of instances arguing for GBP-USD gains...GBP-USD is likely to fall further," HSBC concludes.
EUR/USD
China: HSBC Manufacturing PMI – Flash reading for July due at 0145GMT
The June results deteriorated for the second consecutive month, coming in at 48.2
Expectations for the July result are for unchanged at 48.2
China July flash manufacturing PMI – quick recap
JP Morgan - EUR/USD: Below 1.25 Or Above 1.35 In Q3
JP Morgan kept its EUR/USD targets unchanged into year end (1.30 for Q3 and Q4) to signal that the currency will remain trendless, as it has been for most of the year.
Still, according to JPM, the downside risk to this view could probably take EUR/USD below 1.25 in Q3 if one or more of these 3 scenarios materialize: (1) Fed alters 2015 rate guidance this year due to a steady drop in unemployment rate; (2) ECB cuts the repo rate again or implements negative deposit rates to lingering recession in the periphery; or (3) Greek or Portuguese governments fall, leading to fears of a Syriza win in Greece or debt restructuring with PSI in Portugal.
The opposite upside risk to this view, according to JPM, could probably take EUR/USD above 1.35 in Q3 if one or more of these 3 scenarios materialize: (1) Fed signals that tapering will not begin until 2014; (2) Euro area PMI composite moves above 52 this summer; or (3) weekly LTRO repayments proceed quickly enough to imply less than €200bn of excess liquidity by year-end, thus triggering a 25bp sell-off in 2-yr German rates.
EUR/USD
US Market Report
EUR/USD
•Sovereign & Real Money offers at 1.3250 still strong, more offers at 1.3300
•Buy stops above the mid figure also gaining size
•Bids at 1.3200 and 1.3150
•Sell stops below 1.3190
USD/JPY
•Japanese offers in front of 100.20, more offers at 100.50 - 100.60
•Large buy stops noted and in focus from 100.20 through 100.30
•Bids light at 99.50 and in good size ahead of 99.00
•Sell stops under 98.80
AUD/USD
•Light offers at .9230 and up to the decent offers at .9250, larger selling interest at .9300 and up to .9310
•Buy stops above .9270 and above .9300 (smaller now as many were cleared)
•Bids at .9190 and .9150
•Sell stops quickly lined up under .9180 in decent size
GBP/USD
•Strong real money offers at 1.5390 through 1.5400
•Buy stops quite large above that big figure
•Bids into 1.5320 and more at 1.5300
•Sell stops below the big figure in good size
KEY NEWS
•All data out of the US (and bear in mind that tapering is data-dependent):
•Manufacturing PMI expected 52.50 (9:00 ET)
•New Home Sales forecast at 482K (10:00 ET)
•New Home Sales (MoM) forecast at 1.8% (10:00 ET)
Strong USD demand coming from big US leveraged funds, fueled by the steady rise in US 10yr yields
USD/JPY - Exporter offers in good size at 100.50
USD/CAD - Macro accounts reported as selling into the lows
AUD/USD - Offers from a US hedge fund at .9220
Credit Agricole - Why EUR Short-Squeeze Is Set To Test 1.3250 Today?
Focus of the day:
"We expect EUR/USD’s move higher to continue today as the current event-void fuels a more sanguine market risk outlook. Given this void ahead of next week’s important US data and policy events, EUR/USD could test of 1.3250 today. Perhaps more importantly, in the absence of strong US Q2 GDP revision, or more hawkish policy leaning from Fed Chairman Bernanke next week, positioning risks appear tilted towards a further EUR/USD extension towards 1.34. Outlining these points, our latest FX focus piece identifies some potential short-term triggers for both ECB and Fed policy perceptions to push the pair higher. Notwithstanding these short-term drivers, further ahead we still foresee a weaker EUR/USD as Fed QE-exit perceptions return from their current lull to dominate FX markets lifting USD."
Adam Myers, Senior FX Strategist - Crédit Agricole CIB
Citi - Trading EUR/NZD Around This Week's RBNZ, Ifo
Investors following short term macro strategies should consider expressing a bearish EUR/NZD view around the RBNZ policy decision and Germany Ifo release this week, advises Citibank.
"EURNZD could move lower in coming days if data disappointments out of the Eurozone increase the chances of more aggressive rate guidance by the ECB next week. In addition, unchanged policy outlook from the RBNZ this week could be seen as relatively hawkish," Citi clarifies.
"All that could push EURNZD lower to move more in line with the EUR-NZD 2y rate spread – our proxy for relative policy outlook between the ECB and the RBNZ. As shown in Figure 3 this relative value proxy suggests that EURNZD should be trading close to 1.5000. Recent efforts by various officials around the world to alleviate global growth concerns should support market risk sentiment and weigh on EURNZD," Citi adds.
EUR/USD
BofA Merrill - US 10Y Yields Hold Key To USD Index & GBP/USD: Levels & Targets
While US 10yr yields have briefly pushed higher yesterday, more needs to be seen before we can say with confidence that the bear trend has resumed, says Bank of America Merrill Lynch.
"Indeed, against 2.562%, we risk a deeper probe of 2.463%/2.372%resistance before greater basing and resumption of the larger bear trend (we continue to target 2.857%2.951%)," BofA projects.
Until this move higher in US yields take place, "Dollar bulls need to remain PATIENT", BofA advises.
"Yes, the US Dollar Index may have completed its downside correction at the 82.09/82.12 support zone, but until a break of 82.65 (intra-day trendline support), preferably 83.03, we prefer to take a wait-and-see attitude," BofA clarifies.
Same holds for Cable, where BofA sees gains should be limited to 1.5393/1.5438, worst case the 200d (now 1.5580).
"Back below 1.5269, trendline support is the 1st sign that the bear trend has resumed, with a break of 1.5158 confirming a resumption of the larger bear trend," BofA adds.
Credit Suisse - Stay Long EUR/USD For 1.3340 Then Reverse To Short
EUR/USD has extended its break higher this week above the 1.3208 price level.
"Trendline and 13-day EMA support, now at 1.3121/16, continues to underpin the recovery leaving our bias still higher to 78.6% retracement resistance at 1.3276, next, then the top end of the range at 1.3342/80 – the falling trendline from the May 2011 high and the 61.8% retracement barrier," says Credit Suisse.
"We expect this to cap and would turn sellers again here. Above the 1.3418 peak is needed for a more important break higher. Support moves to 1.3164 initially, then 1.3121/16. Below 1.3067/52 is needed for a deeper setback to see a retest of 1.2994/81," CS adds outlining its current technical bias on the pair.
In line with this view, CS advises clients to stay long EUR/USD for 1.3340 then to reverse to a short here with a stop above 1.3435.
Scotiabank - Buy & Sell Signals For EUR/USD, GBP/USD, USD/JPY, & Other FX Spots
The following table shows the latest buy and sell signals for a selection of FX pairs as provided by the technical strategy team at Scotiabank.