Market Drivers August 27, 2014
Euro tries to test 3150 but holdsKiwi up on Fonterra news
Nikkei 0.09% Europe -0.16%
Oil $94/bbl
Gold $1286/oz.
Europe and Asia:
NZD FPI -0.7% vs. 1.4%EUR Consumer Climate 8.6 vs. 8.9
North America:
No data
Currency markets were relatively steady in quiet late summer trade with very little fresh newsflow on the wires, but dollar came in for a bout of weakness as month end profit taking kicked in.
At the start of Asian session trade the EUR/USD slipped to fresh 2014 lows hitting 1.3151, but the pair found support ahead of the key 1.3150 level as option barrier defenses held the shorts at bay and it managed to bounce to 1.3190 aided by month end flows as shorts booked profits.
The euro is down nearly 300 points in the month of August as interest rate and growth rate differentials have weighed heavily on the pair and today's price action is a natural rebound for a unit that has been relentlessly sold for most of the summer. As we noted yesterday, the EUR/USD is due for technical relief rally and today's price action may signal the start of a small bounce, but the longer term trend remains to the downside in the pair as the economic conditions in the region remain grim.
Today's German Consumer climate reading missed its mark coming in at 8.6 versus 8.9 eyed. Still, the consumer sentiment in Germany remains relatively robust given the geopolitical pressures and if the situation with Russia and Ukraine could stabilize, the lower EUR/USD exchange rate could help business demand rebound in Q4. For now however, the EUR/USD remains under pressure and could test the 1.3000 level sometime in the near term after some corrective bounces.
Elsewhere, the kiwi was the star of the night as announcement by dairy giant Fonterra that its entering a joint venture to meet demand for infant formula in China was met with approval by the market. The investment of more than 500M suggests that Fonterra may be able to smooth out its delivery problems and also indicates that its stream of income from China - which is a significant contributor to New Zealand economy is likely to remain in place. The kiwi responded well to the news and may target the 8400 level as the day proceeds.
Recommended Content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.