Forex News and Events:
The RBA released its monetary policy minutes of its September Board meeting today at 01:30 GMT. The most important feature of the minutes was the fact that the central bankers were strongly dovish, reusing statements from their June meeting such as the fact that “the inflation outlook continued to provide scope to adjust policy in response to any significant deterioration in the outlook for growth”.
The minutes also showed that the Board considered the AUD to be expensive in spite of a fall in commodity prices. Another topic mentioned in the report was corporate and more specifically mining firms’ capital expenditure assessment. The minutes said that there has been “ a more recent reassessment by some resource companies of the prospects of projects to which they had not yet committed”. The RBA focuses on mining capex because of the major part that mining commodities play in the Australian economy. The central bank seems to believe that capex will increase in the upcoming year due to the large LNG and other pending mining investment projects, but that the sustainability of this capex growth is not guaranteed. After having dipped back below parity against the USD in May, the AUD made a spectacular recovery rising back 10.88% from this year’s low. The pair remains safe within the 30-70 RSI band indicating that there is still room for some upside if risk sentiment picks up substantially. We suspect that the central bank’s dovish tone could give way to further cuts in the Bank’s cash rate which is the highest today amongst its G10 peers at 3.50%. In Europe, Spanish bonds rose back above 6% for the first time since September 7th as investors begin to worry about Spain not asking for aid.
ECB’s Coene said yesterday that if markets realize that Spain will not be asking for aid, “spreads will rise again, and then Spain will be somewhat forced to come back on its decision and submit to the conditionality program”. Today, a 12-month Spanish Letras auction went relatively well, with yields dropping to 2.835% from last month’s 3.070% over future expectation of intervention from the part of the ECB on the short-end of the curve (1- to 3-year). Also ZEW economic sentiment for Germany and the Eurozone in general both came in better than expected. Today we eye the Treasury International Capital (TIC) net long-term transactions in the US at 13:00 GMT which measures the difference in value between foreign long-term securities purchased by US citizens and US equivalent securities purchased by foreign investors. We align to market consensus in anticipating a 45.3BN reading, higher than the prior 9.3BN. Any higher than expected reading is considered to be positive for the USD.
Today's Key Issues (time in GMT):
2012-09-18T01:30:00 AUD CN House Prices
2012-09-18T01:30:00 GBP AU Monetary Policy Minutes
2012-09-18T08:30:00 EUR UK Core CPI (YoY)
2012-09-18T09:00:00 EUR EU ZEW Economic Sentiment
2012-09-18T09:00:00 USD GE ZEW Economic Sentiment
2012-09-18T12:00:00 USD US Chicago Fed Evans Speaks
2012-09-18T12:30:00 USD US Current Account
2012-09-18T13:00:00 USD US TIC Net Long Term Transaction
2012-09-18T13:00:00 US Foreign Buying T-Bonds
The Risk Today:
EURUSD EURUSD hit a low of 1.3172 on yesterday, but since then we have corrected lower– briefly peeking slipping to 1.3181 level earlier this morning. Despite this period of consolidation, the broad trend remains bullish, so we look for extended sell-off as an opportunity to reload long positions. With a light data calendar today and RSI in overbought territory there is the possibility that this rally wanes, but eventually the bears should tire and 1.3069 should protect the downside. The first levels of demand are located at 1.3169 (14th Sept high), and 1.3283 (1st May high). Next levels of supply located at 1.3069 (double top on 7th & 8th May), 1.2825 (13th Sept low), 1.2754 (10th & 11th Sept low), 1.2507 (100d MA), 1.2463 (31st Aug low), 1.2386 (14th & 17th Aug high), 1.2241 (10th Aug low), 1.2160 (13th July low), 1.2046 (25th July low), 1.2000 (psychological support) then 1.1870 (7th June low).
GBPUSD The current lull in price action has created a technical picture identical to yesterdays. GBPUSD retracted slightly from its rapid climb higher with this morning’s price action taking us marginally lower to 1.6220. With the break of key resistance of 1.6143, the pairs looks to be in striking distance of 1.6236 but we will be wary of further correctional pullbacks to near term support. The next offers are located at 1.6300 (30th April high) and 1.6454 (29th Aug ’11 top). The supply zone is located at 1.5970 (18d MA), 1.5918 (4th Sept breakout level), 1.5745/53 (30th July pivot & 100d MA), 1.5665 (uptrend channel floor), 1.5564 (8th Aug low), 1.5656 (intraday low),1.5458 (26th July low), 1.5405 (8th June low), 1.5390 (6th June low), then 1.5266 (13th Jan low).
USDJPY At the end of last week, USDJPY began to recoup some of its heavy losses, and even hit a high of 78.93 this yesterday, however we remain unconvinced that the recovery has the momentum needed to break any resistance. Despite the strong reversal the pair still feels heavy as MACD histogram is still negative and downtrend still in play. The next bids can be found at 77.13 (13th Sept low), 76.58 (3rd & 17th Jan low) then 76.03 (1st Feb low). Should USDJPY correction continue , it will be offered at 79.04 (downtrend top & double top), 79.67 (20th Aug high), 80.11 (reversal), 80.62 (2nd May high), 81.60 (failed corrective rally), 82.56 (6th April high), 82.99 (3rd April high), trigger resistance at 83.40.
USDCHF USDCHF appears to have reached a plateau around 0.9238 levels, after the psychological 0.9300 support gave way. After a long and steady drop price action has giving way to some consolidation -trading. Yesterday corrective rally up to 0.9296 has failed to allow RSI oversold conditions to easy , so we are still in oversold territory, indicating the bears might find forcing the downside difficult. Traders will also be watching EURCHF for a further short squeezes and 1.2190 key resistance. The first levels of support should be located at 0.9238 (14th Sept low), then 0.9194 (7th & 11th May low) and 0.9043 (1st May low). The next levels of resistance are located at 0.9300/ 03 (psychological lvl), 0.9355 (14th Sept high), 0.9580 (7th Sept high), 0.9661 (22nd Aug high), 0.9810 (10th Aug high & uptrend channel), 0.9900 (2nd Aug high), 1.0000 (psychological resistance), 1.0070 (1st Dec 11’ pivot high), 1.0149 (2010 pivot), then 1.0294 (10th Sept 10’ high).
Resistance and Support: