US data and Fed speakers in focus, mixed Swiss data

Forex News and Events

US data to take the main stage (by Arnaud Masset)

It has been a week now that the Federal Reserve decided to leave interest rates unchanged. Since then the US dollar has been unable to reverse the negative momentum as market participants kept on lowering rate expectations. The probability - extracted from the Fed funds future - of a rate hike in December have dropped below the 50%, while the market had completely ruled out a November hike. Besides the preliminary Services and Composite PMIs, which rose slightly compared to the previous month, the market had very little economic data to work with. However, durable goods orders will open the ball, then we’ll get GDP and personal consumption on Thursday and finally personal income and spending, PCE deflator and Michigan Index on Friday.

Durable goods orders are expected to reflect the poor outlook for the manufacturing sector. The main gauge is expected to contract 1.5%m/m in August after surging 4.4% in the previous month. Similarly, excluding transportation, the measure should fall 0.5%m/m after July’s 1.3% increase. Overall, we expect that US data will continue to point toward a slowing economic activity in the third quarter, which could eventually put a December hike in jeopardy. Nevertheless, we wouldn’t be surprise if the Fed push button in December even though data are not that good. Indeed, just like it did last year, a slight increase in interest rate would hurt much but would send a strong signal of confidence.

Mixed news in Swiss data (by Peter Rosenstreich)

Swiss UBS consumption indicator for August climbed unexpectedly to 1.526 from 1.45 (revised from 1.32) the highest level since 2014. The indicators surge was due primarily to the recovery of tourism and higher car sales. However, the weak labor markets conditions were a drag on the positivity of the report. The excellent summer weather encouraged domestic tourism as overnight hotel stays increased 1.6% m/m (yet overall hotel stay in Switzerland decrease -0.4% m/m and -1.0% y/y). Worryingly, foreigner overnight hotel stays fell -2.0% m/m (-2.4% y/y) clearly indicating the CHF lack of competitiveness is having a corrosive effect on travelers behaviors. September has also be unseasonable warm and dry suggesting that domestic tourisms should continue to remain supportive of strong Swiss growth. Swiss GDP growth is running at accelerating 2.0% y/y pace. However, unless the labor markets can improve and shake the uncertainty there is little hope that the consumer sentiment meaningfully contribute to improvement. The SNB will continue to remain reactive to macro-conditions that could further strengthen the CHF. However, the IMF suggestions to halt direct FX intervention and defend the currency buy moving deeper into negative rates will likely be ignored. Despite the SNB well circulated view that negative rates have been effective its clearly taking a toll on banks and private savers. Removing the political motivations for more cuts unless absolutely necessary. USDCHF traders should target 0.965 with bullish rallies above 0.9750 as opportunities to reload short positions.

EUR/GBP - Rejected

 

Today's Key Issues	Country/GMT
Jul Total Mortgage Lending YoY, last 13,40%	EUR/07:00
Jul House Mortgage Approvals YoY, last 15,50%	EUR/07:00
Sep Consumer Confidence, exp 95, last 93,9	SEK/07:00
Sep Manufacturing Confidence s.a., exp 98, last 97,7	SEK/07:00
Sep Economic Tendency Survey, last 100	SEK/07:00
Sep Consumer Confidence Index, exp 109, last 109,2	EUR/08:00
Sep Manufacturing Confidence, exp 100,9, last 101,1	EUR/08:00
Sep Economic Sentiment, last 99,4	EUR/08:00
BOE's Shafik speaks at Bloomberg Most Influential Conference	GBP/08:05
ECB President Draghi Addresses Research Conference in London	EUR/09:00
Aug Hourly Wages MoM, last 0,00%	EUR/09:00
Aug Hourly Wages YoY, last 0,60%	EUR/09:00
sept..23 MBA Mortgage Applications, last -7,30%	USD/11:00
Aug P Durable Goods Orders, exp -1,50%, last 4,40%	USD/12:30
Aug P Durables Ex Transportation, exp -0,50%, last 1,30%	USD/12:30
Aug P Cap Goods Orders Nondef Ex Air, exp -0,10%, last 1,50%	USD/12:30
Aug P Cap Goods Ship Nondef Ex Air, exp 0,10%, last -0,50%	USD/12:30
sept..26 CPI Weekly YTD, last 4,00%	RUB/13:00
sept..26 CPI WoW, last 0,10%	RUB/13:00
Draghi Briefs Closed Session of German Parliament EU Committee	EUR/13:30
Aug Outstanding Loans MoM, last -0,40%	BRL/13:30
Aug Total Outstanding Loans, last 3116b	BRL/13:30
Aug Personal Loan Default Rate, last 6,20%	BRL/13:30
Bank of England Bond-Buying Operation Results	GBP/13:50
Fed Chair Yellen Testifies before House Panel on Bank Supervis	USD/14:00
Fed's Bullard Makes Introductory Remarks on Community Banking	USD/14:15
sept..23 DOE U.S. Crude Oil Inventories, exp 3000k, last -6200k	USD/14:30
sept..23 DOE Cushing OK Crude Inventory, exp 95k, last 526k	USD/14:30
Currency Flows Weekly	BRL/15:30
ECB's Villeroy Speaks at EU Parliament Committee in Brussels	EUR/15:30
Fed's Evans Speaks on Community Banking in St. Louis	USD/17:30
ECB's Jazbec Speaks at a Panel at Slovenia Public Broadcaster	EUR/18:00
Fed's Mester Speaks on Economic Outlook, Policy in Cleveland	USD/20:35
Sep Consumer Confidence, last 102	KRW/21:00
Aug Tax Collections, exp 95050m, last 107416m	BRL/22:00
sept..30 Long Term Rate TJLP, exp 7,50%, last 7,50%	BRL/22:00
Sibos Conference in Geneva	EUR/22:00

 

The Risk Today

Peter Rosenstreich

EUR/USD recovery rally has faded below declining trend line at 1.1292. Hourly support is given at 1.1196 (23/09/2016 low). Key resistance is given at 1.1352 (23/08/2016 high) then 1.1428 (23/06/2016 high). Strong support can be found at 1.1046 (05/08/2016 low). Expected to decline towards 1.1100. In the longer term, the technical structure favours a very long-term bearish bias as long 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 is back below 1.300 after a weak attempt at declining trendline. Persistent selling pressure suggests further weakness. Hourly resistance is given at 1.3121 (22/09/2016 high). Key resistance lies at 1.3445 (06/09/2016 high). Hourly support can be found at 1.2947. Expected to show continued downside pressures. The long-term technical pattern is even more negative since the Brexit vote has paved the way for further decline. Long-term support given at 1.0520 (01/03/85) represents a decent target. Long-term resistance is given at 1.5018 (24/06/2015) and would indicate a long-term reversal in the negative trend. Yet, it is very unlikely at the moment.

USD/JPY rally remains weak below hourly resistance at 101.24, with bullish rallies losing momentum. A break of resistance is needed to suggest something more than a temporary rebound. Strong resistance can be found at 104.32 (02/09/2016 high) while hourly resistance is given at 102.79 (21/09/2016 high). Psychological support at 100 is not far away. A key support lies at 99.02 (24/06/2016 low). Expected to further weaken. We favor 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 close to the strong support at 0.9632. However, as long as prices remain below the resistance at 0.9885 (01/09/2016 high), the short-term technical structure is negative. There are alternating periods of strong and low volatility and the pair seems without direction. Next resistance lies at 0.9956 (30/05/2016 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 nonetheless a long term bullish bias since the unpeg in January 2015.

 

Resistance and Support:

EURUSD	GBPUSD	USDCHF	USDJPY
1.1616	1.3534	1.0093	107.9
1.1479	1.3445	0.9956	105.63
1.1428	1.3121	0.9885	104.32
1.1219	1.3002	0.9714	100.72
1.1046	1.2851	0.9522	99.02
1.0913	1.2798	0.9444	96.57
1.0822	1.25	0.9259	93.79