Review: Yesterday’s IFO announcements showed a decline in the IFO Current assessment as well as the IFO – Expectations. This illustrates very well why we expect that Germany and all the euro countries will continue to report low growth as has been the case for some time. It is still expected that EUR will remain under moderate pressure. At the present, only new initiatives on the part of the central banks can turn around the negative investor sentiment that affects EUR.
Overnight the Japanese government revised down its expectations of this year’s growth in Japan. To most countries, this would mean that their currencies come under pressure, but in the case of Japan the opposite will be the case. We expect that this will cause investors, and particularly Japanese investors to close down JPY funding and repatriate capital, respectively, which will strengthen JPY over the coming period. Once again the central banks – as a joker in the pack – may affect this movement.
Macro: The most important announcement today will be the US consumer confidence data at 16:00. Jyske Bank expects a moderate fall – particularly due to the rising petrol and food prices. At 15:00 Casehiller showing the trend of housing prices in the US will be published. Will we still see increases? A development that is stable to rising would support risk appetite.
USDPLN (BUY): We recommend BUY with S/L at 322.98.
We recommend that investors move S/L to 322.98.
The strong range of support of 323-25 still holds firm.
This increases the likelihood of a correction towards the range of 333-36.
Generally we think that the market has had too little focus on the change in the rhetoric of the Polish central bank's communication, as focus has shifted from inflation to growth. This indicates that the interest-rate hike in the spring was a ”policy mistake”, which may be reversed. An interest-rate decision will be made on 5 September. If that happens, we will see extensive selling of PLN.
It is still not too late to follow the case. There is still a lot to gain if we are proven right. Remember to respect S/L as a fall to a level below 321 will give extra momentum to the fall.
AUDUSD (Sell to NEUTRAL): We recommend a sell order at 103.24.
We recommend to take profit and then re-enter the position again at a higher level. We recommend a sell order again at 103.24.
The Australian housing market survey shows that house sales fell by 5.6% over the past month. Rumour has had it for quite some time that the Australian housing market is about to peak. Also, the development in the housing market over the past six months indicates that.
For quite some time the Australian economy has been a ‘dual economy’ as the commodity industry has had a beneficial effect on the economy while the rest of the economy has been subject to a downright setback.
Iron ore prices are still falling. Last night Morgan Stanley issued a report stating that prices will potentially fall by further 17% before equilibrium is reached.
On the whole, this means that the Australian dollar will be under pressure in the coming period.