The appetite for risk waned across the financial markets, in line with expectations. Most of the European and commodity currencies turned down in Europe, while the yen remained in demand. Only the Swiss franc and the Canadian dollar are opening a tad higher in the US. The Asia/Pacific stock markets and the European bourses are down, while the gold/oil spread turned up. Therefore, the breakdown of the correlation between the European and commodity currencies and the stock markets was short lived. The crowded US economic agenda features the GDP for the second quarter, the Chicago PMI and the University of Michigan consumer sentiment index. Just recently, Fed's Bullard told CNBC that he would call for plan for significant quantitative easing if needed.
The short-term outlook is slightly bearish for the European and commodity currencies and bullish for the yen. The medium-term outlook is sideways for most of the foreign currencies futures. My model is long all of the foreign currencies futures.
This analysis is based on my books, as follows:
“Trading in the Global Currency Markets” - Prentice Hall Press, 3rd edition 2007
“Technical Analysis Applications” - McGraw-Hill, 2004
Overnight:
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Japan: The unemployment rate rose to 5.3% in June from 5.2% in May.
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Japan: Household spending rose 0.5% in June on a yearly basis
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Japan: Overall inflation was flat in June after adding 0.1% in May and declined 0.7% on year after easing 0.9% in May. Core consumer prices were down 1.0% on year in June following the 1.2% fall in May. Overall inflation in the Tokyo region was down 1.2% on year following the 0.9% fall in May. Core inflation in Tokyo was down 1.3% on year, the same as in the previous month.
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Japan: Housing starts increased 0.6% year-on-year in June, after declining 4.6% in May.
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Japan: Industrial production declined 1.5% in June following the 0.1% gain in May.
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Australia: The Reserve Bank of Australia said private sector lending increased 0.2% month-on-month, following an increase of 0.5% in May.
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Eurozone: A flash estimate showed that the CPI increased to 1.7% in July from June's unrevised rate of 1.4%.
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Eurozone: The unemployment rate remained stable at 10% in June.
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Italy: The jobless rate edged down to 8.5% in June from May's revised rate of 8.6%.
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Germany: The retail turnover fell 0.9% in June after rising 3%in May. Annually, retail turnover rose 3.1% in June after falling 0.7% in May.
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Italy: The PPI rose 3.4% annually in June after rising 3.7% in May.
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Italy: The CPI rose 1.7% annually in July, faster than June's 1.3% increase.
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Switzerland: The KOF economic institute’s leading index remained unchanged at 2.23 in July from June, which was revised from 2.25 reported initially.
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UK: GfK’s consumer confidence index fell to -22 in July from -19 in the previous month.
Today’s economic calendar:
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US: GDP for the second quarter
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US: Chicago Purchasing Managers' Index for July
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US: University of Michigan consumer sentiment index for July
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Canada: GDP for May
EUR- March
Luca Model: Long since July 22
The overbought September euro opens down in the US after climbing to an over 2 1/2-month high on Thursday. The short-term outlook turned slightly bearish. The medium-term outlook is sideways and my model is long.
Immediate support is 1.2962. The 100-day moving average supports at 1.2915. Distant support follows at 1.2812 from the 21-day moving average.
Initial resistance is at 1.3029. The next caps are 1.3106, 1.3156 and 1.3195. Distant resistance is perched at 1.3275.
INDICATORS
Fast stochastics: Slightly bearish
MACD: Bullish
Ichimoku: Bearish
OUTLOOK
NEAR-TERM: Slightly bearish
MEDIUM-TERM: Sideways
LONG-TERM: Bearish
JPY - March
Luca Model: Long since July 29 (reversing short since July 20)
The September Japanese yen is advancing for a third day to reach a new high for the uptrend. The short-term outlook is slightly bullish. The medium-term outlook turned slightly bearish and my model is long.
The high of the uptrend is 116.12. Further resistance is at 116.55 and 117.06.
Initial support is at 115.57. The next cap is 115.08. Below 114.60, the 21-day moving average supports at 114.12.
INDICATORS
Fast stochastics: Bullish (overbought)
MACD: Bearish (Bearish divergence)
Ichimoku: Sideways
OUTLOOK
NEAR-TERM: Slightly bullish
MEDIUM-TERM: Sideways
LONG-TERM: Sideways
GBP - March
Luca Model: Long since July 23
The September pound opens lower in the US after closing on Thursday off a new high for the uptrend. The short-term is slightly bearish. The medium-term outlook is bullish and my model is long.
Below 1.5523, the next floors are 1.5445 and 1.5396.
The uptrend high is 1.5660. Further resistance follows at 1.5723 and 1.5766.
INDICATORS
Fast stochastics: Slightly bearish
MACD: Bullish
Ichimoku: Sideways
OUTLOOK
NEAR-TERM: Slightly bearish
MEDIUM-TERM: Bullish
LONG-TERM: Bearish
CHF - March
Luca Model: Long since July 29 (reversing short since July 23)
The September Swiss franc edged higher overnight and reached a new high for the uptrend. The short-term outlook is slightly bullish for about half a day and then slightly bearish, as the Swissy is overbought. The medium-term outlook is bullish and my model went promptly long.
The new high of the uptrend is .9655. The next resistance level is .9721.
Immediate support is at .9593. Below .9532, the next floors are .9478 and .9455 from the 21-day moving average.
INDICATORS
Fast stochastics: Bullish (overbought)
MACD: Slightly bearish
Ichimoku: Bearish
OUTLOOK
NEAR-TERM: Slightly bullish for about half a day, then slightly bearish
MEDIUM-TERM: Bullish
LONG-TERM: Sideways
CAD – March
Luca Model: Long since July 22
The September Canadian dollar opens slightly higher in an inside range. The loonie remains in a symmetrical triangle. The short-term outlook is slightly bullish for about half a day and then slightly bearish. The medium-term outlook is sideways and my model is long.
Initial resistance is at .9719. Further resistance is at .9784. A pivot high is at .9857.
Immediate support is at .9660. The 21-day moving average supports at .9609. Distant support is at .9550.
INDICATORS
Fast stochastics: Slightly bullish
MACD: Slightly bullish
Ichimoku: Sideways
OUTLOOK
NEAR-TERM: Slightly bullish for about half a day, then slightly bearish
MEDIUM-TERM: Sideways
LONG-TERM: Bullish
AUD – March
Luca Model: Long since July 20
The overbought September Australian dollar slipped overnight after rising toward the top of the uptrend on Thursday. The short-term outlook is slightly bearish. The medium-term outlook is sideways and my model is long.
Below .8907, the next floors are .8851 and .8797.
Initial resistance is at .8977. The next cap is .9019. Above the key resistance at .9045, further resistance lies at .9132.
INDICATORS
Fast stochastics: Sideways
MACD: Bullish
Ichimoku: Bearish
OUTLOOK
NEAR-TERM: Slightly bearish
MEDIUM-TERM: Sideways
LONG-TERM: Bullish
