SNB keeps intervening, JPY lower amid election result
Forex News and Events
SNB still intervening 2 weeks later (by Arnaud Masset)
The latest data from the SNB suggests that the Swiss central bank has remained quite actively in the week ending July 8 as the domestic sight deposits increased CHF3.7bn to CHF434bn. The amount of cash held by Swiss banks within the SNB rose for the fourth straight week against the backdrop of continued upside pressure on safe haven assets amid the Brexit vote. Since June 23, domestic sight deposits rose CHF17.5bn, the biggest monthly increase since January 2015 when the SNB abandoned the 1.20 floor. So far, the SNB successfully managed to maintain the Swiss franc above the 1.08, despite the massive number of investors who were looking for a shelter.
The 25 delta one month risk reversal - a measure of price difference between calls and puts - did not yet return to its pre-Brexit levels, signalling that investors continue to buy protection against further EUR/CHF weakness. However, the implied volatility difference between calls and puts recovered to -1.62% on Monday after hitting -3.70% a week before the Brexit referendum day. EUR/CHF will most likely remain under renewed downside pressure as the market continue to assess the implication of UK’s exit of the EU. The will therefore continue to intervened in the FX market, boosting sight deposits to record levels.
Japan: weak machine orders, Abe continues (by Yann Quelenn)
Last night, Japan machine orders for May came in lower for the second month in row at -1.4% after the sharp decline, the biggest in the last two years, a month before in April when it had been released at -11%. This is a real bad indicator showing a decline in business investment as well as a slowdown in the global economy. Machine orders is a great proxy of business investment and since January the trend is clearly negative.
As a result, the yen has lost a figure against the greenback early this morning and is almost back to 102. This weekend, Shinzo Abe coalition has won in upper house election and the two arrows of its Abenomics, structural reform and fiscal stimulus may be ramped up. In other words, we believe that monetary easing has to be paused as it has not proven, anywhere in the world, its efficiency. Japan Equity markets have welcomed the elections and have sharply increased. Nonetheless, results still need to come…
AUD/USD - Riding Uptrend Channel.
| Today's Key Issues | Country/GMT |
| May Current Account Balance, last 5.2b | DKK/07:00 |
| May Current Account (Seasonally Adjusted), exp 9.0b, last 6.8b | DKK/07:00 |
| May Trade Balance ex Ships, exp 6.5b, last 6.2b | DKK/07:00 |
| Jun CPI MoM, exp 0,00%, last 0,20% | DKK/07:00 |
| Jun CPI YoY, exp 0,20%, last 0,10% | DKK/07:00 |
| Jun CPI EU Harmonized MoM, last 0,20% | DKK/07:00 |
| Jun CPI EU Harmonized YoY, last -0,10% | DKK/07:00 |
| Jun CPI MoM, exp 0,10%, last 0,30% | NOK/08:00 |
| Jun CPI YoY, exp 3,20%, last 3,40% | NOK/08:00 |
| Jun CPI Underlying MoM, exp 0,00%, last 0,40% | NOK/08:00 |
| Jun CPI Underlying YoY, exp 2,70%, last 3,20% | NOK/08:00 |
| Jun PPI including Oil MoM, last 2,70% | NOK/08:00 |
| Jun PPI including Oil YoY, last -11,90% | NOK/08:00 |
| May Industrial Production MoM, exp 0,10%, last 0,50% | EUR/08:00 |
| May Industrial Production WDA YoY, exp 1,10%, last 1,80% | EUR/08:00 |
| May Industrial Production NSA YoY, last -0,30% | EUR/08:00 |
| Jul 8 Total Sight Deposits, last 507.5b | CHF/08:00 |
| Jul 8 Domestic Sight Deposits, last 430.3b | CHF/08:00 |
| Jul IGP-M Inflation 1st Preview, exp 0,97%, last 1,12% | BRL/11:00 |
| Central Bank Weekly Economists Survey (Table) | BRL/11:25 |
| Jun Housing Starts, exp 189.0k, last 188.6k, rev 188.5k | CAD/12:15 |
| 2Q P Current Account Balance, exp 8300m, last 12600m | RUB/13:00 |
| Jul 8 Bloomberg Nanos Confidence, last 56,7 | CAD/14:00 |
| Jun Labor Market Conditions Index Change, exp 0, last -4,8 | USD/14:00 |
| Fed's George Speaks in Lake Ozark, Missouri | USD/14:00 |
| Jul 10 Trade Balance Weekly | BRL/18:00 |
The Risk Today
Yann Quelenn
EUR/USD is pushing lower towards 1.1100. Hourly support is given at 1.0913 (06/07/2016 low) while hourly resistance is located at 1.1186 (05/07/2016 high). Stronger resistance is given at 1.1479 (06/05/2016 high). Sharp moves do not have to be ruled out as there are still a lot of uncertainties on asset pricing in the market. In the longer term, the technical structure favours a very long-term bearish bias 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 remains very weak and is now consolidating below 1.3000. Hourly support can be found at 1.2798 (06/07/2016 low) and resistance is given at 1.3047 (07/07/2016 high). Uncertainties are important on the market, we absolutely do not rule out further decline. The long-term technical pattern is negative and favours a further decline as long as prices remain below the resistance at 1.5340/64 (04/11/2015 low see also the 200-day moving average). Key support at 1.3503 (23/01/2009 low) has been broken and the road is wide open for further decline.
USD/JPY is increasing again. Hourly supports can be found at 100 (06/07/2016 low) and 99.02 (24/06/2016 low). Hourly resistance is given at 102.12 (intraday high). Expected to show further consolidation in the short-term. We favour 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 is pushing higher. The pair has broken hourly resistance at 0.9837 (28/06/2016 high) while hourly support can be found at 0.9648 (24/06/2016 high). Expected to monitor resistance 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 a long term bullish bias since last December.
| EURUSD | GBPUSD | USDCHF | USDJPY |
| 1.1479 | 1.5018 | 1.0328 | 111.91 |
| 1.1428 | 1.3981 | 1.0093 | 106.84 |
| 1.1186 | 1.3534 | 0.9956 | 103.39 |
| 1.1022 | 1.2866 | 0.9854 | 102.14 |
| 1.0913 | 1.2798 | 0.9522 | 99.02 |
| 1.0822 | 1.188 | 0.9444 | 96.57 |
| 1.0458 | 1.052 | 0.9259 | 93.79 |
Author
Arnaud Masset
Swissquote Bank Ltd
Arnaud Masset is a Market Analyst at Swissquote Bank. He has a strong technical background and also works in the development of quantitative trading strategies.
