Market Overview

BoE and ECB in line with expectations.

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EUR/USD

  • Russia will ban fruit, vegetables, meat, fish, milk and dairy imports from the United States, the European Union, Australia, Canada and Norway. Russia is a major buyer of European fruit and vegetables but 23rd among buyers of food from the United States.
  • German industrial output rose just 0.3% mom vs. median market forecast of 1.3%. Construction output rose by 1.2% mom vs. a strong fall by 3.3% mom a month earlier. Consumer goods output rose by 1.7% mom but not enough to offset May's fall of 3.3% mom, and capital goods output fell by 0.9% mom. The disappointing output figure comes a day after data showed industrial orders fell in June at their steepest rate since September 2011. The Economy Ministry said industrial production was 1.5% lower in the second quarter than in the first. Preliminary second-quarter GDP data will be released next Thursday.
  • A bullish hammer on Wednesday's candlestick line signals the short-term recovery of the EUR/USD. We stay flat. The nearest support level is at 1.3333 (daily low Aug 6). A daily close below that level will end hopes of a recovery. However, in our opinion the more probable scenario is a return above 1.3400.
  • The ECB kept interest rates unchanged today, as widely expected. The ECB seems unlikely to offer firm hints of further policy support.

Significant technical levels:

Resistance: 1.3425 (high Aug 5), 1.3433 (high Aug 1), 1.3445 (high Aug 1)

Support: 1.3333 (low Aug 6), 1.3318 (low Nov 8, 2013), 1.3295 (low Nov 7, 2013)

AUD/USD

  • Australian labor market report was unexpectedly weak in July. The employment fell of 300 vs. a median forecast of a rise of 12,000. The fall was made up of a rise of 14,500 in full-time employment, while part-time employment declined by 14,800. The unemployment rate jumped to its highest in almost 12 years at 6.4%.
  • The AUD/USD was rising yesterday reaching the daily high at 0.9340. However, disappointing Australian labor market data hurt the AUD and pushed the AUD/USD rate down to 0.9256. The macroeconomic reading supported our short position on the AUD/USD with the target of 0.9210.

Significant technical levels:

Resistance: 0.9301 (high Aug 7), 0.9358 (high Aug 7), 0.9376 (high Aug 6)

Support: 0.9272 (low Aug 1), 0.9257 (low Jun 5), 0.9229 (low Jun 3)

EUR/JPY

  • Political sources said that Japan's Government Pension Investment Fund plans to allocate over 20% of its funds to domestic stocks compared with a current 12% target. The source said also that the Fund would likely lower its weighting for Japanese government bonds to around 40% compared with current 60% target and increase investments in global stocks.
  • The information pushed investors towards riskier assets and weighted on the safe-haven JPY. Our outlook for the EUR/JPY is bearish and our trading strategy is to go short on the EUR/JPY at the level of 137.10.

Significant technical levels:

Resistance: 137.23 ( high Aug 6), 137.71 (high Aug 5), 137.90 (high Aug 4)

Support: 136.16 (2014 low Aug 6), 136.02 (low Nov 22), 134.40 (low Nov 21)

EUR/GBP

  • The Bank of England kept interest rates unchanged, as widely expected. The Bank issued no statement after meeting and investors will have to wait nearly two weeks (Aug 20) to know if any members of the MPC voted in favour of raising rates. Another important event will take place on Aug 13 - publication of the quarterly inflation report of the Bank of England.
  • In our opinion central bankers were likely to hold their fire taking into consideration recent weaker data from the manufacturing sector and lack of wage pressure. Another important risk to Britain's recovery is a worsening of tensions in Ukraine which could hurt demand in the European Union.
  • Our trading strategy for the EUR/GBP is to go long at 0.7928, a pip above 21-dma.

Significant technical levels:

Resistance: 0.7964 ( high Aug 5), 0.7985 (high Aug 1), 0.7996 (30-day upper Bollinger)

Support: 0.7927 (21-dma), 0.7916 (low Aug 6), 0.7905 (low Jul 31)

Growth Aces' current trading positions:

AUD/USD: short at 0.9330, target 0.9210, stop-loss 0.9345

We encourage you to subscribe to our daily fundamental macroeconomic analysis newsletter (http://growthaces.com) to read the full version of our analysis right away.

Thank you for reading.

Growth Aces

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

 

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