Market Overview

RBA, BOJ and Canadian jobs data

Share:

 

AUD/USD

  • The RBA lowered its outlook for economic growth. The central bank now saw the economy growing at a 2.5% pace at the end of 2014, down slightly from 2.75% expected in the May report. GDP growth is expected to pick up then to 2.5-3.5% by the end of 2015 and 2.75-4.25% by end-2016.
  • The central bank lowered also its inflation forecast for 2014 to 2.25% from 2.5% previously, due in part to the recent abolition of a carbon tax by the government. The bank expects acceleration in inflation then to 2.25-3.25% in December 2015, as compared to 2.0-3.0% estimated previously.
  • The RBA is the opinion that the unemployment rate is likely to remain elevated for some time yet and may not decline substantially until 2016.
  • The central bank said the Australian dollar remained high by historical standards and had not declined as expected even as commodity prices have fallen and the interest rate differentials between Australia and most other advanced economies have narrowed.
  • We keep our short position on the AUD/USD. We have moved our stop-loss level to 0.9315 from 0.9345 previously.

Significant technical levels:

Resistance: 0.9358 (high Aug 7), 0.9376 (high Aug 6), 0.9390 (high Jul 30)

Support: 0.9229 (low Jun 3), 0.9210 (low May 29), 0.9180 (200-dma)

EUR/JPY

  • The Bank of Japan kept monetary policy unchanged and maintained its positive view of the economy. In the opinion of BoJ Governor Haruhiko Kuroda a positive economic cycle remains in place as job and income conditions steadily improve. He added that industrial output had been weak due to the effect of the sales tax hike and soft exports.
  • Haruhiko Kuroda said: "A reversal of excessive yen rises has had a pretty big positive impact on Japan's economy, such as a pick-up in corporate capital spending (...) The Federal Reserve continues to taper its asset purchases, while the BOJ and the ECB continue to maintain ultra-loose policies. I don't think there is any reason for the yen to rise." The central bank may adjust its policy if achievement of the prices target is threatened.
  • We have lowered our offer to go short on the EUR/JPY to 136.70. New 2014 low at 135.73 has been reached today. The momentum is on the down-side, as the tenkan and kijun line are negatively aligned.

Significant technical levels:

Resistance: 136.46 (high Aug 8), 137.13 ( high Aug 7), 137.24 (high Aug 6)

Support: 135.73 (2014 low Aug 8), 135.00 (psychological level), 134.40 (low Nov 21)

EUR/GBP

  • Britain's goods trade deficit widened to GBP 9.2 bn in May. Exports of goods fell in June by GBP 0.4 bn, reflecting declines in oil and manufactured goods. Imports declined by GBP 0.1 bn.
  • Separate data from the ONS showed construction output rose by 1.2% mom and 5.3% yoy in June vs. a rise by 3.9% yoy in May.
  • In line with the trading strategy described in Growth Aces' newsletter yesterday we went long at 0.7928. Our target is at 0.7995. We have moved the stop-loss today to 0.7920. The EUR/GBP is being traded a few pips below 0.7170 at the time of writing, which strengthen our bullish outlook for this pair.

Significant technical levels:

Resistance: 0.7985 (high Aug 1), 0.8007 (high Jul 1), 0.8027 (high Jun 30)

Support: 0.7937 (low Aug 8), 0.7925 (low Aug 7), 0.7916 (low Aug 6)

USD/CAD

  • The USD/CAD remains in consolidative mode after recent overbought levels. Today's labor market data are likely to increase volatility on the currency pair. Our expectations are slightly lower than median market forecast. Disappointing jobs data could boost USD/CAD towards 1.1000.

Significant technical levels:

Resistance: 1.0949 (50% of 1.1279-1.0620), 1.0986 (high Aug 6), 1.1007 (high May 2)

Support: 1.0907 (low Aug 7), 1.0878 (100-dma), 1.0850 (low Jul 30)

Growth Aces' current trading positions:

AUD/USD: short at 0.9330, target 0.9210, stop-loss 0.9315 (we have move the stop-loss from 0.9345 previously).

EUR/GBP: long at 0.7928, target 0.7995, stop-loss 0.7920.

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.

 

Related Articles

View Comments and Join the Discussion!