Market Overview

ECB surprised with a rate cut and new credit scheme.

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GROWTHACES.COM Trading Positions:

  • AUD/USD: long at 0.9305, target 0.9470, stop-loss 0.9230
  • USD/CAD: long at 1.0850, target 1.1000, stop-loss 1.0810
  • GBP/USD: long at 1.6410, target 1.6610, stop-loss 1.6370

 

EUR/USD: ECB surprised with a rate cut and new credit scheme.

  • The ECB cut its main refinancing rate to 0.05% from 0.15%. The ECB also said it had lowered the rate on bank overnight deposits to -0.20%, which means banks pay to park funds at the central bank and cut its marginal lending facility to 0.30%.
  • Mario Draghi has announced a new asset-backed and covered bond purchase program.
  • The ECB cut its inflation forecast from 0.7% to 0.6% for 2014. Inflation is expected to rise to 1.1% in 2015, still way below the ECB's target of close to but below 2.0%.
  • The U.S. trade deficit fell in July to its lowest level since January and amounted to USD 40.5 bn. Exports rose by 0.9% and imports climbed by 0.7%.
  • The U.S. Labor Department says applications for jobless aid rose 4k to a seasonally adjusted 302k.
  • ADP National Employment Report showed U.S. companies hired 204k workers in August. The reading was below the market consensus.
  • The EUR/USD fell strongly after the ECB decision. Our long position the EUR/USD built on the assumption of the ECB not taking any action reached the stop-loss level at 1.3100.

Significant technical analysis' levels:

Resistance: 1.3110 (low Sep 2), 1.3160 (high Sep 3), 1.3196 (high Aug 29)

Support: 1.2992 (low Jul 15), 1.2966 (low Jul 11), 1.2949 (high Jul 10)

 

GBP/USD: BOE kept interest rates and QE unchanged.

  • The MPC has left rates on hold at 0.5% and quantitative easing unchanged at GBP 375 bn, as widely expected.
  • Investors will have to wait for the minutes to be published on September 17 to see if there are more hawkish votes (apart from McCafferty and Weale).
  • The GBP has depreciated against the USD recently as jitters persisted about the potential impact of a vote by Scotland to split from the rest of the United Kingdom in a referendum in two weeks' time. We expect the recovery after such a strong fall. We go long on the GBP/USD at 1.6410 with the target at the level of 1.6610 and stop-loss at 1.6370.

Significant technical analysis' levels:

Resistance: 1.6498 (high Sep 3), 1.6544 (10-dma), 1.6615(high Sep 2)

Support: 1.6392 (low Feb 11), 1.6303 (low Feb 7), 1.6273 (low Feb 6)

 

USD/JPY: BOJ Kuroda: The JPY consistent with Japan’s fundamentals.

  • The Bank of Japan maintained its monetary stimulus and its projection that the economy would continue to recover moderately, with consumption set to benefit from a tightening job market, which is pushing up wages. The central bank cut its assessment on housing investment and warned that factory output remained weak.
  • BOJ Governor Haruhiko Kuroda remained optimistic that the economy was on its way to hitting 2% target for inflation. Kuroda asked whether Japan should proceed with the second stage of a sales tax increase to 10% from 8% next year said: “It is very important for Japan's fiscal state and for its economy that steady progress is made in efforts to restore fiscal health.” The BOJ is likely to cut its economic growth projection for the current fiscal year when it reviews its long-term forecasts in October.
  • Haruhiko Kuroda said that the USD strengthening vs. the JPY is not negative for Japans’ economy. In his opinion the JPY is approaching levels consistent with Japan’s fundamentals from excessive strength after global financial crisis.
  • The USD/JPY fell in the area of 104.75/85 yesterday during US session but Kuroda gave the USD/JPY a lift and the rate hit today’s high of 105.02. GrowthAces.com is looking to go long on the USD/JPY in the area of 104.60.

Significant technical analysis' levels:

Resistance: 105.31 (high Sep 3),105.42 (high Jan 10), 105.45 (high Jan 1)

Support: 104.30 (low Sep 2), 104.08 (low Sep 1), 103.66 (low Aug 29)

 

AUD/USD firmed after macroeconomic releases.

  • Australia's trade deficit for July amounted to AUD 1.359 bn. (seasonally adjusted) and was slightly lower than the median forecast of AUD 1.5 bn.
  • Australian Bureau of Statistics showed retail sales rose 0.4% mom in July after a rise by 0.6% mom in June. It suggests household spending started the current quarter on firmer footing.
  • The AUD/USD rallied to 0.9367 just after the retail sales data and slightly better-than-expected foreign trade reading. The nearest resistance is the 0.9375 double top. We maintain our long position at GrowthAces.com.

Significant technical analysis' levels:

Resistance: 0.9374 (high Aug 28), 0.9376 (high Aug 6), 0.9390 (high Jul 30)

Support: 0.9263 (low Sep 3), 0.9250 (trendline), 0.9235 (low Aug 21)

 

USD/CAD: BOC slightly more hawkish; strong foreign trade data.

  • The USD/CAD fell on Wednesday after the Bank of Canada repeated its neutral policy stance. The bank said in its statement: “Overall, the risks to the outlook for inflation remain roughly balanced, while the risks associated with household imbalances have not diminished.” The bank said also that activity in the housing market had been stronger than anticipated.
  • The statement was slightly more hawkish than in July. The BOC eliminated its previous expression of "serial disappointment" on global growth, highlighting a solid recovery in the United States and stronger Canadian exports. In the opinion of the central bank recent data reinforced the view that higher inflation had been attributable to temporary effects "rather than to any change in domestic economic fundamentals."
  • GrowthAces.com does not change its forecast of interest rates in Canada. We expect the first hike in February next year.
  • Canada's trade surplus in July jumped to a near six-year high of CAD 2.58 bn. The July surplus was the largest since the CAD 2.61 bn recorded in October 2008 and marked the first time since November 2008 that Canada had posted three consecutive monthly positive trade balances. Exports in July rose by 1.4% to a record CAD 45.54 bn, boosted by higher shipments of motor vehicles and parts. Imports fell by 0.3% to CAD 42.96 bn, due to lower imports of aircraft and other transportation equipment.
  • The USD/CAD firmed after the release of foreign trade data near 1.0830. We used the fall of the USD/CAD to go long at 1.0850. The short-term target is at the level of 1.1000 and the stop-loss at 1.0810.

Significant technical analysis' levels:

Resistance: 1.0943 (high Sep 3), 1.0956 (high Aug 27), 1.0998 (high Aug 26)

Support: 1.0870 (low Sep 3), 1.0868 (low Sep 2), 1.0857 (low Sep 1)

GrowthAces.com is an independent macroeconomic research consultancy for traders. We offer you daily forex analysis with forex trading signals. The service covers forex forecasts and signals for following currencies: EUR, USD, GBP, JPY, CAD, CHF, AUD, NZD as well as emerging markets. Our subscribers should expect to receive: forex trading strategies, latest price changes, support and resistance levels, buy and sell forex signals and early heads-up about the potential fx trading opportunities. GrowthAces.com offers also daily macroeconomic fundamental analysis that enables you to see fundamental changes on forex market. We provide in-depth analysis of economic indicators resulting from knowledge, experience, advanced statistics and cutting-edge quantitative tools.

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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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