Daily Market Analysis by HotForex

[HotForex]

TODAY’S CURRENCY MOVERS

EURUSD, Daily

EURUSD, continues to trade within a multi-week downtrend; this is confirmed by the fact of lower tops and bottoms on price. The failed attack on the 31st of July to break above the 1.1120’s also supports the view that the bears are in control of the medium term EURUSD market. However, for the moment, price seems to be consolidating between a tight range within the 1.0920’s and 1.0970’s with traders seeking direction from the U.S. NFP release, due out on Friday. Technically, I would like to see price hold above the 1.0810’s – 1.0920’s after the upcoming NFP release for a potential short term price recovery to re-visit the 1.1220’s, before resuming the multi-week downtrend to reach my target price near the 1.0750’s.

The EU Outlook was revised down to negative from stable by S&P. The ratings agency is worried about the EU’s continual use of the balance sheet to provide higher risk financing to members without the members paying in capital.

The U.S. Market ISM manufacturing index inched up to 53.8 in July, from a 20-month low of 53.8 in June. This is the first pick up in manufacturing activity since March, but is the slowest pace of purchasing activity in 18 months. U.S. personal income rose 0.4% in June with spending up 0.2%, a little better than forecast; however, May’s 0.5% income gain was revised down to 0.4%.

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[HotForex]

TODAY’S CURRENCY MOVERS

EURUSD, Daily

EURUSD, closed sharply lower on Tuesday in the wake of fresh comments from the U.S. Fed’s Lockhart who suggested that “upcoming U.S. economic data would have to disappoint significantly to get the FOMC to delay a tightening in September.” The market reacted to the hawkish comments with the fresh buying of U.S. dollars, accelerating the downward pressure on the EURUSD pair. Now that the EURUSD has broken through the support turned resistance area of the 1.0920’s, and the fact that price has failed to hold a new higher low above the 1.1120.s, as well as, bearish momentum oscillator analysis, this leads me to hold firm my view that EURUSD prices will continue to trade firmly lower within the multi-week downward price channel towards my target area near the 1.0750’s over the coming days.

As the interest rate spread between the USD and the GBP against the EUR widens, and the expectation that the U.S. and the U.K will begin to raise rates, further supports the buying interest in the U.S. dollar and the British pound in the near term. Traders should also take note of the recent hawkish comments from the BoE and the Fed board members who have been dropping clues of pending rate hikes.

The AUD made a large move on Tuesday following better than expected trade and retail sales data, and then a change in language in the RBA statement following the anticipated decision to leave the cast rate at 2.0%. The Board said in its statement that “the Australian dollar is adjusting to the significant declines in key commodity prices.” The AUDUSD rallied nearly 165 pips on the statement.

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[HotForex]

TODAY’S CURRENCY MOVERS

EURUSD, Daily

EURUSD has a short term support level near the 1.0850’s and resistance levels around 1.0990’s – 1.1020’s. The short term trend is now negative, and trading in line with the ECB’s dovish position to increase the supply of EURs on the market. Short term EURUSD traders may look to re-sell into strength if prices extend past the 1.0990’s – 1.1020’s resistance levels, ideally between the 1.10’s – 1.1050’s for a 1.0750’s price target.

Further negativity on the EUR comes from the much weaker than expected Eurozone retail sales, which fell 0.6% m/m, keeping the euro under pressure, offsetting an upward revision in final Eurozone services and composite PMI survey data for July. The fact that both the U.S. and the U.K. are seeking to raise their rates is giving traders enough reasons to support both the US dollar and the British pound, adding to EUR selling pressures.

On Wednesday, the U.S. ADP employment report missed expectations; however, the July services ISM posted a 10-year high. The EURUSD rallied to session highs around 1.0930 after the employment data, and then fell to session lows near 1.0850 following the ISM outcome.

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[HotForex]

TODAY’S CURRENCY MOVERS

EURUSD, Daily

EURUSD price continues to contract and trade within a narrow three day range ahead of today’s U.S. Nonfarm payrolls economic data release. The Bollinger band EURUSD trend analysis on the daily chart indicates that volatility is narrowing, which is typical before the release of a major economic report. Price over the last three trading sessions has stayed below the 20 period simple moving average, however, a bullish cross is observed within the Stochastic Momentum Oscillator indicator. The fact that price remains well contained within the multi-week downward moving channel and the bullish cross observation that has accrued below the Stochastic 20 level indicates oversold market conditions in the short term.

The Bank of England’s first “Super Thursday” sent Sterling down sharply; the BoE left monetary policy unchanged. The BoE is slowly preparing for the first rate hike, however, they are in no rush to move. The GBPUSD closed sharply lower for the day down around 170 pips from the day’s high in the wake of the day’s heavy GBP economic calendar.

The USD backed off during N.Y. trade on Thursday after decent weekly jobless claims gave the USD some early support. Real U.S. GDP grew 2.3 percent in the second quarter, according to the advance estimate from the U.S. Bureau of Economic Analysis. Asian stock markets were mixed in overnight trade, with China and Japan up. The Bank of Japan left policy unchanged, as widely expected.

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[HotForex]

TODAY’S CURRENCY MOVERS

EURUSD, Daily

EURUSD price continues to recover from oversold market conditions as the USD traded lower on Friday, even though the jobs report largely met expectations. The odds for a U.S. Fed September rate hike seem more likely with the non-farm payroll report pointing to strong U.S. job growth. The EUR barely changed in early Monday trade against the dollar but is up against most other currencies. The European calendar is pretty quiet today, with French business confidence from the Bank of France and Sentix Investor Confidence for the Eurozone. Technically, the EURUSD is holding a multi-week succession of lower tops and bottoms. We could see a third attempt for an upward attack on the 1.1120’s as a price bounce off the 1.0850’s, ahead of the resumption of the multi-week price decline from the June 18 high of 1.1436; this is before we see prices grind lower towards my medium term price target area near the 1.0750’s.

German data weakens, with industrial production unexpectedly dipping 1.4% m/m in June data (the median forecast had been for a 0.9% rise). The unexpected sharp contraction in German June production will cast a shadow over Q2 GDP estimates. However, the EUR seems to be ignoring this as EUR buyers are emerging on short term oversold conditions. Early-week markets in Asia are consolidating after Friday’s U.S. jobs report market volatility. Speculation that Beijing will speed up mergers of state owned companies helped support shares, while Japan’s Nikkei was driven by earnings reports, and the Australian market was supported by a strong rebound in bank shares.

Friday’s headline U.S. report printed a 215k July payroll rise with a 0.2% hourly earnings gain that exactly matched estimates, but tiny gains of 101k for civilian jobs and 69k for the labor force after June declines were a disappointment. There was a drop in the jobless rate to a 5.26% cycle-low from 5.28%, though the labor force participation rate remained at a 38-year low of 62.6%. The FOMC is on the verge of its first rate hike since June 2006. However, a tightening is still not guaranteed and there remain some risks that could keep the Fed sidelined.

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[HotForex]

TODAY’S CURRENCY MOVERS

EURUSD, Daily

EURUSD has been rising for the last four trading days after it created a higher low at 1.0848 weekly support. This has brought the pair conclusively out of the bear channel after a breakout at the end of July failed. This first failed attempt but was a hint of things to come and market was able to create a higher low on August 5th. Yesterday was the first time EURUSD stayed outside the channel for a full trading day thus confirming that the downside dynamics that were in place in July are not dictating the market moves any longer. Therefore, I expect that this week’s price action will be bound between major weekly support and resistance levels at 1.0848 and 1.1189. I am seeing a support area in the daily resolution between 1.0848 and 1.0934 while the nearest resistance area is between 1.1114 and 1.1189 and 50% and 61.8% Fibonacci levels coincide with these levels. However, before EURUSD can move up there, it has to deal with a resistance created by upper 2 stdv Bollinger band and 50 day moving average (currently at 1.1090). I expect the area between 1.1061 and 1.1130 to limit today’s trading on the upside and then look for a move to 1.0870.

German ZEW unexpectedly dropped in August, with the expectations reading falling to 25.0 from 29.7. The current conditions reading still improved to 65.7 from 63.9 and the expectations number still remains firmly in positive territory, indicating that optimists far outnumber pessimists. Still, the fact that investor confidence dropped again, despite signs that Greece is heading for a third bailout highlights that concerns about the impact of the Fed’s lift off and the outlook for the Chinese economy overshadow a more stable situation in the Eurozone. The strong current conditions reading, which ties in with a marked rise in German orders in Q2, suggest the recovery remains on track in Q3, but concerns about the longer term outlook seem to be on the rise. Bund futures extended gains on the weak number and the September 10-year contract is now up 44 ticks at 154.39.

China devalued yuan after July exports we down by 8.3%. Currencies were impacted by the PBoC’s devaluation of the yuan, with the AUD and NZD both losing over 1% to the USD in the wake of the move, while the won and the yen were hit by a lesser extent. An indirect bid for dollars saw EURUSD tumble back to the mid-1.09s after foraying above 1.1000 after the London close yesterday. The PBoC lowered the yuan’s daily fix to the U.S. dollar by 1.9% to 6.228, the largest devaluation since the central bank dropped its peg against the greenback. The move follows dismal trade data out of China over the weekend, and is apparently a one-off initiative intended to converge onshore and offshore pricing as a new pricing regime is put together ahead of the key IMF SDR inclusion vote later this year, according to the FT. AUDUSD dove over a big figure in making a one week low at 0.7305. USDJPY lifted to a two-day peak of 124.89.

European stock futures are heading south, in tandem with U.S. stock futures following China’s move to devalue its currency, which will add to concerns about the health of the Chinese economy, while prompting concerns that the devaluation will hamper exporters elsewhere as it will artificially boost the competitiveness of Chinese manufacturers. This could put fresh pressure on other central banks to take their own currencies more into account. The DAX was looking forward to an expected improvement in the ZEW after yesterday’s robust gains.

Fed’s Lockhart is still disposed to September lift-off though waiting a month or two won’t be decisive for the economy and a gradual tightening pace means something less frequent than a hike at each meeting. He sees some evidence of inflation heating up, though low global commodity prices could be a concern if they signal weak global demand. Lockhart considers progress on inflation important in setting the pace of rate hikes after lift-off. He views immediate risk of Greek spillover as passed, but any agreement still needs to be implemented. Seems he’s left himself some wiggle room on lift-off on the inflation threshold, despite still favoring a September move.

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[HotForex]

TODAY’S CURRENCY MOVERS

EURUSD, Daily

EURUSD rallied to the 1.1090 resistance identified in my report yesterday. The pair reacted lower but then attracted buyers at an intraday support at 1.1012. This has led to a fifth consecutive up day with price once again trying to challenge the resistance area above 1.1090. EURUSD is trading inside the upper Bollinger Bands (1.5 and 2 stdv) and the Stochastics is getting overbought. Trend in 4h resolution has been strong and suggest that this will be another day without a significant correction in EURUSD but the upside is indeed getting limited as the resistance area is near. EURUSD is trading near levels that have been able to turn price lower before, therefore I expect that in today’s trading upside will be limited to 1.1090 – 1.1130 range.

The PBoC devalued again, shifting the yuan’s reference rate to 6.3306 versus the dollar, which is a 1.6% weakening of the Chinese currency relative to yesterday’s 6.228 (which itself marked a 1.9% depreciation). There seems a degree of acceptance in markets, with Credit Suisse economists, for instance, calculating that the yuan was 5 to 10% overvalued going into the devaluations, adding that anything more than a 10% shift in the currency would spark political backlash. Incoming Chinese data today, including production, retail sales and fixed-asset investment, showed weakness.

German lawmakers not ready to wave through Greek bailout. There are reports that German Chancellor Merkel is facing opposition to the plan to let lawmakers vote on the third Greek bailout package early next week. A deputy to Finance Minister Schaeuble told ARD television that “one needs to look closely” and “ask the Bundestag for approval when the common understanding is that this will hold for three years”. If there is a delay it could derail Greece’s close time table and the race to get political approval before Greece faces another big ECB repayment on August 20.

German insolvencies are falling sharply, with the overall number down 6.6% y/y in the year to date and down 10.6% y/y in May alone. This is another sign of a relatively robust domestic economy, but also a reflection of the fact that especially small companies in Germany are facing fewer financing constraints than companies elsewhere in the Eurozone. The low interest rate environment and robust domestic demand are also helping t hem to perform.

Yesterday US wholesale sales edged up 0.1% in June and inventories rose up 0.9%. The 0.3% May sales gain was nudged down to 0.2%. May’s 0.8% jump in inventories was revised lower to 0.6% (0.4% April). The inventory-sales ratio increased to 1.30 from 1.29 (revised from 1.29). Gains in most of the nondurable sales components slightly offset broad-based declines in the durable goods sales. Inventories were boosted by autos and drugs. The data will help fine tune GDP estimates.

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[HotForex]

UPDATE ON US STOCK MARKETS AND MSCI WORLD

Dow Jones Industrial Average future, Weekly

For the first time since the year 2011 the Dow Jones Industrial index futures are now moving below the 50 week moving average for more than two consecutive weeks. This speaks of a changed market psychology and is in line with my predictions in May. Also, China’s decision to devalue Yuan twice hit the market sentiment from two directions. First of all, it is a sign that China’s economy needs artificial support from a lower exchange rate and secondly now the products imported into China are more expensive and therefore less competitive. For German companies for instance China is an important export market. As a result Dax is trading almost 2.5% in the red today. Also, this move has been interpreted a sign of desperation on behalf of Chinese officials.

On May 7th I tweeted on MSCI World Index saying that the bull market for stocks is over. I pointed out that MSCI World etf charts (weekly and monthly) indicate that the markets have entered to a volatile topping phase. This phase typically takes place after a long move higher and leads to a severe correction or a period of bear market. Monthly chart showed an increase in volatility and a bearish shooting star candle with the next candle moving well below the shooting star low. The weekly chart showed how this MSCI World index tracking etf had moved outside the up trending regression channel, a clear sign of increased volatility and weakness.

Since my tweet in May, the technical picture in many of the stock indices has continued to degrade. Dow Jones Industrial Average (DJIA) has moved sideways and has been weaker than both Nasdaq and S&P 500 indices. Just lately DJIA created a lower high that eventually led to index breaking below the 50 week moving average. After such a long move higher this is a bearish indication. Many other indices have also given clear bearish warning signs and suggest that for long term investors it is the time to gradually move money from long stock positions to inverse ETFs and into trading the short side opportunities with CFDs. Let’s take a look at what the other indices are signalling on the state of the global stock markets.

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[HotForex]

TODAY’S CURRENCY MOVERS

EURUSD, Daily

Yesterday’s rally exceeded my expectations for the day as EURUSD blasted through the resistance at 1.1130. However, it still is inside the range I said I would expect to contain this week’s price action. I suggested in my report on Tuesday that EURUSD would not trade beyond 1.1189 resistance. There was a quick move some 25 pips higher but it was quickly rejected by the sellers and the pair is currently trading at 1.1119. EURUSD is now moving lower towards an intraday support area between 1.1030 and 1.1070. The next support level after this intraday support is the weekly high at 1.10996. This weekly high is fairly near to the support area above it and therefore adds to its significance. Nearest daily support and resistance levels are at 1.0934 and 1.1214.

The PBoC devalued the CNY for a third day, but at a decreasingly aggressive pace of 1.1%, comparing to 1.6% yesterday and the initial 1.9% devaluation of Monday. The central bank held a press conference to explain the devaluation — in contrast to the two previous occasions — arguing that there was no economic basis for the currency to continue depreciating, and that it would keep it stable. The PBoC had also intervened during its overnight session, when it trimmed losses in the CNY of nearly 2% to just 1%.

The central bank also said that the way the reference rate for the new session was modified would now incorporate the currency’s close from the previous session, as well as demand and supply conditions. All this mollified broader market concerns. Most other Asian currencies managed to rebound, and stock and commodity markets picked up.

Final German HICP inflation was confirmed at 0.1% y/y, CPI at 0.2% y/y, as expected. The breakdown showed seasonal price drops for clothes and shoes over the month, which were compensated by a rise in holiday related prices. The annual rate continues to reflect the impact of lower energy prices, with household energy down 5.7% y/y, a further acceleration in the pace of decline, driven by a 22.4% y/y drop in prices for heating oil. Headline numbers remain very low, not just in Germany, but deflation risks are now longer a major concern for the central bank, as core inflation starts to rise.

US Treasury posted a $149.2 bln budget deficit in July, a 57.7% erosion versus the $94.6 bln shortfall a year ago. Spending surged 21.2% y/y, while receipts rose only 5.1% y/y. The fiscal year deficit now stands at $465.5 bln, worsening 1.1% y/y compared to the $460.5 bln red ink for the same 10-month period of fiscal 2014. Also for the fiscal year to date, receipts are up 8.0% y/y, with outlays up 6.9% y/y. We’re still forecasting a $430 bln deficit for the current fiscal year, which compares to the -$483.3 bln for FY2014.

September liftoff is far from a done deal thanks to China’s devaluations and the broad impacts and implications rippling around the globe. For the time being we’ll maintain our call for a 25 bp hike in September. But the Fed funds futures market is now showing only about a 40% chance for action. Odds were closer to 70% after the July jobs report. Factors that have the potential to cause the FOMC to delay are the risks of global economic weakness, the renewed threat of disinflation with the plunge in commodities, potential devaluations of other Asian currencies, and the stronger dollar which could be a net headwind to US growth. It’s too soon for Fed officials to start making pronouncements on China, as indicated by Dudley earlier. While data will continue to be the Fed’s guiding light, policymakers have already shown their sensitivities to global dynamics, and overseas events could take precedence in the September rate decision if the markets become unglued.

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[HotForex]

TODAY’S CURRENCY MOVERS

EURUSD, Daily

With money continuing to flow into the USD and the GBP, traders continue to bet if the Fed will move to raise rates before the Bank of England. The EURUSD is set to consolidate after a six straight trading day advance from the 1.0850’s with the recent price advance stopping just short of the 1.1220’s resistance levels. Technically, I am expecting the EURUSD to dip towards the 1.1080’s – 1.0980’s as buyers may emerge at those levels before any attempt to test towards the 1.1260’s. The EUR market continues to re-price, at least in the short term, to reflect the diminished GREXIT concerns.

German Q2 GDP expanded 0.4% q/q, a slight acceleration from the 0.3% q/q in Q1, which brought the working day adjusted annual rate to 1.6%, up from 1.1% y/y in the previous quarter. French non-farm payrolls raised 0.2% q/q in Q2, while wage growth slowed to 0.3% from 0.5%. Overall, French unemployment remains high, especially among the under 25s, but this is also due to France’s ongoing structural issues and low growth potential. Greek parliament approves 3rd bailout after an all night debate that showed the strains in Tsipras’ coalition. The vote paves the way for an agreement by Eurozone finance ministers at the Eurogroup meeting this afternoon.

Markets are trading cautiously after a choppy week in the wake of China’s unexpected devaluation of the yuan, but the move has been generally accepted by the markets. Wall Street also shrugged off the ongoing slide in crude oil below $42 for the time being. Firmer U.S. retail sales data was offset somewhat by negative trade price data and an uptick in jobless claims.

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[HotForex]

GOLD RALLY HALTED NEAR RESISTANCE

Gold, Weekly

I pointed out in my previous report that the long term picture stays weak and suggests lower prices for gold. However, I noted that in short term we should see 1080 support holding and market testing the 1130 – 1146 resistance area. If price moves to this resistance area we should monitor price action for potential signs of momentum reversal at levels identified in this report.

Market has since moved roughly as expected with the price of gold moving briefly below the 1080 support. This intraday move was quickly rejected and price closed above the support. This was followed by a sideways move and then a rally that almost reached the lower end of my resistance range last week. The long term weekly picture remains bearish with gold trading near previous support areas. The 23.6% Fibonacci level coincides with the 1130.40 low and therefore suggests increased significance of that level. Other resistance levels are approx. at 1142 and 1160.

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[HotForex]

TODAY’S CURRENCY MOVERS

EURUSD, Daily

The dollar continued on a steady-to-firm path during pre-European trade session in Asia, despite weakness in US Treasury yields amid growth worries and talk the FOMC will delay lift-off beyond September. EURUSD ebbed to a six-day low of 1.1051, and USDJPY lifted to the 124.50 area, though the pair remained well within its Monday range.

For the last three weeks the Stochastics Oscillator has been giving high quality signals at both ends of its range. This happens when market moves sideways in a well-defined range. I said in my Aug 11th report that I expect this week’s price action to be bound between major weekly support and resistance levels at 1.0848 and 1.1189. The upper end of the range was tested over the next three days but price failed to penetrate the level on a closing basis. Since then the pair has been drifting lower. The key word here is drifting. Price move hasn’t been strong and volatile but rather quite gradual. The pair has now reached the support range I mentioned in my Aug 13th report (1.1030 – 1.1070) and trades at 1.1060 at the time of writing. Therefore, I expect price will find support very close to the current price. The proximity of the 38.2% Fibonacci level at 1.1044 supports the idea. Reaction higher however, could be short lived to as there is resistance in 1.1114 – 1.1125 range. If this I’m right and this resistance holds the support area between 1.08048 and 1.0934 becomes a likely target area for shorts.

German Financial Minister Schaeuble calls on lawmakers to back Greek aid package. He sends a strong signal off support for Greece’s 3rd bailout package ahead of Wednesday’s vote in Germany’s lower house of parliament, where Schaueble and Merkel are facing growing dissent from their own party. Schaeuble told public broadcaster ZDF that he sees a dramatic change in the government’s readiness to reform and that: “I can argue with full conviction, partly because I haven’t taken this decision lightly myself… that the right thing to do is to vote for this”. Schaeuble, like Merkel before him, seemed to be trying to play down difference with the IMF over Greece’s debt sustainability and stressed that he is sure that the IMF will be involved in the program.

US NAHB homebuilder sentiment index rose to 61 in August from 60 in June and is the highest since November 2005. The single family sales index edged up to 66 versus 65 last month (revised from 66). The future sales index was steady at 70 (July revised down from 71). The index of prospective buyer traffic improved 2 points to 45 versus 43 previously, and is the best reading of the year, underpinned by the gains in employment and still low mortgage rates.

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[HotForex]

TODAY’S CURRENCY MOVERS

EURUSD, Daily

The risk-off theme continues in global financial markets as traders re-price the USD in view of the reduced chance that the Fed will begin tightening rates in September. The EURUSD is now trading near multi month highs around 1.15 after accelerating through my 1.1260’s target area; see my August 14 report, current price is starting to look overbought ahead of the 1.1530 resistance level. EURUSD traders should watch if price can hold above the 1.1436 support level before initiating new longs, otherwise a break below the 1.1430’s could open up the possibility for a set-back towards the 1.1216 – 1.1189 levels ahead of an advance on the 1.16’s.

German property prices continue to rise, with prices for apartments rising by around 1.4% m/m. The overall index rose 0.73% m/m and up 5.3% y/y. Low interest rates and a robust labour market are driving up property prices, but while the Bundesbank is keeping a close eye on developments it is not seeing signs of a serious property bubble at the moment, even if prices in key cities are already overvalued.

Asian and emerging market currencies are under pressure, along with commodity related currencies such as the AUD and the CAD as the FOMC minutes showed a Committee divided, the minutes gave no clear signals on the timing of a rate liftoff, however the mention of risks from China, the growth/inflation impacts of a stronger dollar, and a downgraded inflation outlook from the Fed Staff resulted in a downbeat market interpretation. China will remain a focal point as Chinese officials struggle with a slowing economy and falling equity market.

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[HotForex]

TODAY’S CURRENCY MOVERS

EURUSD, Daily

The EUR is trading lower this Tuesday after a nearly +340 pip move with the main cause pointing to Chinese retail investors’ realization that their government is no longer willing to support the Chinese stock markets. Monday’s aggressive global stock market sell-off was amplified by a number of brewing factors, the devaluation of the Yuan, the collapse of commodity prices, and the uncertainty of when Central banks will start to tighten rates.

At the moment, the EURUSD is at risk of a retracement of the 1.1020-1.17 sharp multi up-day move. However, the EURUSD saw serval breaks of resistance that could lead to further positive upward momentum on price. Traders should now be on alert if the former 1.1530 resistance now turned support can hold before initiating new longs, otherwise a possibility dip towards the mid 1.13’s could see buyers remerge to support price for a potential next leg higher move above the 1.1750’s.

The German DAX remains clearly below the 10000 mark and Asian markets were volatile in overnight trade, with the ASX closing higher, but the Nikkei losing nearly 4% again.

Crude Oil touched $37.70 after making it to $39’s following its entry into to the $37‘s. The slide lower comes as traders fear that global stock markets may pick up downward momentum again; the price fall indicates that traders view that global demand for the commodity will weaken as the Chinese economic slowdown takes hold.

The White House said the Treasury is “closely monitoring” global markets and China should continue to pursue reforms, while touting the strength of the U.S. economy. However, it did warn that Congress needs to pass the budget and avoid shutdowns to avoid “self-inflicted wounds”. Merkel of Germany said that a crisis in China won’t last and it will do everything it can to stabilize the situation, while Hollande of France said China will find the right answers to secure its economy.

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[HotForex]

TODAY’S CURRENCY MOVERS

EURUSD, Daily

The hope for a rebound in European stock markets didn’t last long, and equities are selling off again, with the DAX down at the market opening and below the 10000 mark. China’s rate cut yesterday by the People’s Bank of China initiated a rebound in Asian equity markets. It seems the realization in Europe is that the underlying problem is due to the fact that emerging markets are slowing down. The Euro Stoxx 600 has dropped 12% in August so far, and is heading for the worst monthly drop since 2008.

The medium term view on the EURUSD, since price has traded through the May tops at the 1.1430’s and then back under to touch below the 1.14 support on Tuesday, indicates that price still remains at risk of a continued retracement. The risk for longs is a re-visit towards the former major resistance 1.12 area where traders should watch for a potential higher low to develop before any attempt to retest the 1.17 recent high.

The USD gets some support as the U.S. consumer confidence rose sharply to 101.5 in August after climbing to 91.0 in June (revised from 90.9). It was 90.3 a year ago. This is the best level since March. The USD is trading mostly higher against the JPY, GBP, AUD and CHF, ahead of today’s Core Durable Goods Orders data.

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[HotForex]

TODAY’S CURRENCY MOVERS

EURUSD, Daily

The EUR is trading generally weaker after posting broad based declines yesterday, as lower energy prices has led to a 1.7% decline in German import price inflation. The current lower inflation trajectory will give the ECB an excuse to talk down the euro; speculators should not rule out any further ECB QE expansion in the wake of the recent global market turmoil. I continue to see EURUSD risk to the downside in the immediate short term as price may attempt to re-test the mid to low 1.12’s where buyers could potentially emerge to support the pair.

European stock markets are broadly higher, following gains on Wall Street and in Asia, with the Shanghai Comp managing to extend gains in late trade closing with a 5.34% gain. The Nikkei closed 1.08% higher and the Hang Seng is up nearly 3%. In Europe, most markets are up around 2%, with the DAX leading the way with a 2.34% gain – the FTSE 100 is up 2.07% and the Euro Stoxx 2.20%.

Downbeat central bank comments are adding to market support with rate hike expectations in the U.S. and the U.K. being pushed back and the increased possibility that the ECB will move further into QE. Volatility is likely to remain high in this climate of uncertainty about the world growth outlook.

Dovish Fed speaking from Dudley, who said a September rate hike “seems less compelling to me” than a few weeks ago, had an impact on the markets with the Dow Jones closing up nearly +3.95% in Wednesday trade.

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[HotForex]

TODAY’S CURRENCY MOVERS

EURUSD, Daily

The EURUSD hit a low near the key 1.12 support level on Thursday , I previously posted “I continue to see EURUSD risk to the downside in the immediate short term as price may attempt to re-test the mid to low 1.12’s where buyers could potentially emerge to support the pair.” This I posted when the EURUSD was trading around 1.1311. At the moment, the euro is likely to continue its bounce off the key support as buyers emerged to support price. The risk for short sellers is that the latest bounce could extend out towards the 1.14’s – 15’s. However, traders should be on alert for any price drop below the 1.12’s as this move may raise fears for a return towards the low 1.11’s to mid 1.1150’s.

The rebound on stock markets continued in Asia, with the Shanghai Comp up 1.77% and Japanese markets outperforming. The USD managed to firm up in the wake of renewed optimism about the U.S. economy following yesterday’s revised Q2 GDP, which also helped the U.S. Dow Jones to close up 2.30% on Thursday. Today, the Eurozone stock markets are broadly lower, with Eurozone markets underperforming and the DAX down around 8% for the month. The markets are now hoping that stimulus from central banks may have helped to limit the sell off. Uncertainty about growth and central bank outlooks is adding to market volatility and means the impact of stronger than expected data is unclear.

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[HotForex]

TODAY’S CURRENCY MOVERS

EURUSD, Daily

Asian stock markets closed lower again in overnight trade, led by a 1.28% decline in the Nikkei 225, as the Chinese stock markets backed off following a Beijing announcement that large-scale purchases to support the market are not to be expected in the future. This weighed on regional equities, Asian and commodity currencies. At the time of writing, U.S. stock futures are down -125 points, setting the stage for a renewed decline in European stock markets.

Eurozone August inflation data is out later today and it should show a renewed drop in the headline rate closer towards zero in the wake of lower commodity prices, EUR traders will look for further ECB rate clues in language during the press conference on Thursday after the Minimum Bid Rate decision. Traders should also take note that ECB Vice President Constancio said at the Jackson Hole symposium that current inflation forecasts don’t price in recent declines in oil prices. This backs expectations for a downward revision to the central bank’s inflation forecasts at Thursday’s council meeting.

The technical outlook for the EURUSD over the short term is that price is bouncing off the 1.12’s key support level with price potential limited to the upside between the 1.1460 – 1.1530’s. Price looks to be trading at the lower end of the short term upward price channel, and as long as the key 1.12’s hold firm the longs should maintain control over the immediate short term. Short sellers may present themselves on a break below the 1.12’s with support levels seen near the low 1.11’s – 1.1150’s.

Traders should pay some attention to the recent statements by Central Bank “centers of influence members” since a large part of the recent market volatility revolves around the uncertainty of the timing of rate adjustments. The U.S. Fed vice chairman Fischer saying over the weekend that “there is good reason to believe that inflation will move higher as the forces holding down inflation dissipate further,” while BoE Governor Carney said that China uncertainty was unlikely to change UK monetary policy. On Friday, Atlanta Fed moderate Lockhart said he’s less resolute on a September hike in wake of market volatility, according to a Market News report. Market turmoil may change the thinking on policy, he said, though the economy is in “quite solid mode of expansion.”

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[HotForex]

TODAY’S CURRENCY MOVERS

EURUSD, Daily

The global stock market selloff continued in overnight trade in Asia, with the Nikkei dropping off another 3.84%. The USD traded mostly weaker; oil prices have fallen back off the recent high price near $54.3, and now trades just below $53 after rallying strongly over the three previous sessions. The USD weakness may be linked to the new declines in Chinese and global stock markets, this global selloff has investors and traders rethinking the timing of when the U.S. Fed will tighten rates. This uncertainty regarding the timing of a U.S. rate hike is fueling the current downward pressure on the USD. Markets will remain volatile until the markets see clearer signs from the U.S. Fed.

The technical outlook for the EURUSD over the immediate short term remains to be contained within the Aug 7th – Aug 12th upward slopping price channel. Now that the price has clearly bounced off the 1.12’s key, support current price potential is set to test the upside between the 1.1460 – 1.1530’s. However, any break below 1.12 could open up a 1.11 target. A hypothetical trade set up could be to resell near the 1.1460’s – 1.1530’s for a 1.11 target.

German jobless numbers fell 7K in August, slightly more than expected and leaving the seasonally adjusted jobless rate steady at a low 6.4%. Official numbers still look good, but the improvement on the labour market is levelling off as the market is increasingly tight.

The Reserve Bank of Australia left its cash rate at 2.0%, as widely expected and ignoring recent market turmoil in Chinese stock markets. The AUD is seen as adjusting to the significant declines in key commodity prices and further depreciation seems likely; however, the RBA is now cautious about adjusting rates lower because of the strong Australian property market.

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[HotForex]

TODAY’S CURRENCY MOVERS

EURUSD, Daily

Now that concerns about China and forecasted inflation numbers are being lowered, the ECB will now have renewed pressure to expand its QE, traders will be on alert for further ECB clues during tomorrow’s ECB press conference. If the ECB hints at further EU growth concerns, the odds will increase for additional QE which may provide enough of a catalyst to support EUR bear positions over the medium term.

The short term technical outlook for the EURUSD pair remains in an uptrend, however, momentum analysis looks to be weakening , if we can spot a Stochastic bull cross take shape below the 20 line hopes for continued upward price, momentum should remain intact. For the moment we cannot rule out a price move to retest the 1.1460’s – 1.1530’s before the bears emerge once again to potentially carry the pair back towards the 1.11 support area. Traders should also remain alert for price moves out-side of the most recent upward channel line for breakout trade set-ups. I remain committed to selling into EURUSD strength over the coming days.

Chinese markets will be closed both tomorrow and on Friday, which may be good for global markets as it means that the risk of bearish stock market contagion from this source will be set aside until at least Monday.

Market concerns over how central banks will respond to new adjustments in global growth forecast have been a driving force behind the recent financial market volatility. Crude oil prices have been reflecting growth projections with prices now trading lower, around the $43 level. Oil prices today are shapely lower today after a short lived price rebound attempt which posted a largest multi day rally in a quarter of a century. The AUD and CAD have been trading towards the downside within daily chart analysis as money flows into the JPY over the last 5 trading days, as an alternative to the USD, EUR and GBP, this trend should continue until at least we see clearer signals from the U.S. Fed regarding when and if we will see a pending rate hike. This Friday’s release of the U.S. Non-farm Employment Change should provide a clue about the Fed’s next move.

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