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Daily Report: High Beta Currencies Extend Rally, Euro Consolidates Print E-mail
Action Insight Archives | Written by | Jul 31 12 06:37 GMT

Daily Report: High Beta Currencies Extend Rally, Euro Consolidates

High beta currencies continue to ride on risk appetite and strengthen broadly today while European majors are lagging behind and stuck in range against dollar and yen. US Treasury Secretary Geithner met with German Finance Minister Schaeuble yesterday and issued a joint statement afterwards. They expressed "confidence in euro area member states' efforts to reform and move towards greater integration" and hailed improvements in Ireland and Portugal, as well as the "considerable efforts by Spain and Italy. Meanwhile, they also pledged to "cooperate closely with their partners when advancing the policy agenda in autumn to further stabilize global and European economies." And that included emphasis on the need for "ongoing international cooperation and coordination to achieve sustainable public finances, reduce global macroeconomic imbalances, and restore growth." Meanwhile, Greece was omitted from the statement. Geithner also met with ECB president Draghi but no statement was issued.

In Greece, the coalition leaders are still struggling to reach agreement over the EUR 115.b austerity and could seek extension on the bailout program. Democratic Left leader Kouvelis said that discussionis will continue in the coming days. Prime Minister Samara met with coalition leaders for more than two hours yesterday but has yet to agree on a final agreement. It's reported that Greece would push for a two-year extension to meet the fiscal target in planning the new austerity measures. Finance Minister Yannis noted that the choices by the leaders "must not nullify our ability to renegotiate and mainly not to nullify the country's ability to remain in the euro zone."

After all, the main focus this week remains on the central bank meetings, in particular ECB press conference. It should be noted again that Draghi's comments raised hope for ECB to restart the bond buying program and expectations are high. Spanish yield tumbled sharply since making a record high at 7.751% last week and is comfortably below 7% level at 6.63%. Stocks were also boost by overall risk appetite which in turned sent high-beta currencies higher. Euro, while being firm against dollar and yen, lagged behind and has indeed dripped to record low against Aussie and Loonie yesterday.

EUR/CAD's down trend resumed by taking out 1.2280 and made new record low at 1.2269 yesterday. Near term outlook will stay bearish as long as 1.2450 resistance holds. And current fall should extend to next near term target at 100% projection of 1.4174 to 1.2880 from 1.3480 at 1.2186.

On the data front, Japan manufacturing PMI dropped further to 47.9 in July but unemployment rate improved to 4.3% in June. Household spending rose 1.6% yoy in June, housing starts dropped -0.2% yoy. UK Gfk consumer sentiment was unchanged at -29 in July. Australia building approvals dropped-2.5% mom in June. New Zealand NBNZ business confidence dropped to 15.1 in July. German retail sales dropped -0.1% mom in June. Swiss UBS consumption indicator rose to 1.6 in June. Eurozone employment data will be a focus in European session with CPI flash. Canada GDP, IPPI and RMPI, US personal income and spending, Chicago PMI and consumer confidence will be featured in US session.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.0001; (P) 1.0027; (R1) 1.0041; More.

USD/CAD's fall extends further to as low as 1.0003 so far today. Intraday bias remains on the downside and current choppy fall from 1.0445 is going to go deeper and could target a retest on 0.9799 low. On the upside, above 1.0052 minor resistance will turn intraday bias neutral and bring recovery. But break of 1.0231 resistance is needed to indicate near term reversal. Otherwise, outlook will remain mildly bearish.

In the bigger picture, correction from 1.0656 is finished with three waves down to 0.9799 and rise from there is resuming the medium term rebound from 0.9406. Such rise from 0.9406 is either a correction to fall from 1.3063 or the third leg of the whole consolidation pattern from 2007 low of 0.9056. In either case, USD/CAD should target 38.2% retracement of 1.3063 to 0.9406 at 1.0803 first and possibly further to 100% projection of 0.9406 to 1.0656 from 0.9799 at 1.1049 before completion. Break of 0.9799 support is needed to invalidate this view or we'll stay bullish even in case of deep pull back.

USD/CAD 4 Hours Chart

USD/CAD Daily Chart

Economic Indicators Update

GMT Ccy Events Actual Consensus Previous Revised
23:01 GBP GfK Consumer Sentiment Jul -29 -29 -29
23:15 JPY Nomura/JMMA Manufacturing PMI Jul 47.9 49.9
23:30 JPY Unemployment Rate Jun 4.30% 4.40% 4.40%
23:30 JPY Household Spending Y/Y Jun 1.60% 2.80% 4.00%
1:00 NZD NBNZ Business Confidence Jul 15.1 12.6
1:30 AUD Building Approvals M/M Jun -2.50% -15.00% 27.30% 27.00%
5:00 JPY Housing Starts Y/Y Jun -0.20% 9.40% 9.30%
6:00 EUR German Retail Sales M/M Jun -0.10% 0.50% -0.30%
6:00 CHF UBS Consumption Indicator Jun 1.6 1.05 1.02
7:55 EUR German Unemployment Change Jul 7K 7K
7:55 EUR German Unemployment Rate Jul 6.80% 6.80%
8:00 EUR Italian Unemployment Rate Jun P 10.10%
9:00 EUR Eurozone CPI Estimate Y/Y Jul 2.40% 2.40%
9:00 EUR Eurozone Unemployment Rate Jun 11.20% 11.10%
12:30 CAD GDPM/M May 0.20% 0.30%
12:30 CAD Industrial Product Price M/M Jun 0.60% 0.00%
12:30 CAD Raw Materials Price Index M/M Jun 1.70% -1.00%
12:30 USD Employment Cost Index Q2 0.50% 0.40%
12:30 USD Personal Income Jun 0.40% 0.20%
12:30 USD Personal Spending Jun 0.10% 0.00%
12:30 USD PCE Deflator Y/Y Jun 1.70% 1.50%
12:30 USD PCE Core M/M Jun 0.20% 0.10%
12:30 USD PCE Core Y/Y Jun 1.80% 1.80%
13:00 USD S&P/Case-Shiller Composite-20 Y/Y May -1.50% -1.90%
13:45 USD Chicago PMI Jul 52.5 52.9
14:00 USD Consumer Confidence Jul 61.5 62

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