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The First Estimate Of UK GDP Growth In Q2 Is Due Out Today
Market movers today
Inflation releases are a key focus today in the Scandies as well as the US, while geopolitical issues also will continue to be a key market issue.
While July headline inflation in Denmark is set to decline due to base effects, it will increase modestly in Sweden to 2.3% (from 2.2% in June), while the increase will be more pronounced in Norway rising from 2.6% in June to 2.9% in July.
US CPI core index likely rose +0.2% m/m in line with the recent trend, leaving the inflation rate unchanged at 2.3% y/y
The first estimate of UK GDP growth in Q2 is due out today, which we expect to show that growth rebounded to 0.4% q/q from 0.2% q/q in Q1.
In the emerging market space, look out for developments in the relationship between Russia and Turkey on the one side and the US on the other, in relation to the recent US sanctions against the two countries, which has caused a slump in their assets.
Selected market news
The Turkish lira continues to be under pressure and lost more than 5% against the dollar yesterday, given the political tensions between Turkey and the US and the lack of progress in diplomatic talks between Turkish officials and US officials. Hence, the market is looking for central bank action in Turkey in order to stem the lira s slide. Furthermore, the CDS on Turkish government debt has risen more than 200bp and is now very close to the levels for the CDS on Greece. Hence, the price for hedging Turkish debt has become very expensive in recent months.
US government bond yields declined even though the 30Y US Treasury auction was a bit 'soft'. However, given the soft PPI data and solid demand for Treasuries, 10Y yields have declined some 3bp. The bond market also 'ignored' comments from one of the Federal Reserve bank 'doves', Chicago Fed President Evans, who stated yesterday that the Federal Reserve may need to raise interest rates to 'somewhat restrictive' levels to combat the recent stimulus.
Most of the Asian stock markets slipped this morning on the back of the ongoing trade conflict between the US and China as well as sanctions on Russia. The geopolitical tensions continue to set the tone for the markets.
Euro Reverses Its Loses In The Asian Session
For the 24 hours to 23:00 GMT, the EUR declined 0.78% against the USD and closed at 1.1522.
In the US, data showed that US producer price index advanced 3.3% in July, less than market consensus for a rise of 3.4%. In the previous month, the index had climbed 3.4%. Moreover, the number of Americans filing for fresh unemployment benefits unexpectedly dropped to 213.0K in the week ended 04 August 2018, defying market expectations to climb to a level of 220.0K. In the previous week, initial jobless claims had registered a revised reading of 219.0K.
In the Asian session, at GMT0300, the pair is trading at 1.1529, with the EUR trading 0.06% higher against the USD from yesterday’s close.
The pair is expected to find support at 1.1491, and a fall through could take it to the next support level of 1.1453. The pair is expected to find its first resistance at 1.1593, and a rise through could take it to the next resistance level of 1.1657.
In absence of key economic releases in the Euro-zone today, investor sentiment would be determined by the US consumer price index and average hourly earnings, both for July, slated to release later in the day.
The currency pair is trading below its 20 Hr and 50 Hr moving averages.
Sterling Trading On Stronger Footing In The Morning Session
For the 24 hours to 23:00 GMT, the GBP declined 0.47% against the USD and closed at 1.2823.
In the Asian session, at GMT0300, the pair is trading at 1.2830, with the GBP trading 0.05% higher against the USD from yesterday’s close.
The pair is expected to find support at 1.2795, and a fall through could take it to the next support level of 1.2761. The pair is expected to find its first resistance at 1.2888, and a rise through could take it to the next resistance level of 1.2947.
Going forward, investors will keep an eye on UK’s gross domestic product for Q2, along with trade balance data, industrial production, manufacturing production and construction output, all for June, set to release in a few hours.
The currency pair is trading below its 20 Hr and 50 Hr moving averages.
Japan’s Economy Returns To Growth In Second Quarter
For the 24 hours to 23:00 GMT, the USD rose 0.23% against the JPY and closed at 111.15.
Data indicated that Japan's flash machine tool orders surged 13.0% on an annual basis in July, following an advance of 11.4% in the prior month.
In the Asian session, at GMT0300, the pair is trading at 110.95, with the USD trading 0.18% lower against the JPY from yesterday's close.
Overnight data indicated that Japan's flash annualised gross domestic product (GDP) rebounded 1.9% on quarterly basis in Q2 2018, compared to a fall of 0.6% in the previous quarter. Market participants had anticipated the GDP to climb 1.4%.
The pair is expected to find support at 110.71, and a fall through could take it to the next support level of 110.48. The pair is expected to find its first resistance at 111.18, and a rise through could take it to the next resistance level of 111.42.
Moving ahead, investors will await Japan's industrial production and trade balance data, scheduled to release next week.
The currency pair is trading below its 20 Hr and 50 Hr moving averages.
Switzerland’s Unemployment Rate Remained Steady In July
For the 24 hours to 23:00 GMT, the USD rose 0.10% against the CHF and closed at 0.9940.
On the macro front, Switzerland's seasonally adjusted unemployment rate remained unchanged at a rate of 2.6% in July, marking its lowest level since June 2008 and at par with market expectations.
In the Asian session, at GMT0300, the pair is trading at 0.9938, with the USD trading marginally lower against the CHF from yesterday's close.
The pair is expected to find support at 0.9905, and a fall through could take it to the next support level of 0.9872. The pair is expected to find its first resistance at 0.9961, and a rise through could take it to the next resistance level of 0.9984.
With no macroeconomic releases in Switzerland today, investors would look forward to global macroeconomic releases for further directions.
The currency pair is trading above its 20 Hr moving average and showing convergence with its 50 Hr moving average.
Canada’s Housing Starts Fell More Than Market Expectations In July
For the 24 hours to 23:00 GMT, the USD rose 0.25% against the CAD and closed at 1.3051.
Macroeconomic data revealed that Canada's seasonally adjusted housing starts declined to a level of 206.3K in July, compared to a revised level of 246.2K in the prior month. Market participants had anticipated the housing starts to ease to a level of 219.0K.
In the Asian session, at GMT0300, the pair is trading at 1.3049, with the USD trading marginally lower against the CAD from yesterday's close.
The pair is expected to find support at 1.3012, and a fall through could take it to the next support level of 1.2975. The pair is expected to find its first resistance at 1.3075, and a rise through could take it to the next resistance level of 1.3101.
Trading trend in the Loonie today is expected to be determined by the release of Canada's unemployment rate for July, due to be released later in the day.
The currency pair is showing convergence with its 20 Hr and 50 Hr moving averages.
Aussie Trading A Tad Lower In The Asian Session
For the 24 hours to 23:00 GMT, the AUD declined 0.82% against the USD and closed at 0.7370.
LME Copper prices rose 2.2% or $134.0/MT to $6247.0/MT. Aluminium prices rose 4.5% or $91.5/MT to $2118.0/MT.
In the Asian session, at GMT0300, the pair is trading at 0.7368, with the AUD trading slightly lower against the USD from yesterday’s close.
The pair is expected to find support at 0.7338, and a fall through could take it to the next support level of 0.7309. The pair is expected to find its first resistance at 0.7425, and a rise through could take it to the next resistance level of 0.7483.
Going ahead, traders will closely monitor Australia’s, NAB business confidence index, unemployment rate and the Westpac consumer confidence, set to release next week.
The currency pair is trading below its 20 Hr and 50 Hr moving averages.
Gold: Yellow Metal Trading A Tad Lower In The Morning Session
For the 24 hours to 23:00 GMT, Gold declined 0.11% against the USD and closed at USD1220.10 per ounce.
In the Asian session, at GMT0300, the pair is trading at 1219.90, with gold trading slightly lower against the USD from yesterday’s close.
The pair is expected to find support at 1217.00, and a fall through could take it to the next support level of 1214.10. The pair is expected to find its first resistance at 1224.20, and a rise through could take it to the next resistance level of 1228.50.
The yellow metal is showing convergence with its 20 Hr and 50 Hr moving averages.
Euro in broad based selloff, another update on EUR/JPY short
Euro is suffering steep selloff just ahead of European session. In particular, EUR/USD's break of 1.1507 support confirms medium term down trend resumption. The pair should be targeting 1.1186 fibonacci level next.
EUR/CHF is on course for 1.1366 support. Based on current momentum, the medium term correction from 1.2004 should be resuming for 1.1198 key support level before bottoming.
EUR/GBP also suffers steep pull back after failing 0.9043 fibonacci level. But for the cross, outlook stays bullish as long as 0.8854 support holds.
EUR/JPY's break of 127.13 support confirms our view that corrective rise from 124.61 has completed with three waves up to 131.97 already. The larger fall from 137.49 could already be resuming.
Here is an update to our short position (sold at 128.60) as mentioned in prior comment. The development is in line with our expectations so far. We'll hold short in EUR/JPY and lower the stop to 128.10 (slightly above 128.04 minor resistance). The stop is relatively wide for giving the position a bit of space to breathe in case of mild recovery. As noted before, we're indeed eyeing at least a test on 124.61 low. We're decide whether to take profit around there later, based on downside momentum in the cross.
Silver: White Metal Reverses Its Gains In The Asian Session
For the 24 hours to 23:00 GMT, Silver rose 0.06% against the USD and closed at USD15.44 per ounce.
In the Asian session, at GMT0300, the pair is trading at 15.43, with silver trading 0.06% lower against the USD from yesterday’s close.
The pair is expected to find support at 15.37, and a fall through could take it to the next support level of 15.30. The pair is expected to find its first resistance at 15.51, and a rise through could take it to the next resistance level of 15.59.
The white metal is showing convergence with its 20 Hr and 50 Hr moving averages.
