Daily Forex Analysis: EUR/USD: Calm Before US Jobs Report Storm

GROWTHACES.COM Forex Trading Strategies

Taken Positions

EUR/USD: short at 1.0950, target 1.0750, stop-loss 1.1030, risk factor *

USD/JPY: long at 123.70, target 125.80, stop-loss moved to 124.30, risk factor *

USD/CAD: long at 1.3120, target 1.3320, stop-loss 1.3040, risk factor *

AUD/USD: short at 0.7350, target 0.7205, stop-loss 0.7400, risk factor *

NZD/USD: short at 0.6560, target 0.6405, stop-loss 0.6630, risk factor *

EUR/GBP: short at 0.7030, target 0.6830, stop-loss 0.7085, risk factor *

GBP/JPY: long at 193.25, target 196.40, stop-loss 192.40, risk factor **

Pending Orders

USD/CHF: buy at 0.9745, target 0.9940, stop-loss 0.9675, risk factor *

EUR/CHF: buy at 1.0645, target 1.0990, stop-loss 1.0580, risk factor *

 

EUR/USD: Calm Before US Jobs Report Storm

(short for 1.0750)

• Today’s main event will be US non-farm payrolls data at 12:30 GMT. The marker forecast is 223k, and our expectations are close to the market consensus. In our opinion a number above 200k is likely to encourage bets that the Fed will raise rates in September, especially after weaker ADP employment data on Wednesday. The market expects unemployment rate at 5.3%.
• We have managed to get short at 1.0950 today. If non-farm payrolls data are in line with expectations the EUR/USD is likely to break below Wednesday’s 1.0847 low. Stronger-than-expected non-farm payrolls reading may push the EUR/USD below 1.0810 low on July 20.
• On the other hand, a significantly weaker job gain (below 150k) could persuade the Fed to put off a rate increase until perhaps December. In this scenario our short EUR/USD position will certainly hit the stop-loss level.

Significant technical analysis’ levels:

Resistance: 1.0950 (session high Aug 7), 1.0962 (10-dma), 1.0988 (high Aug 4)

Support: 1.0874 (low Aug 6), 1.0847 (low Aug 5), 1.0812 (low Jul 21)

 

GBP/USD: BOE Rate Hike Possible At The Turn Of The Year

(stay sideways)

• Only one of nine BoE policymakers had voted for a rate hike at yesterday’s meeting. Most investors had expected two or even three members of the Monetary Policy Committee to vote for a rate hike.
• The Bank stressed how a recent strengthening of the GBP and a renewed fall in oil prices would push down inflation until at least the middle of next year and said the impact of the rise in GBP could persist even longer. BOE Governor Mark Carney made it clear, however, that a strong currency was no replacement for eventual rate hikes. Carney said also the bank was getting closer to beginning to undo its stimulus for the economy.
• Mark Carney pointed out that the Bank was forecasting that inflation would start to overshoot its 2% target in just over two years’ time, based on predictions in the market for a first BoE rate hike in the second quarter of next year. In other words, Carney warned investors that they might be too relaxed about the rate path. Carney did not rule out a rate hike in 2015.
• Bank of England Deputy Governor Ben Broadbent said today he saw no urgent need to raise interest rates. While wages have risen more quickly in recent months, there was not yet much inflationary pressure, Broadbent said. He added the central bank was comfortable about price gains in Britain’s housing market which have picked up a bit more speed this year. Broadbent, who is deputy governor for monetary policy, also sits on the BoE’s Financial Policy Committee which watches out for risks to the economy from the banking sector. He said measures introduced by the Financial Policy Committee to limit growth of very high mortgages had been successful.
• Britain’s trade deficit in goods widened to GBP 9.184 billion from GBP 8.419 billion, compared with market forecast for it to widen to GBP 9.3 billion. The total trade deficit (goods and services) widened to GBP 1.601 billion in June from GBP 885 million in May.
• For the second quarter as a whole, the goods trade deficit narrowed to GBP 27.440 billion from GBP 30.419 billion pounds in the first quarter, marking it the smallest goods trade deficit since the second quarter of 2013. The total trade deficit in the second quarter fell to GBP 4.182 billion from GBP 7.496 billion, which was the smallest deficit since the second quarter of 2011. The Office for National Statistics said the quarterly trade balance would make a positive contribution to economic growth in the second quarter.
• The GBP/USD fell yesterday on dovish BoE vote. The outlook on the GBP/USD remains mixed, but we expect the GBP to stay relatively strong against other major currencies. That is why we used yesterday’s GBP depreciation to get short on the EUR/GBP at 0.7030 and to get long on the GBP/JPY at 193.25.

Significant technical analysis’ levels:

Resistance: 1.5638 (high Aug 6), 1.5653 (high Aug 5), 1.5679 (high Jul 31)

Support: 1.5465 (low Aug 6), 1.5449 (low Jul 14), 1.5366 (low Jul 10)

 

USD/JPY: Stay Long For 125.80

(long for 125.80)

• The Bank of Japan maintained its massive stimulus programme and upbeat view of the economy today.
• BoJ Governor Haruhiko Kuroda maintained his view that CPI is likely to reach the 2% goal around the first half of fiscal year 2016 if oil rises gradually from current levels. He stressed that the current weakness in Japan’s exports and household spending was temporary: “It’s true consumer spending has hovered on a weak note. But consumption will become more resilient as base salary rises and summer bonuses are paid, underscoring improvements in household income and job conditions.” He added: “The softness in exports and output is likely temporary. It’s true the temporary weakness in US growth in the first quarter, as well as sluggish Asian demand, weighed on exports. But we expect exports to pick up ahead as overseas economies recover and add to support from a weak JPY.”
• Japan’s second-quarter GDP data will be released on August 17. We expect Japan’s economy shrank in the second quarter 0.4% qoq on soft exports and weak household spending. Renewed falls in oil and commodities prices are also adding downward pressure on inflation. Some investors believe that the BOJ will have to expand its monetary stimulus at the end of the year and the JPY may weaken further in the short term on these expectations. We expect growth to rebound and inflation to accelerate in the second half of the year and in our opinion the potential for further JPY depreciation may be lower in the last months this year.
• The short-term outlook remains USD/JPY bullish. We stay long for 125.80. The market has managed two successive daily closes above 124.57 – 76.4% retrace of the 125.86 to 120.41 fall, which adds to the upside potential.

Significant technical analysis’ levels:

Resistance: 124.96 (high Aug 6), 125.01 (high Aug 5), 125.68 (high Jun 8)

Support: 124.55 (low Aug 6), 124.16 (10-dma), 124.02 (low Aug 5)

 

USD/CAD: Twin Jobs Report In The Limelight

(long for 1.3320)

• The CAD strengthened versus USD on Thursday, with trading muted ahead of both Canadian and US employment reports due on Friday (12:30 GMT). The move came despite a fall in the price of oil, a major Canadian export.
• The market expect Canadian economy to have added 5k jobs in July. Our forecast is slightly above the market consensus. However, the US non-farm payrolls data will have stronger influence on the USD/CAD rate. In our opinion US non-farm payrolls around 220k could spur fresh test of 1.3200 on the USD/CAD. Strong US data and negative Canadian reading may push the currency pair through the 1.3300 level.
• We went USD/CAD long at 1.3120 yesterday. The nearest important resistance levels are 1.3213 (2015 high on August 5) and 1.3249 high on August 31, 2004.

Significant technical analysis’ levels:

Resistance: 1.3197 (high Aug 6), 1.3213 (high Aug 5), 1.3249 (high Aug 31, 2004)

Support: 1.3095 (low Aug 6), 1.3082 (low Aug 3), 1.3000 (psychological level)