Forex Daily Analysis for Wednesday, Aug 22nd
Markets are nervous - volatility is still very high. This could be quietness before the storm.Quiet before the storm
Overnight News Bullets
Overnight bullets:
- SZ Trade Balance (Jul) out at 1.57B vs. 1.65B prior.
- GE ZEW Survey (Aug): Econ Sentiment at -6.9 vs. -1.5 expected, Current Situation at 80.2 vs. 85.0 expected.
- E-Z ZEW Survey (Aug): Econ. Sentiment at -6.1 vs. 0.0 expected.
- E-Z Trade Balance (Jun) out at 5.2B vs. 3.0B expected.
- E-Z Construction Output MoM/YoY (Jun) out at 0.6%/2.7% vs. 0.1%/1.6% prior.
- CH – PBOC raises benchmark lending rate to 7.02 pct. vs. 6.84 pct. prior.
- CA CPI MoM/YoY (Jul) out at 0.1%/2.2% as expected. Core CPI at 0.1%/2.3% as expected.
- CA Leading Indicators (Jul) out at 0.4% vs. 0.3% expected.
- CA Retail Sales MoM (Jun) out at -0.9% vs. -0.5% expected. Core retail sales out at -0.3% as expected.
- JN Merchandise Trade Balance (Jul) out at Y671.2B vs. Y844B expected.
- JN Adjusted Merchandise Trade Bal. (Jul) out at Y822.6B vs. Y746B expected.
- AU Westpac Leading Index MoM (Jun) out at 1.0% vs. 0.2% prior.
- AU DEWR Skilled Vacancies (Aug) out at0.7% vs. 0.1% prior.
O/N Data Heat map:
| EU | US | JP | UK | SZ | AU | CA | NZ | NO | SE | FR |
| - | 0 | 0 | 0 | - | 0 | - | 0 | 0 | 0 | 0 |
Calendar
Today's Highlights:
07:30 SW Unemployment rate (JUL) 4.7% 08:00 EC ECB Euro-zone Current Account (JUN) -8.6B 09:00 EC Industrial Orders MoM/YoY (JUN) 2.0% / 12.4% 10:00 SW Riksbank’s Svensson Speaks on Monetary Policy 11:00 US MBA Mortgage Applications (AUG) Prior 3.4% 14:30 US Crude Oil Inventories (AUG) -2750K 23:50 JN MoF Foreign Net Stocks / Net Bonds Investment -JPY324.6B/ JPY1243.6 B
This and Next Week’s Highlights:
23 Aug GE GDP, Private Consumption, Government Spending, Equipment Investment, Construction Investment, Domestic Demand, Imports, Exports 23 Aug SZ Trade Balance, Employment Level, ZEW Survey (expectations) 23 Aug NO GDP 23 Aug UK Total Business Investment 23 Aug US Initial Jobless Claims, Continuing Claims, EIA Natural Gas Storage Change 23 Aug NZ Trade Balance, Imports, Exports 23 Aug JN Corp. Service Price 24 Aug GE Import Price Index 24 Aug NO Unemployment Rate (AKU) 24 Aug UK GDP, Private Consumption, Government Spending, Gross Fixed Capital Formation, Exports, Imports, Index of Services 24 Aug US Durable Goods Orders, Durables Goods Orders ex. Transportation, New Home Sales, Baker Huges U.S. Rig Count,
What's going on?
- Markets consolidating down yesterday, but the storm has not completely settled. Rumours that the Fed would make a surprise cut in benchmark rates puzzled the markets, but the message was that the Fed is ready to act on credit, but is not alarmed. Moody’s also not alarmed by the situation. U.S. Treasury Secretary Henry Paulson said yesterday in an interview with CNBC that volatility in credit markets related to subprime mortgage losses will ``take time'' to subside.
- The EUR sold off on back of the disappointing ZEW figures which adds pressure on the ECB to halt any rate increases. We think however, thath they will go for 4.25 pct. in September.
- Speculation of unchanged rates in the UK also kept GBP offered. It is clear that the BoE will be careful with hiking rates as there are concerns that the credit problems will spill over into the UK economy. GBPUSD tested the 200 day MA at 1.9768, but managed to stay above on close. A close below would give scope for 1.9630.
FX
Market: USD went lower against most majors on back of rate speculations. Carry trades lower as higher volatility makes them difficult to trade.
| EUR | USD | JPY | GBP | CHF | AUD | CAD | NZD | NOK | SEK | PLN |
| - | 0 | + | 0 | 0 | - | - | - | 0 | 0 | 0 |
FX Trading Strategies
| Pair | Supp. | Resis. | Comments |
| GBPUSD | 1.9660 | 1.9905 | GBP-crosses still look soft as there's speculation that the BoE won't be as aggressive on rates as first anticipated. We sell at the break of 1.9800 offer, targeting 1.9660, stop bid at 1.9825. Watch the 200 dag MA, currently at 1.9773 for support. |
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