Forex Daily Analysis - Tuesday, Sep 11st

USD Taking a Big Hit After the US Job Report


The fundmental data has for a considerable time supported a weaker USD, but liquidity concers kept the USD bid. This was changed as the change in nonfarm payrolls came out negative - EURUSD above 1.38.

O/N Data Heat map:

EU US JP UK SZ AU CA NZ NO SE FR
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Calendar

Today's Highlights:

Time (GMT) Region Release Consensus
07:30 SW CPI MoM/YoY (AUG) 0.1% / 1.9%
07:30 SW CPI Core MoM/YoY (AUG) 0.0% / 1.0%
08:30 UK Visible Trade Balance (JUL) -£6400
08:30 UK Trade Balance Non EU GDP/Mn (JUL) -£3500
08:30 UK Total Trade Balance GBP/Mn (JUL) -£3700
12:15 CA Housing Starts (AUG) 220.0K
12:30 US Trade Balance (JUL) -$59.0B
12:30 CA New Housing Price Index MoM (JUL) 0.6%
12:30 CA International Merchandise Trade (JUL) C$5.0
14:00 US IBD/TIPP Economic Optimism (SEP) 46.8
14:30 UK Leading Indicator Index MoM (JUL) Prior 0.2%
14:30 UK Coindident Indicator Index MoM (JUL) Prior 0.2%
15:00 US Bernanke Speaks in Berlin

21:00 US ABC Consumer Confidence (SEP) Prior -17
22:45 NZ Food Prices MoM (AUG) Prior 1.2%
23:50 JN Domestic CGPI MoM/YoY (AUG) 0.1% / 1.8%
23:50 JN Current Account Total (JUL) JPY1815.0B
23:50 JN Adjusted Current Account Total (JUL) JPY1900.0B

This and Next Week’s Highlights:

Date Region Release
12 Sep AU Westpac Consumer Confidence
12 Sep JN Bankruptcies, Consumer Confidence, Consumer Confidence Households, Machine Tool Orders
12 Sep SZ Government Announces Bond Auction Results
12 Sep UK Claimant Count Rate, Jobclaims Change, Avg. Earnings inc/ex bonus, ILO Unemployment Rate, Manual Unit Wage Costs, RICS House Price Balance
12 Sep EC E-Z Labour Costs, E-Z Industrial Production
12 Sep US MBA Mortgage Applications, DOE US Crude Oil Inventories
12 Sep NZ RBNZ Official Cash Rate, Retail Sales, Retail Sales Ex-auto
13 Sep AU Consumer Inflation Expectation, Dweilling Starts
13 Sep JN Tokyo Condominium Sales
13 Sep SW Unemployment Rate
13 Sep SZ SNB 3-month Libor Target Rate
13 Sep US Initial Jobless Claims, Continuing Claims, Monthly Budget Statement
13 Sep CA Capacity Utilization Rate
13 Sep NZ Manufacturing Activity


What's going on?

  • Apparently the credit concern is still keeping a dampener on equities as investors deem it will impact earnings. Resulting in a lack of direction y’day.
  • In the currency markets, similar sideways trading prevailed, as Euro was little changed against the dollar, weighed down by hedge funds taking profits on euro longs and dollar easing against the yen by the pair moving up from the Monday low of 112.58 to settle to upper end of the 113.40-89.

MAJOR HEADLINES – PREVIOUS SESSION

  • SW Riksbank raises rates 25bp to 3.75% as expected.
  • SW Budget Balance (Aug) out at 9.6B vs. 12.4B prior.
  • IT Trade Balance Non-EU (Jul) out at -584M vs. -750M expected.
  • NO Industrial Production MoM/YoY (Jul) out at 7.8%/2.9% vs. 1.1%/1.0% expected. Prior at -4.0%/-8.6% expected.
  • NO Industrial Production Manufacturing MoM/YoY (Jul) out at 0.7%/5.0% vs. 0.7%/5.1% expected.
  • GE Industrial Production MoM/YoY (Jul) out at 0.1%/4.6% vs. 4,9%/0.9% expected. Prior at -0.2%/5.2% (revised from -0.4%/5.1%)
  • E-Z OECD Leading Indicators (Jul) out at 107.9 vs. 108.1 prior (revised from 108.0)
  • CA Unemployment Rate (Aug) out at 6.0% as expected. Net Change in Unemployment out at 23.3K vs. 18.0K expected.
  • US Change in Nonfarm Payrolls out at -4K vs. 100K expected. Prior at 68K (revised from 92K)
  • US Unemployment Rate (Aug) out at 4.6% as expected.
  • US Change in Manufacturing Payrolls (Aug) out at -46K vs. -10K expected. Prior at -1K (revised from -2K)
  • Average Hourly Earnings MoM/YoY (Aug) out at 0.3%/3.9% as expected.
  • US Wholesale Inventories (Jul) out at 0.2% vs. 0.4% expected. Prior at 0.3% (revised from 0.5%)
  • NZ PPI QoQ (2Q). Inputs out at 1.3% vs. -1.5 prior. Outputs at 1.2% vs. -0.2% prior.
  • JN GDP Annualized (2Q F) out at -1.2% vs. -0.7% expected. Nominal GDP at -0.2% vs. 0.0% expected.
  • JN GDP Deflator YoY (2Q F) out at -0.3% as expected.
  • JN Money Supply M2+CD YoY (Aug) out at 1.8% vs. 2.1% expected.
  • JN Borad Liquidity YoY (Aug) out at 1.8% vs. 2.1% expected.
  • JN Bank Lending incl Trusts YoY (Aug) out at 0.5% vs. 0.3% expected.
  • AU Home Loans (Jul) out at -4.1% vs. -2.0% expected.
  • JN Eco Watchers Survey (Aug): Current at 44.1 vs. 44.7 prior, Outlook at 46.4 vs. 46.7 prior.

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THEMES TO WATCH – UPCOMING SESSION

While the currency markes are still digesting the severe blow dealt on Friday by massively disappointing U.S. payroll figures, attention is already turning towards to next FOMC rate meeting on September 18th, with the markets widely pricing in a 25 basis points rate cut, bringing the Federal Reserve benchmark rate to 5% and further diminishing the spread between the Euro Zone and U.S. rates.

Before this key date, however, we wait to see the Consumer Credit Index figure- covering the most short-term and intermediate-term credit extended to individuals but excluding real estate backed loans- to give an indication of how much the consumer borrowing has been effected in an environment of interbank credit crunch. The expected index value is $8.0B, with a prior month's read of $13.2B. The release of data is at 19:00 GMT.

Following Friday's data, the dominant theme of the currency markets is the risk reversal and this theme has already been played out as overnight yen strenght, despite the Q2 GDP figures showing a contraction of -1.2% in the Japanese economy. With the 113 level already broken in the USDJPY, the next key level of support is around 112 level, just above the August low 111.58.

Another interesting side story in the on-going risk reversal theme is the next rate decision the Swiss central bank is to undertake. The market expectations are fairly evenly divided between no change and and a 25 bpt hike from the current 2.50%, with a slim majority of economist surveyed by Bloomberg forecasting a rate increase. But should the SNB choose the bolder course of action and elevate its 3-month Libor Target Rate, there would strong potential for a break off from last week's range 1,1860-2150. We favor the downside in the pair, and look for a break of 1.1814, low of August. The SNB rate announcement is scheduled for 12:00 GMT on Thursday the 13th of August.


FX

FX: Range bound due to lack of interesting data. EURUSD just managing to close above 1.38. Quiet session in Asia.

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EUR USD JPY GBP CHF AUD CAD NZD NOK SEK PLN
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FX Trading Strategies

Pair Supp. Resis. Comments
EURSEK 9.3250 9.4050 We continue our bullish bias on the Swedish economy and will use today's data for an excuse for a new short position. We place an order to sell at 9.3465 stop offer, targeting 9.3250 or possibly lower intra-day. Stop at 9.3550 bid.

Risk warning : ForexWebTrader shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by Forexwebtrader that clients will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades in accordance with the recommendations in an analysis, especially leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the analysis do not occur as anticipated.

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