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Submitted by: Growth Aces
Core markets
EUR/USD
The EUR was under pressure of weak German macroeconomic data and rising geopolitical tensions and the USD was supported by strong ISM Services and factory orders readings.
German industrial orders fell by 3.2% mom. Median market forecast assumed an increase by 1.0% mom. A breakdown of data showed foreign orders slumped by 4.1% mom and domestic orders went down by 1.9% mom. The Economy Ministry said that main reasons for more cautious ordering were geopolitical developments and risks. Factories producing capital goods recorded 6.4% fewer orders in June mom. Orders for consumer goods declined by 0.4% mom and orders for intermediate goods registered a rise by 1.6% mom.
Polish Prime Minister Donald Tusk said on Wednesday that he had reasons to suspect that the threat of a direct intervention by Russia’s military in Ukraine has risen over the last couple of days.
ISM Services amounted to 58.7 in July vs. 56.0 in June (above our forecast of 56.5 and market consensus of 56.3). Orders for manufactured goods increased 1.1% mom (above our forecast of 0.8% and market consensus of 0.6%). Orders for non-defense capital goods excluding aircraft, which is a measure of business confidence and spending plans, increased by 3.3% mom, a record high.
The EUR/USD bears pushed the rate down to new 2014 lows at 1.3349. Then the rate rebounded to 1.3374 but during European session reached as low as 1.3331. The EUR/USD reached our target of 1.3335. We have taken profit on our 1.3433 position.
The main event for the EUR/USD rate is the ECB meeting tomorrow. We do not expect the ECB to take any action and in our opinion Mario Draghi is likely to strike a dovish tone which will not support the EUR.
Significant technical levels:
Resistance: 1.3377 (session high Aug 6), 1.3398 (hourly high Aug 5), 1.3425 (high Aug 5)
Support: 1.3330 (30-day Bollinger), 1.3318 (low Nov 8, 2013), 1.3295 (low Nov 7, 2013)
AUD/USD
A fall of the NZD/USD rate during Asian session put pressure on the AUD/USD today. The rate broke below 0.9300 for a while. The next support level is at 0.9272, breaking which will open the way towards May lows 0.9205/0.9210.
Our short position is in a good shape now. Our target is near May lows (0.9210). However, a deeper move towards the 200-dma cannot be excluded. We have moved our stop-loss level to 0.9345 to reduce the risk.
Important macroeconomic figures will be released today in the evening EDT (employment change and unemployment rate). Markets are waiting for quarterly statement of monetary policy from the RBA on Thursday 21:30 EDT.
Significant technical levels:
Resistance: 0.9344 (high Aug 5), 0.9388 (high Jul 30), 0.9416 (high Jul 29)
Support: 0.9272 (low Aug 1), 0.9257 (low Jun 5), 0.9229 (low Jun 3)
Our current trading positions:
AUD/USD: short at 0.9330, target 0.9210, stop-loss 0.9345 (we have adjusted stop-loss from 0.9380 previously).
CEE markets
EUR/HUF
The National Bank of Hungary released minutes from its recent rate-setting meeting. The bank said that eight of its nine rate setters backed a 20 bps rate cut last month. In the minutes the bank said also that one rate setter, Janos Cinkotai, voted to keep rates on hold. At July’s meeting the end of easing cycle was announced.
Industrial output rose by an 11.3% yoy in June according to preliminary unadjusted data. The reading was better than median market forecast of 8.6% yoy. The annual rise was the fastest since November 2010.
The European Central Bank said that Hungary’s plans to force banks to refund borrowers for overcharging could hurt financial stability. Prime Minister Viktor Orban’s government wants banks to pay for unfair charges and interest rate hikes applied on loans in the past and wants to get rid of foreign currency loans that are burdening Hungarian households. The new law says that the exchange rate spread applied in foreign currency loan contracts was void. Banks will have to recalculate the spreads based on the central bank’s exchange rates. The law also declares unilateral interest and fee rises in loan contracts, for both forint-denominated and foreign currency loans, unfair and void unless banks challenge this provision and prove their right in court within tight deadlines. The new law applies to contracts that were signed between May 1, 2004, and the date when the law takes effect, except for those contracts which had already been closed more than five years before the legislation becomes effective. The National Bank of Hungary has estimated that the compensation could cost the banking sector even HUF 900 bn.
The HUF touched its lowest levels against the euro since January 2012 and reached the daily high of 317.22 despite better-than-expected industrial output data. The depreciation of the HUF resulted from a rising threat of a direct intervention by Russia’s military in Ukraine.
Significant technical levels:
Resistance: 317.30 (session high Aug 6), 324.20 (historic high Jan 5), 330.0 (psychological level)
Support: 312.50 (low Aug 5), 310.94 (low Jul 31), 307.60 (100-dma)
We have currently no trading positions on CEE markets.
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Growth Aces
About the Author: We encourage you to subscribe to our daily fundamental macroeconomic analysis newsletter (
growthaces.com
) to read the full version of our analysis right away.Thank you for reading.Growth Aces
Source:
isnare.com
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