EURUSD, H4            

Consumer Confidence, New Home Sales, Richmond Fed Manufacturing Index and Services PMI and relatively positive and better than expected.

U.S. consumer confidence dipped 0.1 point to 97.3 in July after jumping 5.0 points to 97.4 in June (revised from 98.0). The index was 91.0 last July. The present situations component climbed to 118.3 from 116.6 (revised down from 118.3). The expectations index fell to 83.3 from 84.6 (revised from 84.5). The labor market differential rose to 0.7 from -0.5 (revised from 0.1). The 12-month inflation index slowed to 4.7% from 4.8% (revised from 4.7%). The headline data are better than forecast.

 U.S. new home sales rose 3.5% to 0.592 mln in June, well above expectations (and is the best since February 2008), following an unchanged 0.572 mln print in May (revised up from 0.551 mln). April’s prior 12.3% surge to 0.586 mln was revised down to a 6.5% increase to 0.572 mln. Sales were mixed regionally with gains in the West and Midwest. The months’ supply of homes fell to 4.9 from 5.1 (revised from 5.3). The median sales price jumped 6.2% to $306,700 following a 9.8% drop to $288,800 (revised from $290,400). On an annual basis, prices are up 6.1% y/y following a 0.5% y/y pace.

U.S. Richmond Fed manufacturing index climbed 20 points to 10 in July after dropping 10 points to -10 in June (revised from -7). Most of the components improved, with upward revisions to several of the June readings. The employment index rallied to 6 from 1 (revised from -1). The workweek bounced to 1 from -7 (revised from -4). Wages dipped to 14 from 15 (revised from 14). New orders surged to 15 from -17 (revised from -14). Prices paid slowed to 0.64% from 1.14% (revised from 1.25%), with prices received at 0.48% from 0.79% (revised from 0.88%). The 6-month index improved to 19 from 11 (revised from 9), with employment at 7 from 2 (revised from -1).

U.S. Markit services PMI fell 0.5 points to 50.9 in the flash July reading, after inching up to 51.4 in June from 51.3 in May. It was at 55.7 a year ago. The numbers indicate the service sector remains in expansion for a 5th straight month, but only marginally, after slipping to 49.7 in February. The employment component rose to 52.6 from 52.4. The composite index edged up 0.3 points to 51.5 versus 51.2 in June and 50.9 in May.

EURUSD continues to meander lower, currently trading at 1.0990 having been as high as 1.1029, buyers appeared around 1.0980 earlier but 1.1000 could not be maintained.

Janne Muta

Chief Market Analyst

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Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

EURUSD, H4            

The German Ifo holds up better than feared, with the overall reading coming in a tad above our forecast, which was already more optimistic than consensus. The expectations index eased to 102.2 from while the current conditions indicator unexpectedly improved and rose to 114.7 from 114.6 in the previous month. This brought the overall index to 108.3, down from 108.7, but versus our median of 107.9 and much higher than Bloomberg consensus of 107.5. Confidence in the construction and retail sectors actually improved and like the PMIs the data confirms that the financial sector has been hit more by the Brexit vote than real sector confidence, at least so far. More than to back Draghi’s wait and see stance.

Yesterday (Sunday) meanwhile, the Bundesbank President Jens Weidmann told reporters after the G-20 finance chiefs’ meeting that German growth will accelerate again in the second half and that the G-20 agreed that the world economy will continue to recover, even if Brexit was singled out as a risk factor and it must not be used as an excuse for expansive fiscal policies.  A “straight bat” as ever from the combative Weidmann.

EURUSD continues to meander lower, currently trading at 1.0980 having been as low as 1.0951, buyers appeared around 1.0960.  Our Daily trade is still open with target 1.0930.

Janne Muta

Chief Market Analyst

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Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

EURUSD, Daily             

Germany posted a seasonally adjusted trade surplus of EUR 22.1 bln in May, down from EUR 24.1 bln in the previous month, as exports dropped -1.8% m/m, after rising just 0.1% m/m in April. Imports rose a modest 0.1% m/m after falling -0.3% m/m in the previous month. The three months accumulated trend rate still improved thanks to the strong April number, but the fall back in exports, coupled with weak production and orders data for May confirms concerns about a marked slowdown in growth in the second quarter of the year. Hopes were for a rebound in the second half, but the Brexit referendum will also hit Germany and the Eurozone as a whole so that the overall growth outlook is looking bleaker for the whole of Europe now.

Moody’s have also cut UK and Eurozone growth prospects due to the shock to confidence following the Brexit vote for both areas and the political contagion that could spread.

UK GDP  

• 2016 – down to 1.5% from 1.8%
• 2017 – down significantly to 1.2% from 2.1%

Eurozone GDP

• 2016 – down to 1.5% from 1.7%
• 2017 – down to 1.3% from 1.6%

EURUSD remains range bound prior to the NFP later today around the 1.1075 – 1.1100 zone.

Janne Muta

Chief Market Analyst

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Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

EURUSD, H4            

Central banks are squeezing sovereign debt according to a WSJ article, “A buying spree by central banks is reducing the availability of government debt for other buyers and intensifying the bidding wars that break out when investors get jittery, driving prices higher and yields lower. The yield on the benchmark 10-year Treasury note hit a record low Wednesday. The squeeze could get worse if central banks in Japan and Europe decide, as expected, to step up their stimulus efforts following Britain’s vote to leave the European Union. The world is running out of positive-yielding safe-haven bonds, among those feeling the worst pinch are pension funds and life insurance firms in Japan, Europe and the U.S. Those investors now face tougher competition for the high-grade, long-term bonds they need to match their long-term liabilities.” Even central banks are having trouble finding needed bonds as yield curves turn deeply negative, with nearly half of German bonds ineligible for repurchase below the ECB’s -0.4% depo rate.

Two positive US data points add to the NFP melting pot for tomorrow:

US initial jobless claims fell 16k to 254k in the July 2 week, more than unwinding the 12k bounce to 270k in the last week of June (revised from 268k). The 4-week moving average dipped to 264.75k from 267.25k (revised fro 266.75k). Continuing claims dropped 44k to 2,124k, from a revised 29k increase to 2,168k (revised from 2,120k). The BLS said no special factors impacted, however 6 states did estimate claims. And there are usually some difficulties in seasonal adjusting around holidays too. The claims data continue to suggest a healthy employment report for June.

The 172k June ADP rise nearly matched our estimate, though it undershot our 200k private nonfarm payroll estimate with a 210k total payroll gain, after a slight trimming in the 168k May ADP rise to 168k (was 173k) that narrowed the gap to the 38k private payroll rise in that month. We had expected an undershoot given the impact of strikes and weather on the BLS data that doesn’t impact ADP. The “as reported” ADP figures have run 18k/month weaker than private payrolls since the October 2012 methodology change. Yet, we’ve seen recent ADP overshoots of 148k in May, 26k in April and 33k in March, after undershoots of as much as 122k in four of the prior five months. The ADP as-reported average absolute error since the Moody’s methodology change is 50k, versus a 45k average absolute error over this period for the survey median.

EURUSD moved down marginally to 1.1070, GBPUSD gave up the 130.00 handle and USDJPY moved north of 101.10.

Janne Muta

Chief Market Analyst

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Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

EURUSD, Daily           

How long can Mr Draghi stay stumm? Eurozone stock markets continue to sell off sharply and Eurozone spreads remain volatile, while Italy’s banking problems are looking ever more threatening. That the Eurozone can escape serious negative implications from the UK is clearly wishful thinking and while central bankers have been eager to hand part of the responsibility for the Eurozone’s economic health back to politicians, it is clear that those in charge on both sides of the channel were simply not prepared for the outcome of the referendum. Nor are they willing to work together in order to limit the fallout of Brexit. So its back to central banks, but while the BoE already moved to free up pressure on UK banks and hinted at further easing over the summer, Draghi has been remarkably absent from the public stage so far. Wait and see remains the order of the day and that may also be because many of the ECB’s options are facing serious challenges. A tweaking of the capital key rule in the QE purchases as suggested by some, would only increase EMU fatigue in Germany and likely face fresh legal challenges. Further deposit rate cuts will add to pressure on banks. A relaxation of state aid rules for banks may be needed in Italy, but could push a finalisation of the banking union out even further. So Draghi may be busy behind the scenes trying to evaluate political and legal risks to more radical steps, but likely will be forced to resort to tweaks and minor changes that will leave markets disappointment.

The risk off rush continues, USDJPY struggling with 100.00, GBPUSD struggling with 130.00 and Gold comfortably north of 1360.

The post Brexit EURUSD rally petered out yesterday and we trade below the 200 DMA, however, with attention now turning to the FOMC minutes later today at 18:00 GMT, the ADP numbers tomorrow and the main event NFP on Friday this could simply be movements ahead of the news. Technically, on the Daily timeframe the support area is down at 1.0930 – 1.0825 and resistance at 1.1160 and 1.1220.  My preference would be for SHORT positions from here, dependent on the news flow.

Janne Muta

Chief Market Analyst

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Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

 

EURUSD, H4            

Eurozone June services PMI revised up to 52.8 from 52.4. But this still left the reading down from 53.3 in the previous month. Spanish and Italian readings in particular surprised on the upside but the French services number remains stuck in contraction territory, as did the composite reading. The Eurozone composite PMI was unchanged from May, after the upward revision to manufacturing and services readings and still points to ongoing expansion, but while the data confirms that activity picked up again toward the end of the second quarter, the readings don’t capture the impact of the Brexit referendum yet and as such are already outdated to some extent.

EURUSD traded as high as 1.1184 before reversing to 1.1145.  In the 4 hour chart support is being provided by the 20 period MA, and resistance by the upper Bollinger band as the pair trade in a tight upward sloping range.

The numbers from the UK were down to 52.3, missing expectations (53.1) and down from last time significantly (53.5). This weaker number for June again does not reflect the Brexit impact (as 89% of data was collected before June 23^rd) but will only add to the gloomy outlook. At 52.3 the figures matches the April figure which was a 38 month low. Growth over the whole of the second quarter was the weakest since the first quarter of 2013. Given the post-Brexit political mess and uncertainty, which will be continue for a considerable time, there is a high risk that the UK economy will slip into recession in the second half of the year.

Sterling continues to weaken and trades at 1.3130 against the USD (a post Brexit Low) and EURGBP at a post Brexit high of 0.8486.

Janne Muta

Chief Market Analyst

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Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

EURUSD, Daily         

Eurozone PMI very numbers mixed, with the manufacturing reading coming in much stronger than expected at 52.6, up from 51.5 in the previous month, and the services reading falling back more than anticipated to 52.4 from 53.3, which left the composite at 52.8 in June, down from 53.1 in May. German manufacturing in particular bounced back, but French readings are once again in contraction territory and the data highlights that the Eurozone recovery is not evenly spread and remains subject to downside risks. As Draghi highlighted, structural reforms are needed and ever more monetary accommodation won’t fix the Eurozone’s underlying problems. Bund futures already moved higher going into the overall release, after the weaker than expected French numbers earlier on and the key question also for the Eurozone outlook will be how the U.K. votes in today’s referendum on EU membership.

EURUSD continues to track Cable in a thin-market, Brexit-related correlation. Today’s vote in the UK, needless to say, presents the euro with significant polarized risk. Overnight sterling vols best reflect the magnitude of the event risk having surged to a record high of 106.2%. EURUSD support is at 1.1296-1.1353 while the Jun-8 high at 1.1415, a six-week peak, provides an upside waypoint.

EURUSD, H4        

Fed Chair Yellen repeated the Fed will continue raising rates cautiously, in her prepared testimony before the Senate Banking Committee. She’s optimistic on further growth but noted there are still considerable uncertainties over the outlook. The Fed is monitoring the job market carefully to see whether the weakness in the May report was transitory, she said, and added it is important not to react to one or two reports. On the positive front, she said spending has picked up smartly while housing is recovering. But she cautioned that the Fed can’t dismiss the slow productivity growth. Brexit could have significant economic repercussions. The cautiously optimistic outlook is as expected.

Yellen said the Fed is relying less on forward guidance than during the financial crisis credibility. The Fed still issues quarterly projections, which Yellen believes are helpful for the public to understand the path of the economy. The Fed Chair stressed again, however, that the Fed is not on a preset course. Economic developments have been mixed for some time, with some sectors remaining slow due to the recession in the energy sector and as a result of the stronger dollar, while others, such as the labor market, have performed well, at least until recently.

Key pivot and resistance sits at 1.1300 and 1.1350 in the 4h time frame with support at 1.1240, 1.1220 and 1.1180.

Janne Muta

Chief Market Analyst

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Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.

EURUSD, 240 min

While the ECB President Draqhi is answering the questions here’s a quick update on his speech. According to Draqhi recovery is gaining momentum in the euro area and is supported by the solid domestic demand. While low oil prices benefit the consumers investment is edging up as favourable financing supports it together with corporate profits. GDP in 2016 is expected to come in at 1.6%, and in 2017 at 1.7% and inflation is expected to remain at low levels.

He commented that bank lending rates have fallen to historical lows while credit growth turned positive already in 2015. Bank shares have benefited from readily available financing and growing corporate profits but also SME’s are reporting easy access to credit.

More action is needed to boost Eurozone investment. Draqhi promised that further monetary easing is in the pipeline. At first markets didn’t react to this promise at all but at the time of writing EURUSD has started to edge lower. Draghi also sees the downside risks significant and spend considerable amount of time to justify the recent ECB actions.

The fact that the markets are waiting for the Fed Chair Yellen to speak at 2 pm GMT is likely to keep the participants from reacting strongly on what the ECB president is saying.

Major support and resistance levels in EURUSD are 1.1220, 1.1239 and 1.1300, 1.1350 and 1.1380.

Janne Muta

Chief Market Analyst

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Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.