X markets and risky assets paused ahead of today’s BoE and ECB rate decision.
The EURUSD has been confined to a relatively tight range between 1.4360 and 1.4450, while the GBPUSD to1.6900 to 1.7015. We are in line with market expectations that both central banks will hold rates steady. However, there is significant disagreement among pundits in regards to the BoE QE program. Analysts interviewed by Bloomberg has 23 of 44 expecting an extension of asset purchases. We are in the corner that the BoE will opt for a pause (not a complete end) to assess the effects the program has had on the economy. While a full stop in QE would have been significantly GBP supportive and pause should also be slightly sterling positive. However the most difficult market's reaction to predict what would be if the MPC decision to take the middle path and chooses a small extension. In regard to the ECB, the accompanying statement will probably not be radically changed from July’s statement. Although due to respectable economic data coming from the Eurozone we could see a slightly more optimistic tone, which will be EUR positive. After the smoke from the central bank decisions clear the markets, attention will quickly turn to tomorrow's NFP. Yesterday's ADP release was less than confident and now points to a lower than consensus NFP. Much of the current weakness in the US labor market has already been priced in, but leading indicators such as Monster Online Jobs Index illustrated that the rate of change might not be slowing as fast as markets expect. There is still a considerable buzz of a USD rally and double top in risk appetite. Should labor highlight that the recovery is not entrenched we could expect the liquidation of USD short positions.
Today's Key Issues (time in GMT):
00:00 AUD Czech Republic: NBC interest rate announcement, % Aug 1.50 exp
01:30 AUD Net change employment Jul -20 exp
01:30 GBP Unemployment rate % Jul 6 exp
08:00 EUR Halifax house price index, % m/m (3m y/y) Jul) 0.6 (-12.3) exp
10:00 GBP Germany: New manufacturing orders, % m/m (y/y) Jun 0.8 (-26.5) exp
11:00 EUR BoE Bank Rate decision, % Aug 0.50 exp, 0.50 prior
11:45 EUR ECB rate announcement, % Aug exp 1.00, 1.00 prior
12:30 USD ECB press conference
12:30 Initial jobless claims, thous (4wk mvg avg) 01-Aug 595 (566) exp,
The Risk Today:
EurUsd The range highlighted yesterday on EUR USD continues to play out with buyers at 1.4379 and sellers at 1.4430 / 45. Nothing much more to say on the pair apart from watch for 60 minute closes outside of these levels for the next directional play and keep an eye on the 60 minute RSI for a potential early indication of which way that price move will be. Clearance of 1.4445 paves the way for 1.4569 and to the downside we have support at 1.4338 and 1.4291.
GbpUsd Looking at a 15 minute chart for the intraday rangebound plays, there are longs stepping in at 1.6956 with 1.6904 as a back up and the sellers are appearing at the 1.7030 / 40 level. Medium term we have already highlighted 1.7030 / 40 as a major hurdle due the 2 year downtrend channel so expecting the rangebound play to continue and obviously the big moves will be coming at midday GMT when the Bank of England announces rates. More on cable this afternoon.
UsdJpy Two opportunities yesterday to get long on the uptrend at 94.78 with the 95.30 / 40 region still putting a cap on the upside. Interesting thing here is the amount of stops that must be building each side of these prices so expect a break of either level to trigger some heavy moves. With so many attacks on 95.30 / 40 the odds are increasing that the break will be to the upside but the pair will immediately face fresh resistance at 95.85. To the downside a break below 94.78 targets 94.44 but be aware this will be breaking the 4 week uptrend in the process. Definitely the pair to be watching for some serious action over the next 48 hours alongside AUD JPY and EUR JPY.
UsdChf More rangebound action in the shape of USD CHF with the pair picking up a vibration channel established at higher levels over 3 weeks ago. 1.0632 is serving as minor intraday resistance this morning but with the 4 day uptrend intact expect to see 1.0654 as the next real level to pose a problem in the pair's move higher.
Today's Key Issues (time in GMT):
00:00 AUD Czech Republic: NBC interest rate announcement, % Aug 1.50 exp
01:30 AUD Net change employment Jul -20 exp
01:30 GBP Unemployment rate % Jul 6 exp
08:00 EUR Halifax house price index, % m/m (3m y/y) Jul) 0.6 (-12.3) exp
10:00 GBP Germany: New manufacturing orders, % m/m (y/y) Jun 0.8 (-26.5) exp
11:00 EUR BoE Bank Rate decision, % Aug 0.50 exp, 0.50 prior
11:45 EUR ECB rate announcement, % Aug exp 1.00, 1.00 prior
12:30 USD ECB press conference
12:30 Initial jobless claims, thous (4wk mvg avg) 01-Aug 595 (566) exp,
The Risk Today:
EurUsd The range highlighted yesterday on EUR USD continues to play out with buyers at 1.4379 and sellers at 1.4430 / 45. Nothing much more to say on the pair apart from watch for 60 minute closes outside of these levels for the next directional play and keep an eye on the 60 minute RSI for a potential early indication of which way that price move will be. Clearance of 1.4445 paves the way for 1.4569 and to the downside we have support at 1.4338 and 1.4291.
GbpUsd Looking at a 15 minute chart for the intraday rangebound plays, there are longs stepping in at 1.6956 with 1.6904 as a back up and the sellers are appearing at the 1.7030 / 40 level. Medium term we have already highlighted 1.7030 / 40 as a major hurdle due the 2 year downtrend channel so expecting the rangebound play to continue and obviously the big moves will be coming at midday GMT when the Bank of England announces rates. More on cable this afternoon.
UsdJpy Two opportunities yesterday to get long on the uptrend at 94.78 with the 95.30 / 40 region still putting a cap on the upside. Interesting thing here is the amount of stops that must be building each side of these prices so expect a break of either level to trigger some heavy moves. With so many attacks on 95.30 / 40 the odds are increasing that the break will be to the upside but the pair will immediately face fresh resistance at 95.85. To the downside a break below 94.78 targets 94.44 but be aware this will be breaking the 4 week uptrend in the process. Definitely the pair to be watching for some serious action over the next 48 hours alongside AUD JPY and EUR JPY.
UsdChf More rangebound action in the shape of USD CHF with the pair picking up a vibration channel established at higher levels over 3 weeks ago. 1.0632 is serving as minor intraday resistance this morning but with the 4 day uptrend intact expect to see 1.0654 as the next real level to pose a problem in the pair's move higher.
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