Forex Market Focus

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Dealers Comment July, 13
EUR/USD rose slightly to offers area found at $1.3945/50. Break above that area will secure motion to $1.3960 and $1.3980 – stops are placed above those levels.
EUR/GBP recovery pushed the pair to key resistance at level ₤0.8670/75. Break above will secure motion to ₤0.8690/00 and ₤0.8745/50.
GBP/USD went above level 1.6100 but only for a short time and dropped back soon. The pair had tested lows at level 1.6067, where it found Asian investors demand that was also seen at the first recovery wave. Now GBP/USD is trading at level 1.6085.

 

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Market is Awaiting Corporate Reports
Release of ZEW German research institute report made quite bad impression on bulls among Euro pairs on the background of sudden decrease in optimism concerning perspective of situation in Germany and EU Zone as a whole. Industrial production data appeared rather unfavorable too, and Euro reacted with drop to bids $1.3965/60 (stops are rumored to be below) upon the data release. Bids stunted EUR/USD attempts to develop a downtrend again, and now pair holds ground near $1.3985. However, dealers note that growth attempts (successive or not) keep attracting sellers’ attention. Market participants take their time and do not act aggressively, keeping trading in the range set before. They are waiting for American companies reports, which will help the market decide the direction of further motion. This way, analysts at Commerzbank suppose that market direction may be driven by Goldman Sachs Group report, which is set to be announced today at 13:30 GMT. As expected, this report will announce the Q2 company profit equal to $3.65 per share. German bank, however, recommends paying attention to the fact that economists’ forecast look rather overestimated, and there are risks that actual data will be worse than expected, which in its turn will support US dollar.

 

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GBP/USD. Analysts Recommend Selling upon Retracement
GBP/USD pair is growing today. It has reached level 1.6400 by now. According to analysts at RBS, such retracement from support line allows selecting a strategy of selling the pair from slightly higher levels during the day. After GBP/USD pair broke 20-days sliding midline, the next resistance level is supposed to be found at 1.6458. If the pair gets over that level, then further up-trending motion towards level 1.6570 becomes possible. Taking to account all of above, currency strategists at RBS recommend selling GBP/USD with break target set to level 1.6000, but also mind possibility of drop to 1.5600/1.5200 area in middle-term perspective. Now GBP/USD is trading near 1.6310.

 

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EUR/USD. Analysts Comment on Further Direction of the Pair
According to analysts at Commerzbank, EUR/USD pair’s direction is quite indefinite; however there are some hints at it. The pair is consolidating above 55-day sliding midline at level 1.3864, but, as it appears, it won’t find solid ground above level 1.40 so far – there are a whole lot of resistance levels up to recent high at 1.4340. Dealers note that offers are currently seen at 1.4070/80 area. They also see strong offers associated with options starting from level 1.4070 and up to 1.4100. Stops are set above 1.4080 and 1.4090. As for down-trending motion, in case the pair breaks below level 1.3864, it may head to 1.3740 and 1.3619. Analysts at the bank prefer to use strategy of selling from level 1.3990, strengthening positions on the best rate, having stop loss set to 1.4090 and lowering target at 1.3690. Now EUR/USD is at 1.4055.

 

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EUR/USD. Dealers and Analysts Comment
Euro attempted to grow during Asian trading session on the background of rumors about China’s GDP increase by 7.9%. However, those attempts were short-living and were soon replaced by downward correction. Currency strategists at Royal Bank of Scotland turn their attention to the fact that despite China’s reports were stronger than expected, market participants are much more concerned about real stability of economic progress in China. This way, analysts at RBS have an opinion that such GDP increase is a result of banks’ aggressive credit intervention over last months, but market participants are becoming more and more suspicious about the quality of credits. Nevertheless, profit surveys of American companies are likely to remain the main drivers of currency market for near future. And new pleasant surprises may support the pressure on USD. EUR/USD is currently holding ground near $1.4078, feeling the support from bids at $1.4060/50 area, where demand from Swiss bank is observed. Dealers also note the presence of stops in $1.4040/35 area; their execution may support fast-paced dropping of the pair. Meanwhile, offers are still seen at $1.4105/15 and $1.4135/40 areas. Analysts at German Helaba Landesbank Hessen-Thueringen warn that rising above resistance level $1.4122 may become a catalyst of new wave of Euro growth towards $1.46.

 

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GBP/USD. Dealers Comment
Sterling’s inability of developing an upward motion above $1.6480 disappointed bulls and provoked some shortening of long positions, which went on further today after support at $1.6350 was broken. Drop below bids in stated area became a catalyst of avalanche-like execution of stops (which were placed below; near buy orders at $1.6325/2 and also in the figure area), which lead to setting session lows near $1.6282 by now. However, demand in this area proves to be strong enough to keep bears from advancing and now pair is holding ground at $1.6324. On top of that, dealers accentuate that meanwhile news regarding increased Swine influenza death count and IMF commentary on situation in Great Britain both look negative for GBP, the market situation is still favorable for bulls, which have somewhat activated under the 63rd figure. Yesterday profit surveys released by IBM and Google proved to be better than analysts expected. Dealers think that under condition of absence of strong negative news regarding economic statistics, GBP bulls may take advantage of increased risk appetite to resume advancing. However, they also warn that stops are seen under bids near $1.6280 too, and offers are now found around $1.6325 and $1.6350.

 

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GBP/USD. Dealers Comment July, 20
British currency has started this new week with a quite positive sentiment, which also applies to other risky currencies that also rose against dollar on the background of positive dynamics at the stock markets. Another positive factor was that CIT Group managed to come to an agreement with their bondholders to avoid bankruptcy. As that news was released, GBP/USD confidently rose from levels near $1.6350 to $1.6410. After that a downward correction followed, which attracted new buyers, and so the pair has reached fresh session highs by now (according to dealers, this was conductive to closing of a fair amount of short positions upon repeated leap above $1.6400/05). The next obstacle on the bulls’ way is offers area near $1.6430, but the sentiment is still positive and breaking above will clear the road to $1.6450 and then to larger offers found at $1.6475/80. Stops are observed above the latter level, and dealers note that breaking above will be a signal of possible testing of recent highs.

 

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EUR/USD. Dealers Comment July, 21
EUR/USD dropping attempts are still limited, and after the fall to $1.4180 forced buyers to reveal themselves, pair had rebounded and now is trading near $1.4212. Offers are currently observed at $1.4215/20 and dealers suppose that risks of further rise prevail, while they don’t exclude possibility of new dropping attempts. Also, the fact that trading session was closed above $1.4200 on Monday implies existence of a potential to test this year’s highs during next few days. Break above mentioned offers will clear the way up to the next series of sell orders in $1.4235 area, and then to larger offers near $1.4250/60 (stops are rumored to reside above). Meanwhile bids remain around $1.4180 and in $1.4160 area.

 

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GBP/USD. Technical View
GBP is holding ground above 21-day sliding midline at $1.6360 so far, which allows stating that pair’s prospects remain constructive enough and the bulls may attempt to advance towards $1.6565. On another hand, confident break down will imply risks of a deeper correction to 1.6268.

RES 4: $1.6744 – 30 June high
RES 3: $1.6640 – daily Bollinger band top
RES 2: $1.6565 – 76.4% of movement $1.6744–$1.5986
RES 1: $1.6559 – 20 July high

Current GBP/USD rate: $1.6360

SUP 1: $1.6360 – 21-day sliding midline
SUP 2: $1.6268 – 17 July low
SUP 3: $1.6143 – support line from 8 July
SUP 4: $1.6088 – Bollinger band bottom

 

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EUR/GBP Rising Attempts Are Still Being Resisted
Another EUR/GBP upside rebound didn’t prove to be strong enough to pass recent highs near stg0.8700, and dealers note that events of last few days are signaling the weakening of bullish sentiment on the background of rather high interest in selling the Euro upon rising attempts. Today, the pair demonstrates drop again, and bids in stg0.8615/10 area are in danger now. Dealers note that break below the bids will clear the road down firs to stg0.8590, and then to stg0.8560/50. Offers are starting to accumulate around stg0.8630, meanwhile large orders remain in stg0.8645/50 area.

 

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EUR/GBP. Dealers Comment July, 24
Meanwhile GBP/USD managed to stabilize itself and even to recover past losses to some extent, the Euro is still growing with an outperforming speed, taking into consideration more positive economic statistics over the EU-zone today as well as a moderate demand at the stock market. For these reasons, EUR/GBP has significantly risen in last few hours. Although the pair’s upside was somewhat suppressed near offers in stg0.8655/60 area, drop attempts didn’t disappoint the market participants and bids now start accumulating near stg0.8630 and in stg0.8615/10 area. Dealers don’t exclude a possible profit fixation by short-term accounts; however they also note that while the day’s end is still far enough, the signs of a potential bullish absorption are seen at daily graph. Dealers warn that a break above stg0.8660 will be a signal of another attempt to break through resistance near stg0.87. Successive break will state the presence of a potential for a new rising wave formation.

 

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GBP/USD Forecast Remains Negative
The GBP has opened this week with a positive sentiment – having retraced from level 1.6380, the GBP/USD pair reached level 1.6500. Nevertheless, currency strategists at Commerzbank suppose that any upside will be suppressed at level 1.6585, which comprises 78.6% of Fibonacci retracement. Last week, GBP/USD pair repeatedly attempted to surpass that resistance, and failed nearly everytime. Commerzbank’s analysts have an opinion that this situation won’t change in near future, so they are consistent with a negative forecast. As for downward motion, Commerzbank accentuate level 1.6265 – if the pair fails to hold ground above this level, it will return to the lower part of recent range, and the next targets on the way down will be set to levels 1.6183 / 1.6021 / 1.5800 (the lower range boundary / 55-day sliding midline / 4-month uptrend line). Currently GBP/USD is trading near 1.6464.

 

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Analysts Prefer Short Positions in USD/JPY
On Monday, the USD/JPY pair had set a new 3-week high at level 95.46. However, Mizuho’s analysts note that the upside just followed market situation, when the volume of positions on futures opened was at the lowest level since 2003. Analysts see only a few signals of top formation so far, nevertheless, the pair evidently stooped before Fibonacci resistance near 95.40. As for trading strategy, Mizuho prefers selling for the most profitable price, adding positions upon confident break of 94.40; the target is set to 93.25, stop loss to 95.40. Currently USD/JPY is found near 94.62.

 

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Scotia Capital: Forex Market Daily Update

EURUSD (1.4145). EUR continues to trade within its well defined 1.3750 to 1.4338 range - see middle chart - and has failed twice to break above. Yesterday, the currency formed an ‘engulfing’ pattern, which hints at a underlying change in sentiment. For now, we expect EUR to continue trading within its range, but continue to believe that before year-end we will see EUR move significantly higher than current levels. ECB council member Papademos tried to ease market concerns today when he commented that due to the way liquidity has been injected into the system, the exit strategy should be relatively easy. However, he also noted that it is still too early for liquidity to be withdrawn. It is notable that European equities have managed to remain in positive territory even after the collapse in Chinese markets. This is one of the few positive signals we see as we move into the North American session.

GBPUSD (1.6380). Sterling is flirting with a downside break of its 50-day moving average of 1.6315, which would be bearish, but continues to trade within its recent range. Mortgage approvals, which tend to be a leading indicator for the housing market, made gains for the fifth consecutive month and are now well above their June 2008 level. Even though they remain well below their 10-year average, the consecutive improvements provide further evidence that at a minimum the UK housing cycle has completed its downturn. We continue to look for a push higher in EURGBP into year-end.

USDJPY (94.95). The yen is a midperformer today, having lost 0.4% against the USD as we move into the North American open. Retail trade in Japan came in worse than expected, declining –3.0% y/y and –0.3% m/m. However, this was essentially offset by a material jump in small business confidence, which climbed back to pre-crisis levels (41.1).

Gold (935.80). Yesterday’s violent downward move in gold, which pushed easily through the 50-day moving average of 942.73 indicates that the bears have regained control of the market and foreshadows further downside ahead.

 

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GBP Rises as Nationwide House Market Becomes Positive
The GBP is rising today consequently to the publishing of positive data on Nationwide House prices. The GBP has recovered its 2-day drop against USD by now. This was also empowered by macroeconomic statistics in Great Britain. House prices have been increasing for 3 months in a row, which inspired the market participants to buy GBP. As for the EUR/GBP pair, sterling has been strengthening its positions for 4 days in a row. House price dynamics improves business and consumer confidence in the country. Probably, GBP will continue rising against the main rival currencies within the next few days.

 

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Analysts Forecast EUR/GBP to Drop
According to currency analysts at RBC Capital Markets, the euro may drop to level 0.8236 against sterling in case the pair closes the day below 0.8509. Yesterday, the EUR/GBP pair has closed below the primary support at 0.8571 – RBC’s analysts have an opinion that it was a signal of a short-term bearish turn. Such a low closure has set the ground for testing key support, which lies in the line of uptrend (started in October 2008) at level 0.8509. Closing a day below this level will be a bearish signal and a confirmation of the pair’s serious intention to resume intermediate downtrend. Technical picture is not in favor of the euro too – daily stochastic is signaling a bearish divergence at daily graph, which speaks about possible drop of EUR/USD. According to RBC’s currency strategists, closing a day below 0.8509 will lead to drop to June low at 0.84, then to 0.8331 and to November 28 low at 0.8236. EUR/USD is currently trading near 0.8542.