Posts
NEWS
07 July 2015, 17:03
U.S. STOCKS EXTEND LOSSES; NASDAQ DOWN 0.7 PCT, DOW JONES INDEX DOWN 0.4 PCT;
S&P 500 DOWN 0.4 PCT
07 July 2015, 17:03
U.S. REPUBLICAN PRESIDENTIAL CONTENDER RUBIO CALLS U.S. HIGHER EDUCATION
SYSTEM A "CARTEL," NEEDS TO BE OVERHAULED
07 July 2015, 17:02
RUSSIA C.BANK'S NABIULLINA SAYS RUSSIA'S CONTRIBUTION OF $18 BLN TO POOL
WON'T DECREASE OFFICIAL RESERVES
07 July 2015, 17:02
RUSSIA C.BANK'S NABIULLINA SAYS BRICS FOREX RESERVES POOL IS AN 'INSURANCE
INSTRUMENT'
07 July 2015, 17:01
UK'S NIESR SAYS EXPECTS BANK OF ENGLAND TO BEGIN INCREASING BANK RATE IN
EARLY 2016
07 July 2015, 17:01
UNITED STATES MAY JOLTS JOB OPENINGS DECREASE TO +5.363 MLN (FCAST 5.350 MLN)
VS PREV 5.376 MLN
07 July 2015, 16:51
U.S. 10-YEAR TREASURY WIDENS PRICE GAINS, YIELD AT SESSION LOW OF 2.205
PERCENT
07 July 2015, 16:49
U.S. 30-YEAR TREASURY GAINS TOP 1 POINT, YIELD TOUCHES SESSION LOW OF 3.007
PERCENT
07 July 2015, 13:50
RBNZ surprised markets at its June policy meet with a rate cut which further
reinforced NZD weakness. Monetary Policy Statement that followed was
particularly dovish, it included an explicit easing bias, supported by
incorporating a further 25bp easing in its interest rate forecast profile, and
used strong language on the NZD.
Further easing is in the pipeline with RBNZ likely to cut its OCR by 25bp at each of the July, September and October meetings. Persistently low inflation remains the primary concern for the bank. RBNZ forecast headline inflation to accelerate only slowly over its forecast horizon, not reaching the mid-point of its 1-3% target band until the end of next year.
"The recent rate cut was expected and we forecast another 25bp easing to 3.00% in July in response to extremely low inflation, low commodity prices and an expensive currency (markets currently price a 75% chance of 25bp cut in July and about 50bp of easing over the next 12 months)", says Barclays in a note to its clients.
NZ business confidence fell sharply to 3yr low in Q2-survey. Data kept the kiwi on the defensive as it added to evidence that slowing economic growth will likely require more interest rate cuts in the coming months.
Dairy prices have declined sharply in recent months (down over 35% since early March) in response to moderating Chinese demand and growth in global supply. This along with rising oil prices have further weighed on NZ's terms of trade. Looking ahead, the RBNZ expects this trend to continue, which should result in further NZD depreciation.
NZD/USD trades at 0.6630 = fresh 5yr low, it has tumbled 14 percent on the greenback in the past two months, and we believe its losses will continue to mount given that market uncertainty will likely keep investors risk averse. We forecast NZD at 0.6400 by the year-end.
On the down side minor support is around 122.40 any break below will target 121.85/121.30.
The pair's minor resistance is around 123.15 (20 day MA) and any indicative break above would extend gains till 123.50/123.80.
It is good to sell on rallies around 122.90 with SL around 123.50 for the TP of 121.85/121.25
Further easing is in the pipeline with RBNZ likely to cut its OCR by 25bp at each of the July, September and October meetings. Persistently low inflation remains the primary concern for the bank. RBNZ forecast headline inflation to accelerate only slowly over its forecast horizon, not reaching the mid-point of its 1-3% target band until the end of next year.
"The recent rate cut was expected and we forecast another 25bp easing to 3.00% in July in response to extremely low inflation, low commodity prices and an expensive currency (markets currently price a 75% chance of 25bp cut in July and about 50bp of easing over the next 12 months)", says Barclays in a note to its clients.
NZ business confidence fell sharply to 3yr low in Q2-survey. Data kept the kiwi on the defensive as it added to evidence that slowing economic growth will likely require more interest rate cuts in the coming months.
Dairy prices have declined sharply in recent months (down over 35% since early March) in response to moderating Chinese demand and growth in global supply. This along with rising oil prices have further weighed on NZ's terms of trade. Looking ahead, the RBNZ expects this trend to continue, which should result in further NZD depreciation.
NZD/USD trades at 0.6630 = fresh 5yr low, it has tumbled 14 percent on the greenback in the past two months, and we believe its losses will continue to mount given that market uncertainty will likely keep investors risk averse. We forecast NZD at 0.6400 by the year-end.
07 July 2015, 13:45
- RES 4 :125
- RES 3 : 124.50 (Jun 17th high)
- RES 2: 123.65 (61.8 % retracement of 124.43 and 122.47)
- RES 1: 123.15 (20 day MA)
- SUP 1 :122.40 (Jun 18th low)
- SUP 1: 122 (Jun 28th low)
- SUP 2 : 121.50 (61.8% retracement of 125.84 and 118.87)
- SUP 3: 121.25 (161.8% retracement of 122.47 and 124.36)
On the down side minor support is around 122.40 any break below will target 121.85/121.30.
The pair's minor resistance is around 123.15 (20 day MA) and any indicative break above would extend gains till 123.50/123.80.
It is good to sell on rallies around 122.90 with SL around 123.50 for the TP of 121.85/121.25
07 July 2015, 13:43
EU'S MOSCOVICI SAYS GREXIT WOULD BE A COLLECTIVE FAILURE
07 July 2015, 13:43
EUROGROUP PRESIDENT DIJSSELBLOEM SAYS HAVE NOT YET SEEN GREEK PROPOSAL
07 July 2015, 13:43
CZECH CROWN FIRMS 0.4 PCT ON DAY TO 27.070 PER EURO, STRONGEST SINCE CENTRAL
BANK INTERVENTIONS IN NOV 2013 -REUTERS SYSTEM
07 July 2015, 13:40
EUROGROUP'S DIJSSELBLOEM SAYS WILL DO WHATEVER IT TAKES TO STRENGTHEN EURO
ZONE, KEEP IT TOGETHER
07 July 2015, 13:37
EUROGROUP'S DIJSSELBLOEM SAYS I THINK THE PRESSURE IS MOSTLY ON THE GREEKS
07 July 2015, 13:37
EURO DROPS TO 5-WEEK LOW VS DOLLAR OF $1.0946, DOWN 1 PERCENT ON DAY
07 July 2015, 13:29
STERLING EXTENDS LOSSES VS DOLLAR TO HIT FOUR-WEEK LOW OF $1.5453, DOWN
AROUND 1 PERCENT ON DAY
07 July 2015, 13:24
The BoC's Q2 Business Outlook Survey showed a marginal improvement from Q1
but was still overall very soft on all fronts.
Investment intent in machinery & equipment remains extremely weaker, rising just slightly to 7.0 from 4.0 (compared to a 2014 average of 18.0); employment intentions ticked higher but are still weaker than through most of 2014 and while inflation expectations softened.
The big question is what it means for the BoC decision next week, and the market has taken this as a slight increase in the chance of a cut pricing in another 1-2 bps.
That leaves pricing near 40-50% for a 25 bps cut on July 15. That makes sense given that this report doesn't seem to offer a clear trigger for the Bank, so expectations remain on the fence. With the trade balance data today and employment claims on Friday, there is still potential for greater pricing of a cut, though, and in our view that should leave CAD on the defense for this week at least. We expect the FX streets to experience the low volatility amid unfavorable business climate.
Currency Option Basket:
For long term hedgers as stated earlier, Vega on longs iron butterfly suggests lucrative option.
Iron Butterfly (USD/CAD) = Long (-1%) OTM Put (strike at 1.259) & Short ATM Put (1.2717) + Short ATM Call (1.2717) & Long (1%) OTM Call (strike at 1.2844).
For short term traders, Bear Call Spread (strike at 1.2844 & 1.2588) is recommended.
Long OTM call with strike at 1.2844 and short ITM call with strike at 1.2588.
The maximum return can be achievable using this strategy at net credit received upon shorting OTM call.
Investment intent in machinery & equipment remains extremely weaker, rising just slightly to 7.0 from 4.0 (compared to a 2014 average of 18.0); employment intentions ticked higher but are still weaker than through most of 2014 and while inflation expectations softened.
The big question is what it means for the BoC decision next week, and the market has taken this as a slight increase in the chance of a cut pricing in another 1-2 bps.
That leaves pricing near 40-50% for a 25 bps cut on July 15. That makes sense given that this report doesn't seem to offer a clear trigger for the Bank, so expectations remain on the fence. With the trade balance data today and employment claims on Friday, there is still potential for greater pricing of a cut, though, and in our view that should leave CAD on the defense for this week at least. We expect the FX streets to experience the low volatility amid unfavorable business climate.
Currency Option Basket:
For long term hedgers as stated earlier, Vega on longs iron butterfly suggests lucrative option.
Iron Butterfly (USD/CAD) = Long (-1%) OTM Put (strike at 1.259) & Short ATM Put (1.2717) + Short ATM Call (1.2717) & Long (1%) OTM Call (strike at 1.2844).
For short term traders, Bear Call Spread (strike at 1.2844 & 1.2588) is recommended.
Long OTM call with strike at 1.2844 and short ITM call with strike at 1.2588.
The maximum return can be achievable using this strategy at net credit received upon shorting OTM call.
07 July 2015, 13:22
GHANA TO OPEN 2-YR BOND SALE TO FOREIGN BUYERS THIS MONTH IN BID TO CUT
BORROWING COSTS - CENTRAL BANK SOURCE
07 July 2015, 13:21
BARCLAYS: WE STAY ON THE SIDELINES FOR NOW IN USD/MXN FOR BETTER ENTRY LEVELS
AROUND 15.00-15.15
07 July 2015, 13:21
Chinese stock market rout, which is continuing for fourth consecutive week
and wiped out $3.2 trillion of market capitalization is hitting the commodity
world hard.
R1: 136.06 (Daily High Jul 6)
R2: 136.29 (Tenkan-Sen)
R3: 136.85 (Daily High Jul 3)
Support Levels:
S1: 134.00 (Daily cloud top)
S2: 133.70 (Daily Low Jul 6)
S3: 133.58 (100 DMA)
- Comex copper has broken below $2.5/pound as Chinese stocks continued to drop in spite of several measures taken by China. Call was given to sell copper at $2.62/pound with stop around $2.65 and $2.68 with initial target of $2.51/pound and $2.4/pound as second target. Stop loss can be moved to $2.56/pound.
- WTI has broken the 8 week long congestion pattern to downside. WTI is currently trading at $53.3/barrel. As suggested in previous post first target is around $50-51/barrel area. Likely to drop further. Strategy will shift to sell resistance after first target gets hit. Second target is around $45/barrel and final target is at $35/barrel. Stop loss remains unchanged at $62/barrel.
- Aussie has broken 0.75 area and likely to drift towards 0.715 as first target, 0.7 as second and 0.65 as final target. Stop loss should be maintained at 0.78 for the first two targets and 0.825 for the final one.
- As oil is likely to drop further, Loonie remains extra vulnerable against dollar. As of now it is likely to reach recent high of 1.285 against dollar. Strategy remains buy support.
07 July 2015, 13:20
- The single currency relentlessly sold-off amid risk-aversion as traders await upcoming Euro group meeting. Markets await fresh incentives from the Euro Summit on Greek debt negotiations.
- EUR/JPY hovers near daily lows at 134.62. Daily cloud top at 134.00 is likely to provide strong support.
R1: 136.06 (Daily High Jul 6)
R2: 136.29 (Tenkan-Sen)
R3: 136.85 (Daily High Jul 3)
Support Levels:
S1: 134.00 (Daily cloud top)
S2: 133.70 (Daily Low Jul 6)
S3: 133.58 (100 DMA)
07 July 2015, 13:19
BARCLAYS: RBNZ IS LIKELY TO LEAD THE NZD LOWER THROUGH FURTHER POLICY EASING
IN RESPONSE TO VERY LOW INFLATION, STATIC CAPACITY PRESSURES AND FALLING TERMS
OF TRADE
07 July 2015, 13:17
BANK OF ITALY LIABILITIES TOWARDS REST OF EUROSYSTEM RISE TO 188.63 BLN EUROS
IN JUNE FROM 163.99 BLN EUROS IN MAY
07 July 2015, 13:13
GREEK PROPOSAL WOULD KEEP VAT REBATE FOR ISLANDS, LEAVE VAT FOR RESTAURANTS
AT 13 PCT, AND CONTAIN LIMITED CUTS IN DEFENCE SPENDING - SUEDDEUTSCHE ZEITUNG
07 July 2015, 13:11
GREEK PROPOSALS TO EUROGROUP ON TUESDAY WILL NOT DIFFER SIGNIFICANTLY FROM
REFORM PLAN THAT GREEKS REJECTED IN REFERENDUM - SUEDDEUTSCHE ZEITUNG
07 July 2015, 12:54
GERMAN FINANCE AGENCY SAYS VOLUME ALLOTED AT LINKER TOP-UP AUCTION WAS SET TO
810 MILLION EUROS
07 July 2015, 12:53
GERMAN FINANCE AGENCY SAYS BID-TO-COVER RATIO IN LINKER AUCTION WAS 1.2
07 July 2015, 12:53
GERMAN FINANCE AGENCY SAYS TOP-UP OF 0.10-PCT 2026 LINKER FETCHED AVERAGE
YIELD OF -0.55 PCT IN AUCTION ON TUESDAY
07 July 2015, 12:52
EU'S TUSK CALLS ON PEOPLE NOT TO GIVE IN TO SPECULATION: BULGARIAN GOVERNMENT
STATEMENT
07 July 2015, 12:51
BULGARIA PM SPEAKS TO EU'S TUSK, SAYS ALL MEASURES TAKEN TO SAFEGUARD
BULGARIAN BANKS WHATEVER HAPPENS IN GREECE
07 July 2015, 12:46
BARCLAYS: WE LOWER OUR YEAR-END USD/CNY FORECAST TO 6.35 FROM 6.40
07 July 2015, 12:45
The raw sugar price climbed by around 1.5% to a six-week high of $12.5 per
pound yesterday. One reason for this was the International Sugar Organization
(ISO) revising its estimate for the global market deficit in the 2015/16 season
(which begins in October) slightly upwards by 200,000 tons to 2.5 million
tons.
The ISO only expects to provide a more precise breakdown of its estimate in August. At the same time, the director of the Brazilian Sugarcane Industry Association (Unica) prepared the market for a possible reduction in sugar production in Center-South, the most important growing region which accounts for 90% of Brazilian production.
Despite an increased sugar cane crop, sugar production could fall short of the previous year by over 1 million tons. Previously, production had been expected to achieve roughly the same level as last year's figure of 32 million tons, says Commerzbank.
Now, however, data from the roughly one-third completed harvest indicate that the ongoing shift towards converting more of the cane into ethanol rather than sugar is even more pronounced than previously thought, meaning that sugar production to date is 13% down on the year-on-year figure.
There is considerable demand for ethanol in Brazil, as a large number of so-called flex-fuel vehicles is used there which can run on either gasoline or ethanol. By increasing duty on gasoline, the government has made ethanol a more attractive substitute.
The ISO only expects to provide a more precise breakdown of its estimate in August. At the same time, the director of the Brazilian Sugarcane Industry Association (Unica) prepared the market for a possible reduction in sugar production in Center-South, the most important growing region which accounts for 90% of Brazilian production.
Despite an increased sugar cane crop, sugar production could fall short of the previous year by over 1 million tons. Previously, production had been expected to achieve roughly the same level as last year's figure of 32 million tons, says Commerzbank.
Now, however, data from the roughly one-third completed harvest indicate that the ongoing shift towards converting more of the cane into ethanol rather than sugar is even more pronounced than previously thought, meaning that sugar production to date is 13% down on the year-on-year figure.
There is considerable demand for ethanol in Brazil, as a large number of so-called flex-fuel vehicles is used there which can run on either gasoline or ethanol. By increasing duty on gasoline, the government has made ethanol a more attractive substitute.
07 July 2015, 12:42
Chinese authorities are throwing in almost everything to prevent a stock
market meltdown, which at its peak was up more than 150% in 12 months. The rally
has soured since June and the stock market is down almost 28% in last 3
weeks.
Today the stock fell by another 1.3%, in spite of so many measures taken.
Government and regulators seem to have taken the stance of doing whatever it takes to prevent a full scale rout, however all the measures taken so far remains not only short sighted but dangerously risky.
What Chinese authorities should really do is to get economic fundamentals back on track, rather than throwing everything to fight the stock bear.
R1: 0.7076 (Tenkan level)
R2: 0.7145 (20 DMA)
R3: 0.7187(Kijun level)
Support Levels:
S1: 0.7052 (July 5 low)
S2: 0.6992 (June 29 low)
Today the stock fell by another 1.3%, in spite of so many measures taken.
Government and regulators seem to have taken the stance of doing whatever it takes to prevent a full scale rout, however all the measures taken so far remains not only short sighted but dangerously risky.
- People's bank of China (PBOC) has provided rate cut and targeted reserve ratio cut, which has failed to prevent the downfall so far. Monetary policy actions usually works with a time lag, but the rapidity and the time of the action revealed the state of panic among government officials.
- 21 brokers in China have summed up Yuan 120 billion fund, which would invest in Blue chip stocks. Moreover PBOC would provide liquidity to China securities Finance (CSF) which would then lend to the brokers' fund. CSF makes margin financing available to brokers. CSF's capital would also be quadrupled to 100 billion Yuan. With 5 day average of realized volatility more than 7% and daily turnover of more than Yuan 2 trillion, the fund is unlikely to last even a day in this market. Moreover it will exacerbate the rout in small caps as investors push money towards blue chip.
- Chinese securities regulatory Commission (CSRC) has moved swiftly to ban short selling. However such a rout is not due to short sellers but liquidation by long term holders. Moreover history shows, short selling ban doesn't work and stocks have historically fallen more after the ban.
- Country's sovereign fund and pension funds are going to invest in the market. It is not a prudent strategy to push country's wealth and people's pension in such volatile stock market in a bid to prevent the crash.
- CSRC have eased the margin financing rules, which means one can bet almost anything on the stock market. In a market where margin financing is already at record, pushing for more is a very risky strategy. Moreover, easing margin rules which allows investor to bet even house and households to stock market is sure to cost heavy if collapse continues.
- Chinese authorities and companies have suspended trading on 745 stocks. Monday alone 200 companies suspended trading. This is not a very fine choice to prevent slide. As of now 26% of the listed firms are not tradable, which is $1.4 trillion worth. These practices reduce confidence of the longer term stock investors.
What Chinese authorities should really do is to get economic fundamentals back on track, rather than throwing everything to fight the stock bear.
07 July 2015, 12:41
- EUR/GBP hits lows of 0.7058 in the last hour after range trade in the European morning. The pair is consolidating below 0.71 handle. Currently the pair trades at 0.7073 with resistance at 0.7076 (daily Tenkan level).
- Pound sterling remained unperturbed by mixed factory data from the UK as traders shift their focus towards the upcoming Euro Summit with fresh updates expected on Greece.
- Markets favour the safe-havens such as US dollar ahead of the Euro Summit keeping the cross largely subdued on broad euro weakness.
R1: 0.7076 (Tenkan level)
R2: 0.7145 (20 DMA)
R3: 0.7187(Kijun level)
Support Levels:
S1: 0.7052 (July 5 low)
S2: 0.6992 (June 29 low)
07 July 2015, 12:40
GERMAN ECON MIN GABRIEL TELLS STERN MAGAZINE COULD ONLY TALK ABOUT REDUCING
GREEK DEBT IF GREEK GOVT SHOWS IT IS IMPLEMENTING REFORMS
07 July 2015, 12:40
UK 30-YEAR GILT YIELDS FALL TO LOWEST SINCE JUNE 17 AFTER AUCTION
07 July 2015, 12:39
DANSKE BANK: SHORT EURJPY, ENTRY 135.95, STOP LOSS 136.15, TARGET 133.10
R1: 0.7076 (Tenkan level)
R2: 0.7145 (20 DMA)
R3: 0.7187(Kijun level)
Support Levels:
S1: 0.7052 (July 5 low)
S2: 0.6992 (June 29 low)
07 July 2015, 12:39
- EUR/GBP hits lows of 0.7058 in the last hour after range trade in the European morning. The pair is consolidating below 0.71 handle. Currently the pair trades at 0.7073 with resistance at 0.7076 (daily Tenkan level).
- Pound sterling remained unperturbed by mixed factory data from the UK as traders shift their focus towards the upcoming Euro Summit with fresh updates expected on Greece.
- Markets favour the safe-havens such as US dollar ahead of the Euro Summit keeping the cross largely subdued on broad euro weakness.
R1: 0.7076 (Tenkan level)
R2: 0.7145 (20 DMA)
R3: 0.7187(Kijun level)
Support Levels:
S1: 0.7052 (July 5 low)
S2: 0.6992 (June 29 low)
07 July 2015, 12:39
Oil prices recorded their sharpest respective daily declines in five months
yesterday. Brent shed more than 6% and WTI almost 8%. The even more pronounced
fall in the price of WTI was due mainly to the fact that last Friday was a
public holiday in the US so no trading took place.
At $56.4 per barrel, Brent recorded a three-month low. At $52.4 per barrel, WTI was trading for a time at its lowest level since mid-April. Speculative financial investors expanded their net long positions in Brent by 6,700 contracts in the week to 30 June, which simultaneously marked the first position build in eight weeks.
This saw them completely wrong-footed given that the Brent price has fallen by a good 10% since the reporting date. In other words, the price slide could have been further exacerbated by these investors finding themselves forced to sell, says Commerzbank.
The drop in oil prices in recent days was doubtless due in part to the expectation that agreement will finally be reached in the nuclear negotiations with Iran this week. The extended deadline for this ends today.
At $56.4 per barrel, Brent recorded a three-month low. At $52.4 per barrel, WTI was trading for a time at its lowest level since mid-April. Speculative financial investors expanded their net long positions in Brent by 6,700 contracts in the week to 30 June, which simultaneously marked the first position build in eight weeks.
This saw them completely wrong-footed given that the Brent price has fallen by a good 10% since the reporting date. In other words, the price slide could have been further exacerbated by these investors finding themselves forced to sell, says Commerzbank.
The drop in oil prices in recent days was doubtless due in part to the expectation that agreement will finally be reached in the nuclear negotiations with Iran this week. The extended deadline for this ends today.
07 July 2015, 12:38
DANKSE BANK: LONG USDCAD, ENTRY 1.2630, STOP LOSS 1.2530, TARGET 1.2835
07 July 2015, 12:39
Oil prices recorded their sharpest respective daily declines in five months
yesterday. Brent shed more than 6% and WTI almost 8%. The even more pronounced
fall in the price of WTI was due mainly to the fact that last Friday was a
public holiday in the US so no trading took place.
At $56.4 per barrel, Brent recorded a three-month low. At $52.4 per barrel, WTI was trading for a time at its lowest level since mid-April. Speculative financial investors expanded their net long positions in Brent by 6,700 contracts in the week to 30 June, which simultaneously marked the first position build in eight weeks.
This saw them completely wrong-footed given that the Brent price has fallen by a good 10% since the reporting date. In other words, the price slide could have been further exacerbated by these investors finding themselves forced to sell, says Commerzbank.
The drop in oil prices in recent days was doubtless due in part to the expectation that agreement will finally be reached in the nuclear negotiations with Iran this week. The extended deadline for this ends today.
At $56.4 per barrel, Brent recorded a three-month low. At $52.4 per barrel, WTI was trading for a time at its lowest level since mid-April. Speculative financial investors expanded their net long positions in Brent by 6,700 contracts in the week to 30 June, which simultaneously marked the first position build in eight weeks.
This saw them completely wrong-footed given that the Brent price has fallen by a good 10% since the reporting date. In other words, the price slide could have been further exacerbated by these investors finding themselves forced to sell, says Commerzbank.
The drop in oil prices in recent days was doubtless due in part to the expectation that agreement will finally be reached in the nuclear negotiations with Iran this week. The extended deadline for this ends today.
07 July 2015, 12:38
PATTERN TRAPPER: SHORT EURUSD BELOW 1.1071
ooooooooooooo
07 July 2015, 09:45
FRANCE MAY TRADE BALANCE, EUR, SA DECREASE TO -4.020 BLN EUR (FCAST -3.6 BLN
EUR) VS PREV -3.0 BLN EUR
07 July 2015, 09:45
FRANCE MAY EXPORTS, EUR APPROX TIME DECREASE TO 37.926 BLN EUR VS PREV 38.200
BLN EUR
07 July 2015, 09:45
FRANCE MAY BUDGET BALANCE DECREASE TO -63.9 BLN VS PREV -59.84 BLN
07 July 2015, 09:30
S.KOREA FIN MIN: TAX REVENUE FOR 2015 "PRETTY GOOD" AS OF NOW
07 July 2015, 09:21
- AUD/USD has decline till 0.74636 after RBA left the cash rate unchanged at 2% . RBA reiterated that a lower AUD is needed: "Further depreciation seems both likely and necessary, particularly given the significant declines in key commodity prices."
- Technically AUD/USD is facing major resistance around 0.7550. Overall trend is weak as long as resistance 0.7550 holds.
- On the upside minor resistance is around 0.7520 and any break above will extend gains till 0.7550/0.7600.
- The major support is around 0.7460 and break below targets 0.7420.
07 July 2015, 09:18
LUXEMBOURG FINMIN: A GREEK DEBT HAIRCUT IS NOT TABOO, SHOULD COME IN PACKAGE
WITH GREEK REFORMS
07 July 2015, 09:16
BARCLAYS: UK MAY GO FOR MORE AGGRESSIVE DEFICIT REDUCTION OVER NEXT TWO YEARS
RELATIVE TO OBR’S
07 July 2015, 09:15
On intraday charts, bullish engulfing like candle appeared on declines. This
bullish candle with reasonable volumes on downswings suggests that the bulls in
this pair started showing buying interest.
Slow stochastic does not suggest oversold pressure though as an attempt of %D line crossover is seen near 80 levels but failed to evidence this. (%D line at 64.0229 & %K line at 60.7045).
Rising prices are confirmed with the substantial volumes but not on falling side.
So please be advised that on speculation basis for an intraday trading perspective we recommend buying binary call options for targets at 92.012 and even at 92.186 levels.
On hedging grounds, we are advocating bear put spreads to arrest downside risks as the major trend seems to be downtrend.
On weekly chart oscillators suggest downward convergence with the falling prices. RSI (14) converges price slumps at 38.9917. While stochastic shows %D line crossover but not significant though yet above 20 levels.
With a view being bearish bias we recommend buying 7D (1%) In-The-Money -0.69 delta put option while sell 7D (-1%) Out-Of-The-Money put options for a net debit.
Slow stochastic does not suggest oversold pressure though as an attempt of %D line crossover is seen near 80 levels but failed to evidence this. (%D line at 64.0229 & %K line at 60.7045).
Rising prices are confirmed with the substantial volumes but not on falling side.
So please be advised that on speculation basis for an intraday trading perspective we recommend buying binary call options for targets at 92.012 and even at 92.186 levels.
On hedging grounds, we are advocating bear put spreads to arrest downside risks as the major trend seems to be downtrend.
On weekly chart oscillators suggest downward convergence with the falling prices. RSI (14) converges price slumps at 38.9917. While stochastic shows %D line crossover but not significant though yet above 20 levels.
With a view being bearish bias we recommend buying 7D (1%) In-The-Money -0.69 delta put option while sell 7D (-1%) Out-Of-The-Money put options for a net debit.
07 July 2015, 09:13
- USD/JPY: 122.00 (1.6BLN), 122.50 (745M), 124.00 (1.5BLN)
- EUR/JPY:134.50 (225M), 137.00 (283M)
- EUR/USD: 1.1000 (646M), 1.1090-1.1100 (727M), 1.1125 (405M)
- GBP/USD: 1.5700 (527M)
- AUD: 0.7470 (250M), 0.7500 (206M), 0.7525-30 (500M), 0.7600 (548M)
- USD/CAD: 1.2550 (550M), 1.2600 (320M), 1.2700 (560M)
07 July 2015, 09:10
OVER TO LONDON - EUR/USD -0.17%, AUD/USD -0.12%, NZD/USD -0.31%, USD/SGD
+0.29%, NIKKEI +1.41%, SSEC -2.57%, MSCI AXJ -0.27%, WTI +0.78%, UST 10Y 2.3066
07 July 2015, 09:09
UK budget report is likely to be presented on 8th, July.
On the expenditure side, while the government will keep the pressure on current expenditures, those have already been cut substantially since their cyclical high, and it might become increasingly complicated to decrease them further at the same pace. Barclays expects the focus to turn to housing benefits and tax credits. Both represent nearly half of total welfare spending within the welfare cap (£50bn out of £116bn).
The ability of social benefits to decrease relative to GDP is, however, conditional on the quality of the recovery. As the government pointed out, lower benefits will need to be compensated by lower taxes and higher wages, but the latter is out of the government's hands and the former is only sustainable if the recovery holds.
According to Barclays, "We see no reason to change the deficit trajectory already published in March, but recent statements by the Chancellor using the recent turmoil in Greece as the rationale point towards a possible more aggressive consolidation in the short term. Our fiscal forecasts incorporate such risk and show more aggressive deficit reduction over the next two years relative to the OBR."
However, subsequently, the fiscal effort is likely to ease substantially and the government to fall short of its promise to balance the books by 2018/19, adds Barclays. In general, institutions and think tanks are also sceptical about the government's fiscal strategy. While the IFS has been pointing out the challenges to spending cuts, the OECD has been calling for a slower pace of consolidation to minimise the effect on economic activity.
On the expenditure side, while the government will keep the pressure on current expenditures, those have already been cut substantially since their cyclical high, and it might become increasingly complicated to decrease them further at the same pace. Barclays expects the focus to turn to housing benefits and tax credits. Both represent nearly half of total welfare spending within the welfare cap (£50bn out of £116bn).
The ability of social benefits to decrease relative to GDP is, however, conditional on the quality of the recovery. As the government pointed out, lower benefits will need to be compensated by lower taxes and higher wages, but the latter is out of the government's hands and the former is only sustainable if the recovery holds.
According to Barclays, "We see no reason to change the deficit trajectory already published in March, but recent statements by the Chancellor using the recent turmoil in Greece as the rationale point towards a possible more aggressive consolidation in the short term. Our fiscal forecasts incorporate such risk and show more aggressive deficit reduction over the next two years relative to the OBR."
However, subsequently, the fiscal effort is likely to ease substantially and the government to fall short of its promise to balance the books by 2018/19, adds Barclays. In general, institutions and think tanks are also sceptical about the government's fiscal strategy. While the IFS has been pointing out the challenges to spending cuts, the OECD has been calling for a slower pace of consolidation to minimise the effect on economic activity.
07 July 2015, 09:07
BANGLADESH 2014/15 GARMENT EXPORTS REACH $25.5 BLN, OUT OF TOTAL EXPORTS OF
$31.2 BLN – EXPORT BODY
07 July 2015, 09:07
BANGLADESH 2014/15 GARMENT EXPORTS RISE 4.5 PCT FROM YEAR AGO – EXPORT BODY
07 July 2015, 09:04
GERMAN 10-YEAR BOND YIELDS FALL 3 BASIS POINTS IN EARLY TRADING TO 0.74
PERCENT
07 July 2015, 09:03
RBC CAPITAL MARKETS: LONGER-TERM, THERE ARE TWO KEY RISKS FOR GBP – THE UK’S
UNSUSTAINABLE CURRENT ACCOUNT DEFICIT (6.2% OF GDP) AND THE EU REFERENDUM,
PROMISED FOR END-2017
07 July 2015, 09:03
SWISS TREASURY REOPENS 0.5 PCT 2030 BOND IN LATEST AUCTION
07 July 2015, 09:01
GERMAN BUND FUTURES OPEN 33 TICKS HIGHER AT 152.5
07 July 2015, 09:01
RBC CAPITAL MARKETS: USD/JPY TO MAKE MORE NEW HIGHS IN Q3 AND JPY’S APPARENT
LOSS OF SAFE-HAVEN STATUS REMOVES ANOTHER OBSTACLE TO THIS HAPPENING
07 July 2015, 09:00
SEOUL SHARES UNOFFICIALLY CLOSE DOWN 0.68 PCT
07 July 2015, 09:00
TOKYO'S NIKKEI AVERAGE UNOFFICIALLY CLOSES UP 1.31 PCT AT 20,376.59
07 July 2015, 09:00
AUSTRALIA'S S&P/ASX 200 INDEX UNOFFICALLY CLOSES UP 1.96 PCT AT 5,582.30
POINTS
07 July 2015, 04:30
JAPAN OFFERS 0.5 TRLN YEN IN CPI-LINKED 10-YEAR JGBS WITH 0.10 PCT COUPON
07 July 2015, 04:26
CHINA'S CSI300 INDEX TO OPEN DOWN 3.0 PCT AT 3,877.85 POINTS
07 July 2015, 04:25
SHANGHAI COMPOSITE INDEX TO OPEN DOWN 3.2 PCT AT 3,654.78 POINTS
07 July 2015, 04:20
HK’S HANG SENG INDEX TO OPEN UP 0.6 PCT AT 25,391.76 POINTS
07 July 2015, 03:59
RBC Capital Markets notes:
1 - 3 Month Outlook - EUR/CHF capped by politics
On the Monday after the Greek referendum was announced, the SNB's Chairman Jordan confirmed that the SNB intervened in the FX market in a difficult situation. He said the Eurozone is more robust than it was a few years ago and that he doesn't think Greece will destabilize others in the union though went on to say if a country left the Euro, one would have to ask questions about the union.
On the Monday after Greece voted No in the same referendum, EUR/CHF was much better behaved, it did not even make it as far as 1.0350, before bouncing back to 1.0440 where it has traded for most of the past month. At its latest meeting in June, the SNB repeated that it would remain active in FX to keep the "significantly overvalued" CHF down so it was not entirely surprising that the SNB felt it needed to intervene on June 29.
Nevertheless traders report that the intervention was limited which is backed up by analysts looking for the June reserves data (due this week) to remain stable around CHF516bn. It was just enough to prevent EUR/CHF from a rapid test of parity (low 1.0310) and as the day wore on and markets digested news of the Greek referendum, the tightening in EGB spreads coupled with the recovery in other markets, allowed EUR/CHF to grind back up. The threat of SNB intervention may be enough to avoid a test of parity as long as a Greek EUR exit is avoided. But the ongoing uncertainty surrounding Greece, particularly over the next month, will act as a cap on any EUR/CHF rallies.
The technical outlook for USD/CHF is bullish near-term with our analysts highlighting the confluence of resistance between 0.9529 (200dma) and 0.9545 (May 15 high). Rallies over the coming quarter should struggle at 0.9866. On the downside, initial support is the 50dma at 0.9333.
6 - 12 Month Outlook - Closer to fair value
As we have noted before, fair value for EUR/CHF (and even more so USD/CHF) has declined over time, given the negative inflation differential between Switzerland and the rest of the world. But it is not declining fast enough to meet EUR/CHF at current spot (our lowest fair value estimate still puts EUR/CHF at 1.13). As safe haven flows and EZ political risks diminish, we expect to see EUR/CHF eventually trade up to 1.15
1 - 3 Month Outlook - EUR/CHF capped by politics
On the Monday after the Greek referendum was announced, the SNB's Chairman Jordan confirmed that the SNB intervened in the FX market in a difficult situation. He said the Eurozone is more robust than it was a few years ago and that he doesn't think Greece will destabilize others in the union though went on to say if a country left the Euro, one would have to ask questions about the union.
On the Monday after Greece voted No in the same referendum, EUR/CHF was much better behaved, it did not even make it as far as 1.0350, before bouncing back to 1.0440 where it has traded for most of the past month. At its latest meeting in June, the SNB repeated that it would remain active in FX to keep the "significantly overvalued" CHF down so it was not entirely surprising that the SNB felt it needed to intervene on June 29.
Nevertheless traders report that the intervention was limited which is backed up by analysts looking for the June reserves data (due this week) to remain stable around CHF516bn. It was just enough to prevent EUR/CHF from a rapid test of parity (low 1.0310) and as the day wore on and markets digested news of the Greek referendum, the tightening in EGB spreads coupled with the recovery in other markets, allowed EUR/CHF to grind back up. The threat of SNB intervention may be enough to avoid a test of parity as long as a Greek EUR exit is avoided. But the ongoing uncertainty surrounding Greece, particularly over the next month, will act as a cap on any EUR/CHF rallies.
The technical outlook for USD/CHF is bullish near-term with our analysts highlighting the confluence of resistance between 0.9529 (200dma) and 0.9545 (May 15 high). Rallies over the coming quarter should struggle at 0.9866. On the downside, initial support is the 50dma at 0.9333.
6 - 12 Month Outlook - Closer to fair value
As we have noted before, fair value for EUR/CHF (and even more so USD/CHF) has declined over time, given the negative inflation differential between Switzerland and the rest of the world. But it is not declining fast enough to meet EUR/CHF at current spot (our lowest fair value estimate still puts EUR/CHF at 1.13). As safe haven flows and EZ political risks diminish, we expect to see EUR/CHF eventually trade up to 1.15
07 July 2015, 03:48
JAPAN FINMIN ASO: JAPAN WILL STAND READY TO RESPOND TO MARKET MOVES AS HARD
TO FORESEE DEVELOPMENTS IN GREEK SITUATION
07 July 2015, 03:46
JAPAN FINMIN ASO: STABILITY IN EURO ZONE, EU ECONOMIES VITAL FOR STABLE
GLOBAL GROWTH
07 July 2015, 03:37
RBC Capital Markets notes:
1-3 Month Outlook - Sustained outperformance
GBP performed very strongly again over the last month, gaining against all other G10 currencies and with EUR/GBP briefly dipping below 0.70 for a new seven year low. GBP's outperformance is largely a conventional interest rate expectations story. 2yr spreads widened in the UK's favour against every major market, with the exception of the European periphery. But despite GBP's outperformance since the UK general election, we think there is plenty more to go for going forward.
The OIS market does not have a full hike priced until May/June 2016 - far later than our economists' ongoing expectations of a November hike. If GDP rebounds in Q2 (as we expect), the housing market firms in line with its lead indicators and wage inflation maintains the acceleration seen in April (highly likely as it is the key month for pay settlements), we expect market rate expectations to converge to closer to our own.
The main near-term risk to our bullish GBP view is from fiscal policy. The July 8 Budget will no doubt be presented as a significant, front-end loaded, tightening of fiscal policy and, other things being equal, this would put downwards pressure on forward rates. However, with so little discounted as a starting point, this risk is not great and we would also note that the MPC has in past not shown great sensitivity to shifts in fiscal policy when setting rates.
6-12 Month Outlook - Referendum risk overstated
Longer-term, there are two key risks for GBP - the UK's unsustainable current account deficit (6.2% of GDP) and the EU referendum, promised for end-2017 at the latest. We think both are manageable, however. The current account deficit is the counterpart to the budget deficit domestically and so long as the upcoming fiscal strategy is credible, it should remain fundable. This would have been amuch greater risk under other, less certain, election outcomes.
When we looked in detail at the EU referendum risk, we concluded the UK electorate is probably less Eurosceptic than the most recent opinion polls imply. In the longer term, the balance of opinion has almost always been in favour of staying in and it still is when pollsters add a qualification that the government recommends voting to stay. We maintain a moderately constructive long-term view on GBP.
1-3 Month Outlook - Sustained outperformance
GBP performed very strongly again over the last month, gaining against all other G10 currencies and with EUR/GBP briefly dipping below 0.70 for a new seven year low. GBP's outperformance is largely a conventional interest rate expectations story. 2yr spreads widened in the UK's favour against every major market, with the exception of the European periphery. But despite GBP's outperformance since the UK general election, we think there is plenty more to go for going forward.
The OIS market does not have a full hike priced until May/June 2016 - far later than our economists' ongoing expectations of a November hike. If GDP rebounds in Q2 (as we expect), the housing market firms in line with its lead indicators and wage inflation maintains the acceleration seen in April (highly likely as it is the key month for pay settlements), we expect market rate expectations to converge to closer to our own.
The main near-term risk to our bullish GBP view is from fiscal policy. The July 8 Budget will no doubt be presented as a significant, front-end loaded, tightening of fiscal policy and, other things being equal, this would put downwards pressure on forward rates. However, with so little discounted as a starting point, this risk is not great and we would also note that the MPC has in past not shown great sensitivity to shifts in fiscal policy when setting rates.
6-12 Month Outlook - Referendum risk overstated
Longer-term, there are two key risks for GBP - the UK's unsustainable current account deficit (6.2% of GDP) and the EU referendum, promised for end-2017 at the latest. We think both are manageable, however. The current account deficit is the counterpart to the budget deficit domestically and so long as the upcoming fiscal strategy is credible, it should remain fundable. This would have been amuch greater risk under other, less certain, election outcomes.
When we looked in detail at the EU referendum risk, we concluded the UK electorate is probably less Eurosceptic than the most recent opinion polls imply. In the longer term, the balance of opinion has almost always been in favour of staying in and it still is when pollsters add a qualification that the government recommends voting to stay. We maintain a moderately constructive long-term view on GBP.
07 July 2015, 03:37
JAPAN GOVT APPOINTS NOBUCHIKA MORI AS HEAD OF FINANCIAL SERVICES AGENCY
07 July 2015, 03:37
JAPAN MOF NAMES INTERNATIONAL POLICY VETERAN MASATSUGU ASAKAWA AS TOP
CURRENCY DIPLOMAT
07 July 2015, 03:18
RBC Capital Markets notes:
1 - 3 Month Outlook - New lows in prospect
USD/JPY lurched up to a new 13 year high (125.87) in earlyJune, but another string of comments from MoF and BoJ officials suggesting little scope for further JPY weakness capped the move and the last couple of weeks have seen consolidation in a 122-124 range. We expect USD/JPY to make more new highs in Q3 and JPY's apparent loss of safe-haven status removes another obstacle to this happening.
In the latest three months there were no JPYcrosses significantly correlated to equity returns except CHF/JPY and in that case, JPY is trading as the risky asset and CHF the safe haven. This is unprecedented in the postcrisis era when typically (85% of the time) all JPY crosses with the exception of USD/JPY have traded as proxies for general risk appetite, with JPY as the safe haven. This remained true right up to the early months of this year . That JPY's apparent loss of safe-haven status is such a recent phenomenon has to leave a question mark over how sustainable it is, but for now that JPY appears to benefit much less than it did in periods of risk aversion removes another obstacle to near-term USD/JPY gains. That JPY's status is changing should perhaps not be that surprising.
Japan's external flows have undergone a transformation in recent months due to the reallocation of public sector assets overseas, which at the very least should be neutralising some of the flow that was at the root of JPY's safe haven status. These sustained (and unhedged) equity outflows are also a key reason why we are bearish JPY near-term.
6 - 12 Month Outlook - Waiting for the final seller
These domestic public sector flows drove the move from 100 to the 120s. Prior to that, the overseas sector fuelled the move from 80 to 100. The sector we expect to drive the third leg of JPY selling has so far had limited involvement and appears to be largely indifferent to domestic policy - the Japanese private sector, specifically, bond investors. Unlike equity flows, the raw bond flows tell us little about the supply/demand balance for the currency as much fixed income investment is currency hedged.
Indeed for fixed income investors, shifts in hedging behavior have the potential to generate much bigger FX flows than the crossborder asset movements themselves as they affect the entire stock of existing investment, not just the current flow. As US short rates rise, so does the cost of hedging and we still expect an unintended consequence of higher US rates to be another big leg down in JPY (target: 132).
1 - 3 Month Outlook - New lows in prospect
USD/JPY lurched up to a new 13 year high (125.87) in earlyJune, but another string of comments from MoF and BoJ officials suggesting little scope for further JPY weakness capped the move and the last couple of weeks have seen consolidation in a 122-124 range. We expect USD/JPY to make more new highs in Q3 and JPY's apparent loss of safe-haven status removes another obstacle to this happening.
In the latest three months there were no JPYcrosses significantly correlated to equity returns except CHF/JPY and in that case, JPY is trading as the risky asset and CHF the safe haven. This is unprecedented in the postcrisis era when typically (85% of the time) all JPY crosses with the exception of USD/JPY have traded as proxies for general risk appetite, with JPY as the safe haven. This remained true right up to the early months of this year . That JPY's apparent loss of safe-haven status is such a recent phenomenon has to leave a question mark over how sustainable it is, but for now that JPY appears to benefit much less than it did in periods of risk aversion removes another obstacle to near-term USD/JPY gains. That JPY's status is changing should perhaps not be that surprising.
Japan's external flows have undergone a transformation in recent months due to the reallocation of public sector assets overseas, which at the very least should be neutralising some of the flow that was at the root of JPY's safe haven status. These sustained (and unhedged) equity outflows are also a key reason why we are bearish JPY near-term.
6 - 12 Month Outlook - Waiting for the final seller
These domestic public sector flows drove the move from 100 to the 120s. Prior to that, the overseas sector fuelled the move from 80 to 100. The sector we expect to drive the third leg of JPY selling has so far had limited involvement and appears to be largely indifferent to domestic policy - the Japanese private sector, specifically, bond investors. Unlike equity flows, the raw bond flows tell us little about the supply/demand balance for the currency as much fixed income investment is currency hedged.
Indeed for fixed income investors, shifts in hedging behavior have the potential to generate much bigger FX flows than the crossborder asset movements themselves as they affect the entire stock of existing investment, not just the current flow. As US short rates rise, so does the cost of hedging and we still expect an unintended consequence of higher US rates to be another big leg down in JPY (target: 132).
07 July 2015, 03:17
LEW SAYS U.S. WILL KEEP MONITORING SITUATION CLOSELY, OFFERS TO STAY IN CLOSE
TOUCH IN COMING DAYS
07 July 2015, 03:17
LEW HOPES THAT GREECE CAN MAKE FISCAL AND STRUCTURAL REFORMS, RETURN TO
GROWTH AND ACHIEVE DEBT SUSTAINABILITY WITHIN EUROZONE
07 July 2015, 03:16
U.S. TREASURY'S LEW SPEAKS WITH GREEK PRIME MINISTER AND FINANCE MINISTER,
SAYS LOOKS FORWARD TO GREECE, OTHER PARTIES RESUMING CONSERVATIONS TOWARD
CONSTRUCTIVE OUTCOME -TREASURY SPOKESWOMAN
07 July 2015, 03:14
JAPAN ECONMIN AMARI: WORKING TO HOLD MINISTERS' MEETING FOR TPP NEGOTIATIONS
ON JULY 28, HOPE THIS MEETING WILL LEAD TO FINAL AGREEMENT
07 July 2015, 03:08
JAPAN ECONMIN AMARI: GREECE AND EU NEED TO WORK SERIOUSLY TO ACHIEVE A
WIN-WIN SITUATION IN STAND OFF
07 July 2015, 03:00
SOUTH KOREAN WON OPENS ONSHORE TRADE AT 1,126.5 PER DOLLAR VS 1,126.5 AT
PREVIOUS CLOSE
07 July 2015, 02:47
RBC Capital Markets notes:
1 - 3 Month Outlook - A deeper crisis in Greece
Greece's July 5 referendum led to overwhelming support for "No" though it is still unclear what No actually means. With the second bailout having expired, Greece now needs to negotiate a third programme from scratch in order to access funding and reopen its banks; the alternative is EUR exit. The situation is very fluid as we go to press, with yet another eurogroup and EU summit scheduled for July 7.
Despite all this, our forecasts are unchanged - we look for EUR/USD to remain rangebound in 2015 (assuming Greece remains within the Euro area which has been and still is our base case). In the event that we are wrong and Greece does leave the Euro area we would expect EUR/USD to test parity. The uncertainty surrounding a Greek exit would make a September Fed hike less likely (NY Fed President Dudley has warned the market may be too complacent in the event of an exit) but we would still expect EUR to be the main loser in FX.
The ECB would be expected to ease further to avoid any threat of contagion while there is a long-term impact in turning EUR into nothing more than a fixed peg. EUR's reaction to Greek developments so far has been limited - in part that seems to be market expectation that Europeans will "sort this out at the last minute" as that has been the lesson of the last five years. Outside of Greece, we have spent some time looking at financial conditions in the Euro area. We put together an 'ECG' (European Conditions Gauge): a barometer for Euro area market conditions based on EUR, 10y Bund yields and Euro Stoxx 50. Rapid rises in this ECG usually come ahead of softening survey/business sentiment data and we are already beginning to see evidence of this in our European economic surprise indicator.
Our Euro area ESI was very positive earlier this year, peaking at 64 in early/mid April. But since then it has turned negative and has been below zero since early May. The FX implication is that EUR rallies should be capped. Our technical analysts see the risks skewed towards a retest of the prior lows. The May low of 1.0815 is the first target; below there support is at 1.0465 and 1.0521. On the topside initial and secondary trendline resistance comes in at 1.1292 and 1.1424 with the 200dMA at 1.1609 representing much stronger resistance.
6 - 12 Month Outlook - Modest recovery
Further out, we still look for a modest EUR recovery, as the positive effects of QE/credit easing feed through. The economic recovery will take time to feed into higher inflation capping our longer-term forecasts.
1 - 3 Month Outlook - A deeper crisis in Greece
Greece's July 5 referendum led to overwhelming support for "No" though it is still unclear what No actually means. With the second bailout having expired, Greece now needs to negotiate a third programme from scratch in order to access funding and reopen its banks; the alternative is EUR exit. The situation is very fluid as we go to press, with yet another eurogroup and EU summit scheduled for July 7.
Despite all this, our forecasts are unchanged - we look for EUR/USD to remain rangebound in 2015 (assuming Greece remains within the Euro area which has been and still is our base case). In the event that we are wrong and Greece does leave the Euro area we would expect EUR/USD to test parity. The uncertainty surrounding a Greek exit would make a September Fed hike less likely (NY Fed President Dudley has warned the market may be too complacent in the event of an exit) but we would still expect EUR to be the main loser in FX.
The ECB would be expected to ease further to avoid any threat of contagion while there is a long-term impact in turning EUR into nothing more than a fixed peg. EUR's reaction to Greek developments so far has been limited - in part that seems to be market expectation that Europeans will "sort this out at the last minute" as that has been the lesson of the last five years. Outside of Greece, we have spent some time looking at financial conditions in the Euro area. We put together an 'ECG' (European Conditions Gauge): a barometer for Euro area market conditions based on EUR, 10y Bund yields and Euro Stoxx 50. Rapid rises in this ECG usually come ahead of softening survey/business sentiment data and we are already beginning to see evidence of this in our European economic surprise indicator.
Our Euro area ESI was very positive earlier this year, peaking at 64 in early/mid April. But since then it has turned negative and has been below zero since early May. The FX implication is that EUR rallies should be capped. Our technical analysts see the risks skewed towards a retest of the prior lows. The May low of 1.0815 is the first target; below there support is at 1.0465 and 1.0521. On the topside initial and secondary trendline resistance comes in at 1.1292 and 1.1424 with the 200dMA at 1.1609 representing much stronger resistance.
6 - 12 Month Outlook - Modest recovery
Further out, we still look for a modest EUR recovery, as the positive effects of QE/credit easing feed through. The economic recovery will take time to feed into higher inflation capping our longer-term forecasts.
07 July 2015, 02:31
RBC Capital Markets notes:
1 - 3 Month Outlook - USD/CAD toward the highs
After rebounding from its low in May, USD/CAD has rebounded through June, and in the coming months, we continue to look for the pair to extend to new highs. We believe the key drivers of USD/CAD strength should come to a head in the second half of 2015 and we continue to call for a Q3 peak of 1.31.
The main drivers include: 1) Monetary policy divergence. The BoC has taken on a firmly neutral message, and our economists expect the BoC to keep rates at 0.75% until Q2 2016. Regardless of the exact timing of an eventual rate increase though, the issue is that the BoC hiking cycle will considerably lag that of the Fed, which is likely to begin in the second half of this year.
2) Greater downside risk to Canadian activity. Q1 growth was even worse than anticipated, and what matters now is whether we begin to see the rebound in Q2 that the BoC has said they expect. Early signs suggests there is a strong risk that Q2 disappoints the BoC's projection of 1.8%q/q growth. That should weigh on rate expectations and CAD.
3) Oil has bounced, but we do not anticipate any significant shift in the larger macro outlook unless prices rise above the breakeven threshold for new oil sands projects (WTI above the mid-USD70s/bbl). Our commodity analysts do not expect a strong rebound in oil prices (forecasting USD53/bbl average WTI in 2015).
6 - 12 Month Outlook - USD/CAD sustainably higher
As we enter 2016, we look for a gradual pullback in USD/CAD from a peak later this year. By then, we expect the trends that have driven the pair higher should unwind somewhat. Oil prices are anticipated to recover more significantly (RBC forecasting WTI USD77/bbl in 2016); the benefits of a weaker currency should show more clearly in exports and non-energy capital investment; and US/CA monetary policy should begin to converge. Other than against USD, we expect CAD to have mixed performance among the G10.
One issue that has kept us generally bearish on CAD over the medium term has been the type of funding of the current account deficit. The issue bears watching in the coming months because long-term capital inflows have jumped in H1 this year-mostly on a surge in bond flows-however, we suspect that may be temporary. For now, that leaves us still medium term bearish still.
1 - 3 Month Outlook - USD/CAD toward the highs
After rebounding from its low in May, USD/CAD has rebounded through June, and in the coming months, we continue to look for the pair to extend to new highs. We believe the key drivers of USD/CAD strength should come to a head in the second half of 2015 and we continue to call for a Q3 peak of 1.31.
The main drivers include: 1) Monetary policy divergence. The BoC has taken on a firmly neutral message, and our economists expect the BoC to keep rates at 0.75% until Q2 2016. Regardless of the exact timing of an eventual rate increase though, the issue is that the BoC hiking cycle will considerably lag that of the Fed, which is likely to begin in the second half of this year.
2) Greater downside risk to Canadian activity. Q1 growth was even worse than anticipated, and what matters now is whether we begin to see the rebound in Q2 that the BoC has said they expect. Early signs suggests there is a strong risk that Q2 disappoints the BoC's projection of 1.8%q/q growth. That should weigh on rate expectations and CAD.
3) Oil has bounced, but we do not anticipate any significant shift in the larger macro outlook unless prices rise above the breakeven threshold for new oil sands projects (WTI above the mid-USD70s/bbl). Our commodity analysts do not expect a strong rebound in oil prices (forecasting USD53/bbl average WTI in 2015).
6 - 12 Month Outlook - USD/CAD sustainably higher
As we enter 2016, we look for a gradual pullback in USD/CAD from a peak later this year. By then, we expect the trends that have driven the pair higher should unwind somewhat. Oil prices are anticipated to recover more significantly (RBC forecasting WTI USD77/bbl in 2016); the benefits of a weaker currency should show more clearly in exports and non-energy capital investment; and US/CA monetary policy should begin to converge. Other than against USD, we expect CAD to have mixed performance among the G10.
One issue that has kept us generally bearish on CAD over the medium term has been the type of funding of the current account deficit. The issue bears watching in the coming months because long-term capital inflows have jumped in H1 this year-mostly on a surge in bond flows-however, we suspect that may be temporary. For now, that leaves us still medium term bearish still.
07 July 2015, 02:30
AUSTRALIA JUN AIG CONSTRUCTION INDEX DECREASE TO 46.4 VS PREV 48
07 July 2015, 02:23
Market Roundup
EUR/USD
EUR/USD is supported above 1.1020 levels and currently trading at 1.1053 levels. It hit intraday high at 1.1090. and low at 1.020 levels. The pair started to recover from 1.002 in the early US session, and reached high at 1.089. Euro is trading under pressure as risk begins to sour from ECB headlines. ECB said the governing council is determined to use all the instruments available within its mandate to help Greece. France Hollande and German's Merkel held talks with respect to vote of Greek's and noted that the doors are still open for new Greece proposals. All eyes will now be on Euro Zone leader's meeting today. who will discuss Greek referendum. Initial support is seen around 1.000 and resistance is seen around 1.1064 levels.
USD/JPY
USD/JPY is supported above 122.30 levels and posted a high of 122.90 levels. It has made session low at 122.30 and currently trading at 122.55 levels. Economic data released form the US showed Market Composite PMI (Jun) at 54.6, Service PMI (Jun), ISM Non-Manufacturing PMI (Jun) at 56.0 against forecast of 56.2. The pair lost its bullish momentum at 122.91 and fell back towards 122.30 session lows. ECB increased haircuts, but kept ELA levels steady at pre Tuesday's Euro Group meetings.
GBP/USD
GBP/USD is supported above $1.5540 levels. It hit intraday high at 1.5628, and low at 1.5532 levels. Pair is currently trading at 1.5556 levels. The pair strongly pulled back from 1.5330 to reach 1.5627 intraday high. The ECB said it is determined to use all the instruments available within its mandate, and to bailout Greece. ECB has decided to leave the Emergency Assistance Liquidity (ELA) ceiling for Greek banks unchanged at €89 billion. Yanis Varoufakis resigned from his position, creating chaos in the already troubled markets. Meanwhile a new finance minister, Euclid Tsaklotos, took over Yanis Vardoulakis seat at the negotiating table. Greek turmoil may lead to a dovish BOE/FED in near term, BOE meets on Thursday. To the downside Immediate support lies at 1.5561, on the flipside immediate resistance can be found at 1.5630.
USD/CAD
USD/CAD is supported above 1.2562 levels. It hit session high at 1.5664 and session low at 1.5612 levels. Pair is currently trading at 1.2649 levels. The pair pulled back from 1.2610 to reach 1.5662 intraday high. The US dollar continues to be stronger against CAD, due to safe heaven tag attached to USD amid Greece crisis, and also Crude oil prices fell more than 4% to reach $56.73 per barrel today. Economic data released showed IVEY PMI (Jun) printed slightly better figures at 55.9 against forecast of 54.0, Market Composite PMI (Jun) at 54.6, Service PMI (Jun), ISM Non-Manufacturing PMI (Jun) at 56.0 against forecast of 56.2. Immediate support can be seen at 1.2605, on the downside. To the upside, resistance can be seen at 1.2667
- Merkel reiterates last offer from creditors was very generous
- ECB maintains ELA for Greek banks, collateral for ELA tightened
- Greek banking source says haircut on ELA security increased by about 10% on some collateral
- ECB haircut for ELA will not impact banks' everyday business due to gap b/w level of ELA & collateral
- Greece's Tsakalotos to be sworn in as finance minister
- Greek party leaders say aid deal must address debt sustainability
- Greece to extend bank holiday for at least a few more days (Bankers)
- French, German leaders urge Greece to offer quick proposals
- Political leaders back Tsipras in aid talks (Coalition partner)
- Germany's Gabriel - Greece needs to change position to stay in euro
- Fitch: an unplanned reactive process could not be orderly & would inflict severe damage on Greece's economy
- WTI tumbles more than 7%
- Bank of Canada survey shows weak oil still hurting business outlook
- US Markit Comp Final PMI Jun 54.6, 54.6-prev
- US ISM N-Mfg Empl Idx Jun 52.7, 55.3-prev
- US ISM N-Mfg Price Pd Idx Jun 53, 55.9-prev
- Brazil CB f/c '15 inflation to 9.04 from 9%, '15 GDP growth to -1.5 From -1.49%, high inflation/low growth continue to dog Brazil
- 22:00 NZ NZIER Confidence* Q2 23.00%-prev
- 22:00 NZ NZIER QSBO Capacity* Q2 92.30%-prev
- 23:30 AU AIG Construction Index Jun 48-prev
- 23:50 JP Foreign Reserves Jun 1245.80b-prev
- 04:30 AU RBA Cash Rate* Jul f/c 2.00%, 2.00%-prev
EUR/USD
EUR/USD is supported above 1.1020 levels and currently trading at 1.1053 levels. It hit intraday high at 1.1090. and low at 1.020 levels. The pair started to recover from 1.002 in the early US session, and reached high at 1.089. Euro is trading under pressure as risk begins to sour from ECB headlines. ECB said the governing council is determined to use all the instruments available within its mandate to help Greece. France Hollande and German's Merkel held talks with respect to vote of Greek's and noted that the doors are still open for new Greece proposals. All eyes will now be on Euro Zone leader's meeting today. who will discuss Greek referendum. Initial support is seen around 1.000 and resistance is seen around 1.1064 levels.
USD/JPY
USD/JPY is supported above 122.30 levels and posted a high of 122.90 levels. It has made session low at 122.30 and currently trading at 122.55 levels. Economic data released form the US showed Market Composite PMI (Jun) at 54.6, Service PMI (Jun), ISM Non-Manufacturing PMI (Jun) at 56.0 against forecast of 56.2. The pair lost its bullish momentum at 122.91 and fell back towards 122.30 session lows. ECB increased haircuts, but kept ELA levels steady at pre Tuesday's Euro Group meetings.
GBP/USD
GBP/USD is supported above $1.5540 levels. It hit intraday high at 1.5628, and low at 1.5532 levels. Pair is currently trading at 1.5556 levels. The pair strongly pulled back from 1.5330 to reach 1.5627 intraday high. The ECB said it is determined to use all the instruments available within its mandate, and to bailout Greece. ECB has decided to leave the Emergency Assistance Liquidity (ELA) ceiling for Greek banks unchanged at €89 billion. Yanis Varoufakis resigned from his position, creating chaos in the already troubled markets. Meanwhile a new finance minister, Euclid Tsaklotos, took over Yanis Vardoulakis seat at the negotiating table. Greek turmoil may lead to a dovish BOE/FED in near term, BOE meets on Thursday. To the downside Immediate support lies at 1.5561, on the flipside immediate resistance can be found at 1.5630.
USD/CAD
USD/CAD is supported above 1.2562 levels. It hit session high at 1.5664 and session low at 1.5612 levels. Pair is currently trading at 1.2649 levels. The pair pulled back from 1.2610 to reach 1.5662 intraday high. The US dollar continues to be stronger against CAD, due to safe heaven tag attached to USD amid Greece crisis, and also Crude oil prices fell more than 4% to reach $56.73 per barrel today. Economic data released showed IVEY PMI (Jun) printed slightly better figures at 55.9 against forecast of 54.0, Market Composite PMI (Jun) at 54.6, Service PMI (Jun), ISM Non-Manufacturing PMI (Jun) at 56.0 against forecast of 56.2. Immediate support can be seen at 1.2605, on the downside. To the upside, resistance can be seen at 1.2667
07 July 2015, 02:19
RBC Capital Markets notes:
1-3 Month Outlook
For the last 2-3 months, USD has been going sideways. It peaked in March, when markets were pricing in the first rate hike by September, but USD has retraced since then, in line with rate expectations that have also been pushed back . For the last few months, there has been a steady drift in the US forward curve - as we roll forward a month, the market consensus for the first Fed hike does the same. Meanwhile positioning has stopped falling but has stabilised at relatively low levels compared to the extreme USD longs seen at the start of the year.
But US data continue to improve. Our US ESI has been in positive territory for the past month (more upside than downside data surprises), having been in negative territory from mid-February until early June. And even FOMC members themselves are tilted towards a September hike - based on the dot plot, 60% of Fed members are pencilling in at least two hikes this year (Sept and Dec) and 90% are looking for at least one hike. If the Fed skips September, our economists' base case for Fed lift-off will shift all the way out to 2016 as they argue year-end liquidity concerns will make the odds of a December start to tightening very low.
Along these lines, we think the odds of a scenario where the Fed starts in September and pauses are higher than starting in December. As long as we are on track for a September hike , we see potential for USD to make further gains into the end of this quarter. Technically, DXY has already broken above key resistance (100dma, prior highs, and trendline) indicating a re-invigorated upswing toward 97.775 (May highs). Above there, stronger resistance is found near the 2015 highs between 99.99 and 100.39. Initial support is at the 50dma at 95.29. The larger bull trend is still defined by the 200dMA at 92.85.
6-12 Month Outlook
Longer-term, we remain USD positive, though the pace of gains should moderate. There is some risk that if the Fed does not hike in September, it pushes that back into 2016, which would also delay further USD gains. But we are still comfortable in calling for further USD gains, particularly against JPY. While we have heard more Fed officials complain about USD strength, we think the US is well-placed to shoulder modest currency appreciation. Our forecasts are unchanged.
1-3 Month Outlook
For the last 2-3 months, USD has been going sideways. It peaked in March, when markets were pricing in the first rate hike by September, but USD has retraced since then, in line with rate expectations that have also been pushed back . For the last few months, there has been a steady drift in the US forward curve - as we roll forward a month, the market consensus for the first Fed hike does the same. Meanwhile positioning has stopped falling but has stabilised at relatively low levels compared to the extreme USD longs seen at the start of the year.
But US data continue to improve. Our US ESI has been in positive territory for the past month (more upside than downside data surprises), having been in negative territory from mid-February until early June. And even FOMC members themselves are tilted towards a September hike - based on the dot plot, 60% of Fed members are pencilling in at least two hikes this year (Sept and Dec) and 90% are looking for at least one hike. If the Fed skips September, our economists' base case for Fed lift-off will shift all the way out to 2016 as they argue year-end liquidity concerns will make the odds of a December start to tightening very low.
Along these lines, we think the odds of a scenario where the Fed starts in September and pauses are higher than starting in December. As long as we are on track for a September hike , we see potential for USD to make further gains into the end of this quarter. Technically, DXY has already broken above key resistance (100dma, prior highs, and trendline) indicating a re-invigorated upswing toward 97.775 (May highs). Above there, stronger resistance is found near the 2015 highs between 99.99 and 100.39. Initial support is at the 50dma at 95.29. The larger bull trend is still defined by the 200dMA at 92.85.
6-12 Month Outlook
Longer-term, we remain USD positive, though the pace of gains should moderate. There is some risk that if the Fed does not hike in September, it pushes that back into 2016, which would also delay further USD gains. But we are still comfortable in calling for further USD gains, particularly against JPY. While we have heard more Fed officials complain about USD strength, we think the US is well-placed to shoulder modest currency appreciation. Our forecasts are unchanged.
07 July 2015, 01:57
The Bank of Canada's Q2 Business Outlook Survey showed a marginal improvement
from Q1 but was still overall very soft on all fronts. Machinery & equipment
investment intentions remain very weak, rising just slightly to 7.0 from 4.0
(compared to a 2014 average of 18.0); employment intentions ticked higher but
are still weaker than through most of 2014 (to 26.0 from 20.0 in Q1, vs. a '14
avg. of 37.0); and inflation expectations softened.
The big question is what it means for the BoC decision next week, and the market has taken this as a slight increase in the chance of a cut-pricing in another 1-2bps. That leaves pricing near 40-50% for a 25bps cut on July 15. That makes sense given that this report doesn't seem to offer a clear trigger for the Bank, so expectations remain on the fence. With merchandise trade data tomorrow and employment Friday, there is still potential for greater pricing of a cut, though, and that should leave CAD on the defense-for this week at least.
The big question is what it means for the BoC decision next week, and the market has taken this as a slight increase in the chance of a cut-pricing in another 1-2bps. That leaves pricing near 40-50% for a 25bps cut on July 15. That makes sense given that this report doesn't seem to offer a clear trigger for the Bank, so expectations remain on the fence. With merchandise trade data tomorrow and employment Friday, there is still potential for greater pricing of a cut, though, and that should leave CAD on the defense-for this week at least.
07 July 2015, 01:55
BOJ: Current account balance at 229.1 trln at end of day
06 July 2015, 23:31
ECB'S NOWOTNY SAYS BRIDGE FINANCING FOR GREECE WITHOUT NEW BAILOUT PROGRAMME
COULD BE DISCUSSED
06 July 2015, 23:29
ECB'S NOWOTNY SAYS IF GREECE GOES BANKRUPT, ECB WOULD NOT BE ABLE TO PROVIDE
MORE LIQUIDITY
06 July 2015, 23:28
OBAMA, ASKED WHETHER HE WILL VETO DEFENSE BILL, SAYS OUR MEN AND WOMEN ARE
GOING TO GET PAID
06 July 2015, 23:21
OBAMA SAYS ONLY WAY SYRIA CIVIL WAR WILL END IN A WAY TO UNITE AGAINST
ISLAMIC STATE IS THROUGH A GOVERNMENT WITHOUT ASSAD
06 July 2015, 23:21
OBAMA SAYS HAS MADE IT CLEAR TO HIS TEAM U.S. WILL DO MORE TO TRAIN AND EQUIP
MODERATE OPPOSITION IN SYRIA
06 July 2015, 23:20
OBAMA SAYS WILL CONTINUE TO CRACK DOWN ON ISLAMIC STATE'S ILLICIT FINANCE
AROUND THE WORLD
06 July 2015, 23:20
OBAMA SAYS ISLAMIC STATE'S LOSSES IN SYRIA AND IRAQ PROVE IT CAN AND WILL BE
DEFEATED
06 July 2015, 23:20
OBAMA SAYS WHEN U.S. HAS AN EFFECTIVE PARTNER ON THE GROUND, ISIL CAN BE
PUSHED BACK
06 July 2015, 23:20
OBAMA SAYS DEFEATING ISLAMIC STATE MUST BE JOB OF LOCAL FORCES ON THE GROUND