Error in deserializing body of reply message for operation 'Translate'. The maximum string content length quota (8192) has been exceeded while reading XML data. This quota may be increased by changing the MaxStringContentLength property on the XmlDictionaryReaderQuotas object used when creating the XML reader. Line 1, position 9736.
The much anticipated ECB meeting is finally just around the corner but the market has already turned decidingly bearish. Risk appetite has been heavy in Asia following a worrying day in equities. S&P dropped to 1279.56 while Shanghai closed down 1.6% today.
In FX, our barometer for risk sentiment, the AUDJPY, dropped out of its range heading towards its May lows at 84.32. Yesterday, the markets debated the US current soft patch as the beige book suggested slow and steady growth – we’re unlikely to see a double dip recession just yet. It was however the Asian session that provided with firm evidence that data was turning downwards. Australia May employment came in at 7.8k vs. 25k expected and Japan’s Q1 GDP surprised to the downside at -3.5% y/y vs. -3% expected. While it’s becoming clear that global growth is moderating, China is not helping with their aggressive tightening policy and the OPEC decision against raising production quotas which pushed Oil above $101bll.
The RBNZ left the OCR unchanged at 2.50%. The decision was unremarkable since the whole world expected such – but it does set the stage for today’s ECB rate decisions leaning towards a less aggressive tightening path. The RBNZ stated the earthquake reconstruction and strong exports have helped GDP saying "the outlook for the New Zealand economy has improved since the publication of the March Statement" but provided an important caveat that risk remained over the global outlook.
Markets are universally expecting the ECB to leave the benchmark refinancing rate at 1.25%. The Eurozone’s consumer price index (CPI) annual inflation rate came out at 2.7% in May, compared with 2.8% in April; although marginally lower, still way above the ECB 2% target. The ECB’s Mario Draghi, who is widely expected to become the next ECB president, stated in late May that "there is now a greater need to proceed with monetary policy normalization so as to prevent expectations of higher inflation from becoming entrenched.” Furthermore, just last week ECB member Bini Smaghi claimed that the “current, very low level of interest rates does not seem justified.”
While imported commodity driven inflation could ease, ECB President Trichet has not backed away from his hawkish tone. He stated that commodity prices could ignite a second round of inflationary effects and it was the central bank’s role to prevent this from happening. Rate markets have already priced in almost a full hike for July but even so, the knee jerk reaction to any mention of “vigilance” should be EUR positive.
There clearly seems to be a shift way from general the consensus that a July hike would be signaled today to a more conservative outlook that Trichet and gang will hold off as inflation levels have marginally declined, peripherals still need support and global outlook is uncertain. The erosion of consensus is taking its toll on the EURUSD. We still believe the ECB will raise rates in July by 25 bps, unless the fundamentals change between now and then.
For today’s meeting, the risk is clearly to the EURO downside. If the ECB does not give a the signal for an upcoming rate hike (“vigilance”) this will make FX markets uncertain and we could see a rapid unwind of interest rate differential-fueled EUR longs.
Today, we expect the ECB to announce vigilance and for the rate meeting to be an overall non-event. For the Pound, we expect the BoE’s MPC to leave the Bank Rate at 0.5% and the Asset Purchase target at £200bn. We are still holding to our central theory that the incoming bailout to Greece will end current risk aversion and set the stage for a summer risk rally. That said, do not turn a blind eye to the economic storm clouds building over the USA, as this could be a game changer this summer.
11:00 GBP BoE Announces Rates % 0.50% prior/exp11:45 EUR ECB Announces Interest Rates % 1.25% prior/exp12:30 EUR ECB's Trichet Speaks12:30 USD Initial Jobless Claims (Jun-4) 419K prior12:30 USD Continuing Claims (May-28) 3700K prior12:30 USD Trade Balance (Apr) USD bn -48.8 prior15:30 USD Fed Vice-Chair Yellen speaksEurUsd It may seem like a subtle shift on the surface, but from our perspective, there’s been a complete turnaround for EURUSD’s prospects in the past 24 hours. For one thing, yesterday’s bullish engulfing pattern failed miserably to produce any further gains, the thin 2-week uptrend channel has been broken, and now we believe there may be a nascent head and shoulders pattern forming on the hourly chart. At the moment, only the left shoulder and head have been clearly defined, along with half of a potential right shoulder. In order for this pattern to be a bona fide head and shoulders top though, the next rally MUST not exceed the height of the head (1.4696), and then we need to see a break below the neckline 1.4457. Should that happen, we would go short and aim for a target of approximately 1.4425. Nearest supports are seen at the neckline 1.4557 (6 Jun low), 1.4453 (3 Jun low), and 1.4309 (1 Jun low).If we are wrong-footed by a resumption of the uptrend, watch for resistance levels above at 1.4696 (7 Jun high), 1.4899 (5 May high), 1.4940 (4 May high), and the hugely significant 1.5000 psychological barrier.
GbpUsd GBPUSD managed to rally strongly off yesterday’s 1.6349 lows, and is now well on its way towards 1.6500 and possibly to printing new highs in this short-term uptrend. Key resistance in the meantime stands at 1.6472 (Tuesday’s high), closely followed by 1.6498 (1 Jun high), and 1.6574 (4 May high). If we managed to break above that latter 1.6574 level, we feel it would open the path for a test of 1.6746 (28 Apr high). Nearest supports now stand at 1.6349 (yesterday’s low), 1.6325 (Tuesday’s low), 1.6274 (26 May low), 1.6240 (100-day moving average), 1.6133 (25 May low) and then the critical 1.6060 support (24 May low).
UsdJpy After spending the past week suppressed and creeping along the lower edge of its downtrend channel, USDJPY finally managed to rebound higher; but the gains are still modest by most standards, getting only as far as 80.30. We still expect that the resistance levels stacked on the topside will be more than capable of preventing an all-out reversal; the key ones of note are 80.40 (6 Jun high), 81.01 (3 Jun high), 81.33 (2 Jun high), 81.78 (31 May high), 82.79 (27 Apr high), 83.27 (18 Apr high), and 83.79 (15 Apr high). Our base case scenario is that the pair ascends no further than 80.70-81.00 (so that would be a great area for short entry), and then we resume our focus on the downside. Nearest supports are seen at 79.57 (5 May low), 78.26 and (17 Mar low), before the all-time low 76.40.
UsdChf Incredibly subdued price action in USDCHF over the past 24 hours has kept us in a <35 pip range (0.8347 –0.8381), and contributed to an extremely dull day’s trading. As such, the technical outlook remains much the same as per yesterday’s report. To recap; we are already short and playing a bearish flag pattern on the hourly chart that began on the break below 0.8415. Using the length of the flag pole as a guide, we are therefore aiming for a target of 0.8260. Really the only things we are relying on for support below are the all-time low set Monday at 0.8328, then purely psychological supports like 0.8300, 0.8200 etc. Levels on the topside stand at 0.8391 (Tuesday’s high), 0.8453 (2 Jun high), 0.8547 (31 May high), and 0.8595 (rebound highs seen 27 May).
S: Strong, M: Minor, T: Trendline, K: Keylevel, P: PivotView the original article here
Nenhum comentário:
Postar um comentário