Weekly Outlook: 2014, August 10 - August 17

AUD/USD weekly outlook: August 11 - 15

The Australian dollar bounced off a nine-week low against its U.S. counterpart on Friday, as appetite for riskier assets strengthened after news reports that Russia ended military exercises on the Ukrainian border, easing concerns that an invasion could take place.

AUD/USD hit a daily low of 0.9239 on Friday, the pair’s weakest level since June 3, before subsequently consolidating at 0.9277 by close of trade, up 0.03% for the day but still 0.39% lower for the week.

The pair is likely to find support at 0.9228, the low from June 3 and resistance at 0.9356, the high from August 7.

Fears over hostilities between Russia and Ukraine eased on Friday after Russia’s defense ministry said it had concluded military exercises it was holding close to the border with Ukraine.

NATO warned earlier in the week that Russia massed around 20,000 combat-ready troops on Ukraine's border in preparation for a possible ground invasion.

Meanwhile, U.S. President Barack Obama authorized air strikes in Iraq to halt a Sunni insurgency there and to protect Iraqi civilians from the uprising as well as U.S. personnel in the country.

The Australian dollar sold off on Thursday after a poor employment report revived expectation that the Reserve Bank of Australia may cut interest rates again from the current record low.

Official data showed that the number of employed people in Australia fell by 300 in July, confounding expectations for an increase of 12,000. June's figure was revised down to a 14,900 gain from a previously estimated 15,900 rise.

The report also showed that Australia's unemployment rate rose to 6.4% last month, from 6.0% in June. Analysts had expected the unemployment rate to remain unchanged in July.

On Tuesday, the RBA left its benchmark interest rate unchanged at a record low 2.50% and reiterated that it expects borrowing costs to remain low for an extended period of time.

Commenting on the decision, RBA Governor Glenn Stevens said "the most prudent course is likely to be a period of stability in interest rates."

Data from the Commodities Futures Trading Commission released Friday showed that speculators decreased their bullish bets on the Australian dollar in the week ending August 5.

Net longs totaled 33,300 contracts, down from net longs of 39,606 in the preceding week.

In the week ahead, investors will continue to monitor geopolitical risk, while a U.S. report on July retail sales will also be in focus for further clues about the strength of the economy and the timing of future interest rate hikes.

Tuesday, August 12

• Australia is to release reports on business confidence and house prices.

Wednesday, August 13

• Australia is to publish data on consumer sentiment and the wage price index.
• China is to release a report on industrial production. The Asian nation is Australia’s largest trade partner.
• The U.S. is to publish data on retail sales and business inventories.

Thursday, August 14

• The U.S. is to release the weekly report on initial jobless claims.

Friday, August 15

• The U.S. is to round up the week with reports on manufacturing activity in New York state and industrial output, as well as preliminary data on consumer sentiment.

NZD/USD weekly outlook: August 11 - 15

The New Zealand dollar ended the week close to a two-month low against its U.S. counterpart on Friday, as investors monitored geopolitical tensions in Ukraine and Iraq.

NZD/USD hit 0.8422 on Wednesday, the pair’s lowest since June 5, before subsequently consolidating at 0.8462 by close of trade on Friday, down 0.17% for the day and 0.61% lower for the week.

The pair is likely to find support at 0.8422, the low from August 6 and resistance at 0.8493, the high from August 7.

Fears over hostilities between Russia and Ukraine eased on Friday after Russia’s defense ministry said it had concluded military exercises it was holding close to the border with Ukraine.

NATO warned earlier in the week that Russia massed around 20,000 combat-ready troops on Ukraine's border in preparation for a possible ground invasion.

Meanwhile, U.S. President Barack Obama authorized air strikes in Iraq to halt a Sunni insurgency there and to protect Iraqi civilians from the uprising as well as U.S. personnel in the country.

The New Zealand dollar had dropped to two-month lows against the greenback on Wednesday, after data showed that the number of employed people in New Zealand rose less than expected in the last quarter, although the unemployment rate fell more than markets had anticipated.

Data from the Commodities Futures Trading Commission released Friday showed that speculators decreased their bullish bets on the New Zealand dollar in the week ending August 5.

Net longs totaled 14,500 contracts, down slightly from net longs of 15,289 in the preceding week.

In the week ahead, investors will continue to monitor geopolitical risk, while a U.S. report on July retail sales will also be in focus for further clues about the strength of the economy and the timing of future interest rate hikes.

Wednesday, August 13

• China is to release a report on industrial production. The Asian nation is New Zealand’s second-largest trade partner.
• The U.S. is to publish data on retail sales and business inventories.

Thursday, August 14

• New Zealand is to release data on retail sales as well as a private sector report on manufacturing activity.
• The U.S. is to release the weekly report on initial jobless claims.

Friday, August 15

• The U.S. is to round up the week with reports on manufacturing activity in New York state and industrial output, as well as preliminary data on consumer sentiment.

GBP/USD weekly outlook: August 11 - 15

The pound slumped to two month lows against the dollar on Friday after U.K. trade data showed that exports fell in June and as escalating geopolitical tensions bolstered safe haven demand.

GBP/USD was down 0.35% to 1.6772 late Friday, the lowest level since June 11. For the week, the pair lost 0.31%.

Cable was likely to find support at the 1.6700 level and resistance at around 1.6860.

Sterling moved lower after official data showed that U.K. exports fell by 1.9% in June, largely due to weak demand in the euro zone, while imports fell by 0.3%.

As a result, the U.K. trade deficit widened to £9.4 billion from £9.2 billion in June, against forecasts that it would narrow to £8.8 billion.

The poor trade data overshadowed another report showing that U.K. construction output was up 1.2% in June, erasing a loss of the same amount in May, and climbed 5.3% on a year-over-year basis.

The pound fell to six week lows against the euro, with EUR/GBP rising 0.70% to 0.7996 late Friday.

Concerns over rising geopolitical tensions continued to dominate market sentiment after the U.S. launched airstrikes in Iraq, in a bit to halt the advance of extremists in the country’s north. A breakdown in the ceasefire between Israel and Gaza also fuelled widespread risk aversion.

However, fears over hostilities between Russia and Ukraine eased on Friday after Russia’s defense ministry said it had concluded military exercises it was holding close to the border with Ukraine.

In the week ahead, investors will be continuing to monitor geopolitical risk. Markets watchers will also be looking ahead to Wednesday’s inflation report from the Bank of England and the U.S. report on retail sales the same day.

Tuesday, August 12

• The U.K. is to release private sector data on retail sales.

Wednesday, August 13

• The U.K. is to publish data on the change in the number of people employed and the unemployment rate, as well as data on average earnings. Later in the day, the Bank of England is to publish its quarterly inflation report and Governor Mark Carney is to speak.
• The U.S. is to publish data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity.

Thursday, August 14

• The U.S. is to release the weekly report on initial jobless claims.

Friday, August 15

• The U.K. is to release revised data on second quarter economic growth.
• The U.S. is to round up the week with reports on manufacturing activity in New York state and industrial output, as well as preliminary data on consumer sentiment.

EUR/USD weekly outlook: August 11 - 15

The euro moved higher against the dollar on Friday as heightened concerns over geopolitical risks saw investors sell the dollar to lock in gains following its recent strong gains.

EUR/USD was up 0.35% to 1.3410 late Friday, trimming the week’s losses to 0.13%.

The pair is likely to find support at Wednesday’s eight month lows of 1.3332 and resistance at 1.3450.

Concerns over rising geopolitical tensions continued to dominate market sentiment on Friday after the U.S. launched airstrikes in Iraq, in a bit to halt the advance of extremists in the country’s north. A breakdown in the ceasefire between Israel and Gaza also fuelled widespread risk aversion.

However, fears over hostilities between Russia and Ukraine eased on Friday after Russia’s defense ministry said it had concluded military exercises it was holding close to the border with Ukraine.

The dollar showed little reactions after data on Friday showed that U.S. wholesale inventories rose by a smaller than forecast 0.3% in June.

The euro remained supported after the European Central Bank left monetary policy unchanged at the conclusion of its policy meeting on Thursday.

ECB President Mario Draghi indicated that the bank was pleased with the weaker exchange rate for the euro, which should help to bolster inflation and shore up exports. He also played down concerns over the recent slowdown in inflation, saying it is mostly due to energy prices.

The single currency was also higher against the yen and the pound on Friday, with EUR/JPY rising 0.31% to 136.83 and EUR/GBP rising 0.70% to 0.7996.

In the week ahead, investors will be awaiting Tuesday’s ZEW report on German economic sentiment, amid concerns over the outlook for the recovery in the bloc’s largest economy. Wednesday’s U.S. retail sales report and Thursday’s preliminary data on second quarter growth in the euro area will also be in focus.

Tuesday, August 12

• The ZEW Institute is to release its closely watched report on German economic sentiment, a leading indicator of economic health.

Wednesday, August 13

• The euro zone is to release data on industrial production.
• The U.S. is to publish data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity.

Thursday, August 14

• The euro zone is to publish preliminary data on second quarter gross domestic product, in addition to revised data on consumer price inflation.
• The U.S. is to release the weekly report on initial jobless claims.

Friday, August 15

• The U.S. is to round up the week with reports on manufacturing activity in New York state and industrial output, as well as preliminary data on consumer sentiment.

USD/JPY Monthly Technical Analysis for August 2014

The improving U.S. economy and the threat of an early interest rate hike by the U.S. Federal Reserve helped boost the USD/JPY in July. This developing trend is expected to continue if the U.S. economy continues to be supported by strong jobs and inflation data in August.

The main trend is up on the daily chart. Last month’s price action suggests the Forex pair is set up to resume that uptrend. The main range is 93.783 to 105.434. The retracement zone formed by that range is 99.61 to 98.23. This is the major support area along with uptrending angles at 100.78 and 100.13.

Overtaking the downtrending angle at 101.93 this month is a sign of strength. The short-term range is 105.434 to 100.749. The pivot price created by this range is 103.09. Overtaking this pivot will put the USD/JPY in a strong position to continue the rally.

The next upside objective is 103.68. This is the last major resistance angle before the main top at 105.434.

The tone this month will be determined by investor reaction to the pivot at 103.09. This price is controlling the short-term direction of the market. The catalyst behind the move will be the continuing improvements in the U.S. labor market and inflation rate.

GBP/USD Monthly Technical Analysis for August 2014

The GBP/USD posted its biggest monthly decline in July since May 2013. The selling pressure was driven by the strengthening U.S. economy and increased expectations for higher U.S. interest rates.

Some of the weakness last month was driven by a drop in house prices. Further hurting the Sterling was comments from Bank of England Deputy Governor Ben Broadbent who said in an interview with Bloomberg News that the “edge is coming off” the housing market. The slowdown in U.K. housing may be one reason for the weakness, others include a slowdown in the global economy and a strengthening U.S. Dollar.

The U.S. Non-Farm Payrolls report, due to be released on August 2, could set the tone for August. A strong number will likely move the U.S. Federal Reserve closer to hiking interest rates in early 2015. The key factor of the report the Fed will be watching is Average Hourly Earnings. A stronger number will lift the doubt the Fed has about the strength of the economy. This could lead to further selling pressure on the British Pound.

Technically, the GBP/USD posted a potentially bearish closing price reversal top in July. This chart pattern occurred slightly below a downtrending angle at 1.7236 this month, and inside a major retracement zone bounded by 1.6829 to 1.7614.

The major uptrending angle to watch is 1.6892. Taking out this angle with conviction will put the Forex pair on the weakside of this long-term angle that has given the market support and guidance for 13 months, or since the market bottomed at 1.4812 in July 2013. A sustained move under this angle will do some serious damage to the structure of the bull market.

The short-term range is 1.6251 to 1.7190. Its retracement zone at 1.6721 to 1.6610 is the first downside target.

The main range is 1.4812 to 1.7190. The retracement zone formed by this range at 1.6001 to 1.5720 is another possible target, but it may take months to reach this zone.

The angle at 1.6892 should control the direction of the market this month. The closing price reversal top gives the GBP/USD a bearish tone.

Natural Gas Monthly Technical Analysis for August 2014

Nearby Monthly Natural Gas futures declined sharply in July after below normal summer temperatures drove down air conditioning usage and thereby demand for fuel to run the power plants. Record injections drove supply higher, putting inventories at nearly record levels. So the best way to put it is, natural gas prices fell because of rising supply and falling demand.

The sell-off in July wiped out the entire winter premium established earlier in the year when extremely cold temperatures covered much of the Midwest and Northeastern United States. It now looks as if there is going to be an ample supply of natural gas available before the start of the winter heating season.

Fundamentally, unless there is a spike higher in temperatures in the Midwest or East Coast this month, or a lingering high pressure zone, or even a hurricane in the Gulf of Mexico, it looks as if natural gas prices will be under pressure again in August.

Technically, the main range is 7.322 to 2.371. The retracement zone created by this range is 4.847 to 5.431. This is the best resistance this month.

The hard sell-off last month was triggered by a break through a long-term uptrending angle. This angle moves up to 4.4070 in Augusts and should be considered resistance along with a short-term 50% level at 4.102.

Last month, nearby natural gas found support on a short-term Fibonacci level at 3.720. This level is support once again this month. Look for an acceleration to the downside if this price fails as support with an angle at 3.4470 the next likely target.

Look for a downside bias this month unless there is a change in the weather. Last month was one of the coolest Julys in history. This trend is showing no sign of changing so look for support to continue to erode.

Gold Monthly Technical Analysis for August 2014

Nearby Comex Gold futures closed lower for July and near the low of the month, suggesting more selling pressure may be coming in August. The short-term view shows a market that is very sensitive to U.S. economic data and not too much to geopolitical events.

With the improving U.S. economy slowly moving the Fed towards an interest rate hike in 2015, some of the uncertainty that has been supportive for gold has been lifted. The unrest in Ukraine and the crisis in Gaza may have slowed down the rate of the market’s decline, but speculators have not flocked into the precious metal for protection like they have done in the past.

Based on this assessment, gold is not likely to post a strong rally unless the economy starts to weaken. This would push any plan by the Fed to raise interest rates deeper into 2015. The wildcard in this analysis may be a sharp plunge in the equity markets, or direct U.S. involvement in any of the military action taking place in Ukraine, Gaza, Syria or Libya. A steep decline is global equity markets could send investors into gold for safety, however, the U.S. is not likely to move troops or military equipment into any of the “hot zones”.

Technically, the main trend is down, but the market has been trapped inside a major retracement zone for a little over a year. The main range is the October 2008 bottom at $735.90 to the September 2011 top at $1952.60. The retracement zone formed by this range that has been providing both support and resistance since April 2013 is at $1341.80 to $1198.20. The upper, or 50% level provided resistance in July.

The short-term range is $1181.30 to $1392.80. The pivot price of this range is $1287.00. Gold has straddled this level six consecutive months. How investors react to this level in August should set the tone for the month.

The major support angle that has provided guidance and direction since the $735.90 bottom comes in at $1295.90 in August. Since the market closed at $1282.80 in July, it will begin the month on the weakside of the uptrending angle, giving it a downside bias.

The monthly chart indicates there is plenty of room to the downside if $1287.00 is taken out with conviction. A sustained move under this level could trigger a break into the Fibonacci level at $1198.00. On the upside, taking out the 50% level with better-than-average volume could trigger a move into the major downtrending angle at $1392.60.

Watch the price action and order flow at $1287.00 this month. It should let you know which way investors want to take this market.

EUR/USD Monthly Technical Analysis for August 2014

The stronger U.S. economy and the possibility of higher interest rates helped drive the EUR/USD lower in July. At the same time, Euro investors are starting to believe the European Central Bank may have to impose more aggressive economic stimulus on the Euro Zone in order to avoid deflation. Additional sanctions on Russia because of its active involvement in Ukraine is also influencing the price action as investors price in the possibility the sanctions will lead to further economic weakness.

Last month, the EUR/USD found resistance at 1.3700. This was also on a downtrending angle that drops in at 1.3513 this month.

The July low at 1.3366 fell on a steep downtrending Gann angle from the 1.3993 top. This angle, moving down .0320 per month, drops in at 1.3033 in August. If the selling pressure were to continue at last month’s pace then this would be one likely downside target.

An uptrending angle from the 1.2744 bottom also provided some support last month. This angle, moving up .004 per month, moves up to 1.3384 in August. Taking out this angle will put further pressure on the Euro.

The short-term range is 1.2744 to 1.3993. The retracement zone formed by this range is 1.3368 to 1.3221. The upper or 50% level of this range was tested and held in July. Taking out this level with conviction could lead to a steep drop into the lower or 61.8% level at 1.3221.

Traders need to watch the price action and order flow at 1.3368 to 1.3384 early in the month. Trader reaction to this area is likely to set the tone for the month. Since the main trend is down on the monthly chart, August starts with a strong bias to the downside.

Watch for a choppy trade inside 1.3368 to 1.3221. A sustained move over 1.3368 is likely to trigger some short-covering while taking out 1.3221 with conviction will be bearish.

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