Technical Forecasts

US Dollar Ready for Break…But Direction Awaits Volatility or Fed
The Dow Jones FXCM Dollar Index (ticker = USDollar) continues to linger conspicuously close to a level that has held the floor on the currency for the past 16 months. Whether the assessment is technical or fundamental, the signs point to a meaningful break for the greenback in the near-term future. However, the direction the market chooses and the commitment to a new trend’s continuity depends on how underlying market conditions evolve and whether the rate forecasts start to solidify.

British Pound May Fall as Soft Inflation Data Undermines BOE Bets
Monetary policy expectations remain firmly in the driver’s seat for the British Pound. Indeed, the correlation between GBPUSD and the UK 2-year Gilt yield – a reflection of investors’ near- to medium-term interest rate outlook – is now at a one-month high (0.42 on 20-day percent change studies). Last week’s BOE announcement proved to be a non-event, with Mark Carney and company leaving the setting of monetary policy unchanged and publishing no explanatory statement to lay out their reasoning going forward.

Gold Breaks Through July Range- Rally at Risk Ahead of Yellen
Gold prices are higher on the week with the precious metal up more than 1% to trade at $1335 ahead of the New York close on Friday. The advance marks the sixth consecutive weekly advance and comes on the back of a poor performance in broader equity markets and growing geopolitical tensions in the Middle East. Major US stock indices were off by more than 1% this week with European bourses shedding 3%-4% across the board amid concerns over the health of the Portuguese banking system.

Japanese Yen Losses Remain Likely, but What Could Change?
The Japanese Yen finished the week marginally higher versus the US Dollar, but the fact that it trades near critical resistance (USDJPY at support) leaves it at risk. We’ll watch the coming week’s Bank of Japan interest rate decision with special interest.
We expect little change from the BoJ and indeed the Dollar/Yen exchange rate seems likely to stick to its year-to-date trading range.

NZD/USD Risks Fresh Record-Highs Ahead of RBNZ on Faster Inflation
The NZD/USD remains at risk of marking fresh record-highs ahead of the next Reserve Bank of New Zealand (RBNZ) policy meeting on July 23 as the economic docket is expected to show heightening price pressures across the region.Indeed, the headline reading for New Zealand inflation is expected to increase an annualized 1.8% in the second-quarter, which would mark the fastest pace of growth since the last three-months of 2011, and heightening price pressures may generate a further advance in the exchange rate as it fuels interest rate expectations.

More...

US Dollar Awaits Heavier Volatility, Rate Speculation Returns
There was a considerable commotion in the financial markets this past week with sharp declines in global equities and sizable swells in volatility measures (the short-term equity-based measure increased nearly 60 percent on Thursday). Yet, a notable contrast to this chaos was the more moderate response from FX – and particularly the calm demeanor of the US Dollar. If the greenback is considered a safe haven, why did it not rally as other capital markets felt the effects of fear? What does this mean for the currency moving forward?

GBP/USD Needs Hawkish BoE Minutes, Upbeat 2Q GDP for Fresh Highs
The Bank of England (BoE) Minutes and the U.K.’s 2Q Gross Domestic Product (GDP) report is likely spark increased volatility in the GBP/USD as market participants continue weigh the outlook for monetary policy. The BoE policy statement may prop up the British Pound as a growing number of central bank officials show a greater willingness to normalize monetary policy sooner rather later, but we would need to see a greater dissent within the Monetary Policy Committee (MPC) to see fresh yearly highs in the GBP/USD as the pair retains the range-bound price action from earlier this month.

AUD Braces for Jawboning From Stevens And Quarterly Inflation Data
The Australian Dollar’s consolidation continued over the most recent week with AUD/USD remaining within its narrow range between 0.9210 and 0.9440. A status-quo set of Minutes from the RBA and positive Chinese second quarter growth figures failed to inspire the Aussie bulls. While a sell-off on heightened geopolitical tensions proved to be short-lived, with the currency bouncing back during Friday’s trading.

Gold Posts 2% Weekly Loss- $1324 Key Resistance ahead of US CPI
Gold prices are considerably lower on the week with the precious metal down more than 2.3% to trade at $1307 ahead of the New York close on Friday. The losses come amid a tumultuous week for markets with geopolitical tensions continuing to build both in Ukraine and Israel. A downed civilian airliner in Ukraine and an Israeli ground invasion of Gaza fueled a substantial rally in gold on Thursday as broader equity markets turned over.



More...

US Dollar Turn Can Forge Trend on Fed Decision, NFPs, 2Q GDP
There was little in the backdrop that should have meaningfully bolstered the US Dollar. Interest rate expectations measured through yields and Fed Fund futures were stagnant.

USDJPY Rallies to Multi-Week Highs, but What Could Force it Higher?
The Japanese Yen remains in a miniscule trading range versus the US Dollar, but a jump in volatility suggests some predict key events ahead could finally force some sharper USD/JPY moves.

New Zealand Dollar May Continue Lower on US Economic News-Flow
New Zealand Dollar selling may continue after last week’s aggressive decline as sentiment trends take the reins from RBNZ monetary policy considerations.

GDP/USD to Carve Higher-Low on Dovish FOMC
The GBP/USD looks poised to resume the bullish trend carried over from the previous year as the Bank of England (BoE) shows a greater willingness to normalize monetary policy sooner rather than later.

AUD to Continue Consolidation With Void of Local Data On Tap
The Australian Dollar may remain elevated with an absence of major domestic data ahead to shift policy bets alongside the prospect of continued carry demand.

Gold Defends July Lows- Outlook Hinges on GDP, FOMC, NFPs
Gold prices are softer on the week with the precious metal off by 0.51% to trade at $1298 ahead of the New York close on Friday.





More...

US Dollar Rally at the Mercy of Volatility, Interest Rate Trends
The Dow Jones FXCM Dollar Index (ticker = USDollar) mounted its biggest rally in six months this past week. That is a serious reversal of fortune from the technical collapse the currency was facing in the first half of July. Yet, the transition from rebound to full-blown rally is a jump the dollar may not be able to make. After grinding out hard-fought gains against its major counterparts, the greenback’s top fundamental drivers are starting to show the tell-tale signs of doubt. Will US interest rate expectations finally hit the same stride that carried the Pound to seven-year highs? Are we on the brink of an all-out risk aversion move?

British Pound Likely to Continue Lower Unless Bank of England Reacts
The British Pound tumbled further versus the US Dollar, and the sharp shift in momentum all but confirms that the GBPUSD likely topped and is likely to continue lower. Traders sent the Sterling lower for the fourth-cocutive trading week, and whether it can recover into the new month may depend on the upcoming Bank of England monetary policy decision on the 7th and Inflation Report due the 13th.

USD/JPY Risks Larger Pullback as BoJ Refrains From Expanding QE
The USD/JPY broke out of the bearish trend from earlier this year as the Federal Open Market Committee (FOMC) scaled back its dovish tone for monetary policy, but the Bank of Japan (BoJ) interest rate decision on August 8 may boost the appeal of the Japanese Yen as the central bank remains confident in achieve the 2% inflation target over the policy horizon.

Gold Trades Heavy as USD Goes Bid on Fed, GDP- August Open In Focus
Gold prices are lower for a third consecutive week with the precious metal off by 0.90% to trade at $1295 ahead of the New York close on Friday. The losses mark a 2.47% decline for the month of July and come amid renewed strength in the greenback with the Dow Jones FXCM Dollar Index breaking through trendline resistance dating back to the 2013 high on the back of a stellar 2Q GDP print and a more upbeat assessment of the economy from the Federal Reserve.

Australian Dollar May Bounce Before Selling Pressure Builds in Earnest
The Australian Dollar faced heavy selling pressure last week, with prices dropping through the bottom of a range that contained price action since the beginning of June. The force behind the move lower came from external factors: an impressively strong second-quarter US GDP figure and an easing of the FOMC’s concern about persistently low inflation hinted Janet Yellen and company may move swiftly to raise rates after the QE3 asset purchase program is wound down in October.



More...

Big Warning Sign for Japanese Yen - Time to Abandon Positions?
Professionals scrambled for explanations on why the USDJPY posted a sharp 50-point tumble in the typically-quiet period after London markets closed. And indeed some initially pointed to a so-called “fat finger trade”—where a trader accidentally places an especially-large order that sends markets reeling. Yet the truth was far simpler: there was indeed a spike in USDJPY selling (Yen buying), but nothing about it seemed accidental.

British Pound May Rise on Status-Quo Bank of England Inflation Report
The British Pound may rise after five consecutive weeks of losses unless the Bank of England Inflation Report delivers a dovish jolt to priced-in policy bets.

AUD at Risk as Rate Hike Bets Squashed Alongside Geopolitical Turmoil
The Australian Dollar extended its recent declines over the past week on the back of broad-based risk aversion and disappointing domestic data. Heightened geopolitical turmoil sapped demand for the high-yielding currency as traders flocked to the perceived safety of the Yen and US Dollar. Looking ahead, if we see tensions surrounding the Middle East or Ukraine escalate, the Aussie could face further weakness in the short-term.

Gold at Resistance as USD Stalls, Stocks Roll Over- $1321 Key
With mounting concerns over new US military involvement in Iraq and the ongoing turmoil seen in Gaza and Ukraine, the onset of more classic risk aversion flows have been identified with gold likely biggest beneficiary. However, with the precious metal closing the week just below key near-term resistance, the focus shifts to the initial August range.


More...

Dollar Traders Look Ahead to Jackson Hole, Eye Volatility Warily
In the past month-and-a-half, the currency has reversed from a significant escalation of a bearish trend bearing and subsequently marked impressive gains. Yet, without fundamentals to support the move, the speculative drive can easily collapse on itself.

British Pound Heads into Critical Week - Could it Finally Bounce?
The British Pound fell for the sixth-consecutive week, matching its longest streak since setting key lows near $1.43 in 2010. Yet there are signs that the move may be overdone, and key data ahead promises big moves for the GBP.

USD/JPY Opening Monthly Range in Focus Ahead of Fed Symposium
The USD/JPY pared the decline from earlier this month, with the pair trading back above the 102.00 handle ahead of the Fed’s Economic Symposium in Jackson Hole, Wyoming, but the dollar-yen may continue to carve a string of lower-highs in August as it preserves the opening monthly range.

AUD Range To Remain On Status-Quo RBA Minutes And Lift In Chinese Data
Over the coming week, the RBA’s August Meeting Minutes and the HSBC China Flash Manufacturing PMI data are the most noteworthy pieces of regional event risk for the Aussie. The Reserve Bank has held steadfast in its preference for a ‘period of stability’ for rates and the Minutes are unlikely to reveal any major revelations.

New Zealand Dollar to Fall if Fed Rate Hike Fears Fuel Risk Aversion
A relatively timid domestic calendar is led by second-quarter PPI figures. New Zealand price-growth data has increasingly underperformed relative to consensus forecasts since February, suggesting economists have tended to overestimate inflation and opening the door for a soft print.

Gold Rebounds Off Support on Rising Tensions in Ukraine- $1292 Key
Gold prices are softer at the close of trade this week with the precious metal off by 0.40% to trade at $1304 ahead of the New York close on Friday. With geopolitical tensions on the rise, gold could remain supported with key US data next week and the Jackson Hole Economic Symposium likely to drive prices.



More...

Dollar’s Best Rally in 18 Months Will Stall Without Catalyst
Looking into the dollar’s backdrop, there is little of the fundamental motivation we would normally expect the currency to advance on. Without a turn in speculative appetites, groundswell in the market’s rate forecasts or material drop in other majors; the dollar’s rally is likely to stall.

Japanese Yen at Make-or-Break Levels Ahead of Key Data
The Japanese Yen tumbled towards yearly lows versus the US Dollar, and key data in the week ahead could decide whether the USDJPY makes a sustained break of its year-to-date trading range.

GBP/USD Remains Oversold Despite BoE Dissent- RSI in Focus
We may see the British Pound regain its footing ahead of the next interest rate decision on September 4 should the fundamental developments coming out of the U.K. further boost interest rate expectations.

AUD To Remain Resilient Amid Drive To Yield and Void of Local Data
Looking ahead, RBA policy bets as well as general market risk appetite remain the dominant themes to monitor for the Aussie. On the policy front; a void of local economic data is on the calendar heading into the end of the month. This is likely to leave the ‘period of stability’ baseline scenario for rates intact. Which in turn could keep the currency supported via its yield spread over its major counterparts.

New Zealand Dollar Weakness to Persist as Fed Rates Outlook Firms
A lull in high-profile domestic news-flow puts external forces in the spotlight as the primary drivers of New Zealand Dollar price action in the week ahead. The central issue on this front continues to be the evolution of the expected time gap between the end of the Fed’s QE3 asset purchases in October and the first subsequent interest rate hike.

Gold Tumbles to Fresh Two Month Lows on Fed Outlook- $1271 Support
Looking ahead to next week, traders will be closely eyeing the second print for 2Q GDP with consensus estimates calling for a slight downward revision to an annualized pace of 3.9% from 4% q/q. July durable goods orders, pending home sales, and the final read for the August University of Michigan Confidence survey are also on tap next week and we’ll look for stronger data to broadly remain supportive of the dollar / limit gold advances.



More...

Dollar Traders Look Ahead to a Return of Liquidity and NFPs
Relative performance versus weakened cross currencies and a stable economic footing are unlikely to drive EURUSD below 1.3000 or GBPUSD through 1.6500. The next leg will be decided between Fed rate forecasts and the level of volatility in the markets. As it happens, we happen to have the ingredients to ignite speculation on both fronts.

GBP/USD Needs Greater BoE Dissent to Breakout of Bearish Trend
The British Pound may face additional headwinds ahead of the policy meeting as the economic docket for the U.K. is expected to show a slowdown in private-sector lending, and a series of dismal data prints may keep the central bank on the sidelines as Governor Mark Carney persistently highlights the ongoing slack in the real economy.

Japanese Yen Looks Ripe for a Reversal on Huge Week Ahead
The Japanese Yen traded to fresh lows versus the resurgent US Dollar on a relatively quiet week of trading. Yet the coming days promise significantly more volatility and may ultimately decide whether the USDJPY continues higher or remains within its year-to-date range.

AUD Braces For Volatility On Torrent Of Top-Tier Events
A drought of domestic data is set to give rise to a torrent of top-tier economic events over the coming week. These offer the potential to catalyse significant intraday volatility for the Aussie. Yet an escape from its multi-month range against the greenback may prove difficult without the requisite shift in RBA rhetoric.

Canadian Dollar Faces Conflicting Cues from BOC, Key US Data
While the latest price action demonstrates that M&A considerations are to be respected, their ability to fuel continued Canadian Dollar gains without support from baseline fundamentals seems inherently limited. With that in mind, the outcome of next week’s Bank of Canada (BOC) monetary policy announcement stands out as critical, with the outcome likely to prove formative for the Loonie’s direction in the near term.

Gold Posts Monthly Gain But Prices Vulnerable Ahead of NFPs- $1271 Key
Gold prices are slightly firmer this week with the precious metal higher by 0.48% to trade at $1287 ahead of the New York close on Friday. As we head into the open of September trade, the focus shifts back onto the economic data front as bullion holds just above the technically significant 200-day moving average.



More...

Dollar Matches Longest Run in 15 Years - A Distinct Reversal Risk
If indeed, the dollar is riding high on the difficulties of its most liquid counterparts; then its trend is fragile and at significant risk of stalling. For indirect strength, the Euro is a key patron as the ECB has further turned from the slow tightening path the Fed is on with another round of rate cuts and the announcement of asset purchases.

British Pound Has Plummeted - Here's What We’re Watching Next
A relatively empty economic calendar for both the UK and the US suggests that the Sterling might catch a break. Yet we’ll need to keep a close eye on official commentary ahead of the highly-anticipated Scottish referendum just two weeks away.

Japanese Yen to Ignore Domestic Data, Focus on Fed Policy Speculation
The Japanese Yen may rise if a round of supportive US economic data fuels stimulus withdrawal fears, sparking risk aversion and triggering carry trade liquidation.

AUD To Remain Resilient Amid Drive To Yield And Void of Local Data
Looking ahead, RBA policy bets as well as general market risk appetite remain the dominant themes to monitor for the Aussie. On the policy front; a void of local economic data is on the calendar heading into the end of the month. This is likely to leave the ‘period of stability’ baseline scenario for rates intact.

NZDUSD to Face Larger Rebound If RBNZ Removes Verbal Intervention
The biggest risk surrounding the RBNZ interest rate decision will be a removal of the verbal intervention on the kiwi as the central bank sees a more sustainable recovery in New Zealand.

Gold Holds Support Post NFPs- Bearish Sub $1282
Looking ahead to next week, the US economic docket will be rather light with only Whole sale inventories, retail sales and the preliminary University of Michigan confidence surveys on tap. The most significant risks to the upside near-term in gold would be escalating geopolitical tensions both in the Europe and the Middle East and/or a broader correction lower in equirty prices.


More...

Dollar’s Longest Run in Half a Century Hinges on Fed Decision
Dollar momentum looks self-sustaining, and few things seem as if they could curb this move much less reverse it decisively. But, it just so happens that one of the most capable fundamentals cues is dead ahead.

Euro Faces Volatility as External Factors Compound Onset of TLTRO
The operative question for the Euro going forward is whether this precedes a period of consolidation before a reinvigorated push downward or a correction upward.

Japanese Yen Remains Strong Sell Until these Factors Change
The Japanese Yen broke convincingly lower versus the US Dollar as the USDJPY set its single-largest weekly advance on the year. We believe the currency pair remains an attractive buy on the impressive break higher.

GBP/USD Vulnerable on Dovish BoE Minutes, Scotland Independence
The British Pound is likely to face heavy volatility in the week ahead as the Bank of England (BoE) publishes the policy meeting minutes, while Scotland takes to the polls to vote for independence on September 18.

AUD Remains at Risk as the Return of Volatility Caps Carry Demand
The dam wall may have finally broken for the Australian Dollar following the currency’s plunge below the 92 US cent handle..

Gold Plummets to Eight-Month Lows on Persistent USD - All Eyes on FOMC
While the broader outlook for gold remains weighted to the downside, near-term the metal is coming into support as investors shift their focus to next week’s key event risk from the Fed.


More...