Forex News and Events
Further crude oil gains unlikely as rig count rises (by Arnaud Masset)
It has a been a hell of a year for crude oil so far with the price of a barrel of West Texas Intermediate almost doubling in less than six months. However, the rally has already lost steam against the backdrop of a strengthening US dollar, which gained momentum in the wake of the Brexit vote, and against the backdrop of mounting uncertainties about a supply glut. The WTI has been trading in a downtrend channel since mid-June and has lost roughly 13%. A strong support lies at $43.03 (low from May 10th).
US crude oil inventories are due for release this afternoon and are expected to have shrunk for a seventh straight week, which would bring total inventories down to 519.3 million barrels from 521.8 million in the previous week. Even though the continuous decrease in oil inventories could provide a boost to crude oil prices, the market is increasingly focused on the substantial increase in the number of US rig counts. Indeed the count of active US drilling rigs gained 7 units up to 447 during the week ended July 15, making this the sixth increase in the last seven weeks. Since May 20th, rig counts have risen by 47 units in response to strengthening prices. It is therefore increasingly likely that the rally has come to an end and that we are most likely heading towards a period of consolidation, if not one of downward adjustment.
Markets focus on ECB rate decision (by Yann Quelenn)
Thursday’s ECB meeting should not bring major changes in terms of monetary policy and the main refinancing rate should remain stuck at zero. In our view, the Brexit vote has not been entirely digested by financial markets despite currency valuations being more or less at the same price as before the referendum. Uncertainties around the future triggering of Article 50 can bring volatility.
Nonetheless, the future impact of a Brexit has not yet been properly appraised. Eurozone economic growth could be diminished by 0.5% in the wake of Britain’s vote and European banks are at stake, especially Italian banks, which plunged around 20%. At this point a bailout seems more than necessary. More data is needed in order to adjust current monetary policy. As a result a move to further ease seems premature and we expect the current massive stimulus of €1.8 trillion to remain unchanged. We are seeing a situation similar to that faced by the Bank of England last week when a rate cut was expected, but did not materialise as the central bank kept its monetary policy unchanged. We firmly believe that the ECB will follow suit.
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Crude Oil – Ready For Further Decline.
|Today’s Key Issues||Country / GMT|
|Jul Consumer Confidence Indicator, exp 4, last 4,4||DKK / 07:00|
|Jul Consumer Confidence Index, exp 69,8, last 69,43||TRY / 07:00|
|Jun Convenience Store Sales YoY, last -0,30%||JPY / 07:00|
|Bloomberg July Switzerland Economic Survey||CHF / 07:30|
|May ECB Current Account SA, last 36.2b||EUR / 08:00|
|May Current Account NSA, last 34.0b||EUR / 08:00|
|Jun CPI YoY, exp 6,30%, last 6,10%||ZAR / 08:00|
|Jun CPI Core MoM, exp 0,40%, last 0,20%||ZAR / 08:00|
|Jun CPI Core YoY, exp 5,60%, last 5,50%||ZAR / 08:00|
|Jun CPI MoM, exp 0,60%, last 0,20%||ZAR / 08:00|
|Jun Claimant Count Rate, exp 2,20%, last 2,20%||GBP / 08:30|
|Jun Jobless Claims Change, exp 3.5k, last -0.4k||GBP / 08:30|
|May Average Weekly Earnings 3M/YoY, exp 2,30%, last 2,00%||GBP / 08:30|
|May Weekly Earnings ex Bonus 3M/YoY, exp 2,40%, last 2,30%||GBP / 08:30|
|May ILO Unemployment Rate 3Mths, exp 5,00%, last 5,00%||GBP / 08:30|
|May Employment Change 3M/3M, exp 73k, last 55k||GBP / 08:30|
|May Current Account Balance, last 4655m||EUR / 08:30|
|Jul Credit Suisse ZEW Survey Expectations, last 19,4||CHF / 09:00|
|Jul 15 MBA Mortgage Applications, last 7,20%||USD / 11:00|
|Jul 18 CPI Weekly YTD, last 3,70%||RUB / 13:00|
|Jul 18 CPI WoW, last 0,10%||RUB / 13:00|
|Conference Board China June Leading Economic Index||CNY / 13:00|
|Jul A Consumer Confidence, exp -8, last -7,3||EUR / 14:00|
|Jul 15 DOE U.S. Crude Oil Inventories, exp -2000k, last -2546k||USD / 14:30|
|Jul 15 DOE Cushing OK Crude Inventory, exp 100k, last -232k||USD / 14:30|
|Currency Flows Weekly||BRL / 15:30|
|RBNZ Publishes Assessment of Economy||NZD / 21:00|
|Jul 20 Selic Rate, exp 14,25%, last 14,25%||BRL / 22:00|
|Jun Tax Collections, exp 98300m, last 95219m||BRL / 22:00|
|Jun Formal Job Creation Total, exp -56000, last -72615||BRL / 22:00|
The Risk Today
EURUSD EUR/USD is pushing lower. Hourly support at 1.1002 (08/07/2016 low) has been broken. Another hourly support lies at 1.0913 (06/07/2016 low) while hourly resistance is located at 1.1186 (05/07/2016 high). Stronger resistance is given at 1.1479 (06/05/2016 high). Sharp moves do not have to be ruled out as there are still a lot of uncertainties on asset pricing in the market. Expected to show continued weakeness. In the longer term, the technical structure favours a very long-term bearish bias as resistance at 1.1714 (24/08/2015 high) holds. The pair is trading in range since the start of 2015. Strong support is given at 1.0458 (16/03/2015 low). However, the current technical structure since last December implies a gradual increase.
GBPUSD GBP/USD is pausing. Hourly support at 1.3106 (14/07/2016 low) has been broken. Uncertainties are still important on the market, we absolutely do not rule out further increasing volatility. Expected to show further weakening. Resistance at 1.3534 (29/06/2016 high) looks far. The long-term technical pattern is negative and favours a further decline as long as prices remain below the resistance at 1.5340/64 (04/11/2015 low see also the 200-day moving average). Key support at 1.3503 (23/01/2009 low) has been broken and the road is wide open for further decline.
USDJPY USD/JPY keeps on pushing higher. Hourly supports are located at 103.91 (13/07/2016 low) and at 100 (06/07/2016 low). Expected to keep increasing towards resistance at 106.84 (23/06/2016 high). We favour a long-term bearish bias. Support is now given at 96.57 (10/08/2013 low). A gradual rise towards the major resistance at 135.15 (01/02/2002 high) seems absolutely unlikely. Expected to decline further support at 93.79 (13/06/2013 low).
USDCHF USD/CHF’s momentum is clearly bullish. The buying pressures seem to prevent the pair to go lower towards hourly support at 0.9764 (14/07/2016 high). Expected to test hourly resistance at 0.9894 (12/07/2016 high). In the long-term, the pair is still trading in range since 2011 despite some turmoil when the SNB unpegged the CHF. Key support can be found 0.8986 (30/01/2015 low). The technical structure favours a long term bullish bias since last December.
Resistance and Support:
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