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Forex Market Update
Published: Aug. 16 2006, 06:31 GMT
Market focused on US CPI
Todays trading will be directed at positioning in front of US releases.
MAJOR HEADLINES â€“ PREVIOUS SESSION
â€˘ Norwegian Trade Balance (Jul) out at 31.9B vs. 35.0B expected.
â€˘ UK CPI MoM (Jul) out at -0.1% vs. 0.0% expected.
â€˘ UK RPI MoM (Jul) out at 0.0% as expected.
â€˘ UK Core CPI YoY (Jul) out at 0.9% vs. 1.2% expected.
â€˘ US PPI MoM (Jul) out at 0.1% vs. 0.4% expected.
â€˘ US PPI Ex Food & Energy MoM (Jul) out at -0.3% vs. 0.2% expected.
â€˘ US Empire Manufacturing (Aug) out at 10.3 vs. 15.0 expected.
â€˘ US Net Foreign Security Purchases (Jun) out at $75.1B vs. $65.0B expected.
â€˘ US NAHB Housing Market Index (Aug) out at 32 vs. 38 expected.
â€˘ Australian Westpac Consumer Confidence (Aug) out at -16.2% vs. 3.5% prev.
â€˘ Australian Wage Price Index QoQ (2Q) out at 1.1% vs. 1.0% expected.
â€˘ New Zealand Nonresident Bond Holdings (Jul) out at 69.8% vs. 68.8% prev.
â€˘ Japanese BoJ Monetary Policy Meeting Minutes showed great caution and no indication of rate hikes in the near future.
THEMES TO WATCH â€“ UPCOMING SESSION
The greenback has gone soft, afters surprise yesterdayâ€™s lower then expected PPI figures, which significantly lessened the probability of a rate hike above 5.50% in September. Specifically Core PPI fell -0.3%, which printed considerably weaker then the consensus expectations for a 0.2% gain. Overall the decline was not focused in a particular sector but reflected a moderate decrease in automobiles and aircrafts and a increase in consumer goods. Headline PPI continued to see pressure from energy rising 1.3% but a fall in food prices -0.3%.
Its important to emphasize there is only a weak correlation between PPI and CPI MoM. As it should bve since there are significant differences between the two indicators. PPI measures producer cost and CPI measures consumer inflation, which are different parts of the economy. In addition services are included in CPI and left out of PPI readings. Two quick things before we position ourselves before figures; first the market really has jumped on the PPI / Pause bandwagon and second we still have PCE which the Fed likes, before September FOMC.
ĂŤnflation in the UK tapered off slightly as CPI MoM fell -0.1% vs a 0.3% rise in June and YoY fell to 2.4% vs. 2.5% rise in June. While these figures are above the BoEâ€™s comfort levels they do suggest perhaps the BoE showed too much bravado in hiking rates. We will be very interested in reading todayâ€™s BoE minutes to see the thought process behind this aggressive move and to forecast monetary policy.
Sweden / SEK
Sweden will release industrial production and industrial activity figures today. Recent economic activity in the country has show accelerating growth and a central bank showing no reservations in fighting inflation through monetary policy tightening. Continued positive numbers should add more support to the SEK.
Note: the support/resistance levels used in the matrixâ€™s of this document are levels derived from yesterday high, low and close. Reference in the text to other support/resistance levels will occur.
EURUSD (1.2792 @ 06:30 GMT)
EURUSD â€“ after a strong rally to 1.2800 lvls on the back of low US PPI figures the pair fell into a tight consolidation pattern around 1.2780 lvls. Current consolidation will continue until US CPI figures. Rangebound 1.2760 â€“ 1.2800.
16 Aug 06
British Pound/US Dollar
GBPUSD (1.8937 @ 06:30 GMT)
GBPUSD â€“ consolidated in Asia around the 1.8930 area after a busy day. Watch of UK & US figures to break out of this 5 day neutral range 1.8850 - 1.8990 (strong resistance). Upside break could lead to 1.9030 (62% retrace) rally.
16 Aug 06
US Dollar/Japanese Yen
USDJPY (116.07 @ 06:30 GMT)
USDJPY â€“ USD driven activity. Rejection of the 116.70 on US figures sent the pair to 115.80 daily lows. Consolidated in Asia session around 116.00 lvls. Rangebound 116.20 â€“ 115.85. A bearish break looks to test 115.45 intra day.
16 Aug 06
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