Daily Report: Euro Stays Weak as Imposes New Sanctions on Russia

Euro stays generally weak as EU agreed to impose new sanctions on Russian officials for the suspected role in downing a Malaysia Airline jet over eastern Ukraine last week. EU ministers agreed to draft a new set of names that provide “financial or material” support to Russia’s decision makers. And, they warned of further actions if there is no “full and immediate cooperation” from Russia and pro-Russia separatists on handing the crash aftermath. Nonetheless, the ministers still refrained from so called level three sanctions and would only prepare a list of possible options, including arms embargo, limits on dual-technology sales and measures targeting energy and finance sectors.

Euro is weakest against Aussie this week as the Australian dollar was lifted by inflation data today. Headline CPI accelerated to 3.0% yoy in Q2, up from prior month’s 2.9% yoy but was below expectation of 3.1%. RBA trimmed mean CPI jumped sharply to 2.9% yoy versus expectation of 2.7% yoy. RBA weighted median CPI was unchanged at 2.7% qoq. The headline inflation was at the upper bound of the 2-3% inflation limit and that should be strong bullet for RBA to keep rates on hold. There were talk that RBA could be forced to raise rate if the acceleration in inflation continues. But overall, the RBA is expected to wait further and start to consider rate hike next year.

BoE minutes will be a major focus today. Markets will look for clues on the timing of BoE’s rate hike from the current record low of 0.50%. BoE governor Carney’s message has been rather conflicting recently but markets are pricing in a hike from the central bank next February. The more important information would be MPC member’s general view on the timing of stimulus withdrawal. Carney will also speak in Glasgow today.

Elsewhere, Canada will release retail sales and Eurozone will release consumer confidence today.

Daily Pivots: (S1) 0.9362; (P) 0.9391; (R1) 0.9423; More…

AUD/USD recovers strongly today but stays in range below 0.9504. Intraday bias remains neutral for the moment. The consolidation is still expected to continue with another fall. Below 0.9328 will turn bias to the downside for 0.9211 support. In that case downside should be contained by 38.2% retracement of 0.8659 to 0.9504 at 0.9181 and bring rebound. Meanwhile, above 0.9504 will extend the rise from 0.8659 to medium term fibonacci level of 0.9583.

In the bigger picture, price actions from 1.1079 are viewed as a medium term correction. Recent development argues that it’s possibly finished at 0.8659 on bullish convergence condition in weekly MACD, ahead of 50% retracement of 0.6008 to 1.1079 at 0.8544. Rebound from there would extend higher to 38.2% retracement of 1.1079 to 0.8659 at 0.9583 first. Sustained break there will confirm this case and target 61.8% retracement at 1.0155 and above. However, break of 0.9080 near term support will dampen this bullish view and would likely extend the correction from 1.1079 to a new low.

AUD/USD 4 Hours Chart

AUD/USD Daily Chart

GMT
Ccy
Events
Actual
Consensus
Previous
Revised
1:30
AUD
CPI Q/Q Q2
0.50%
0.60%
0.60%

1:30
AUD
CPI Y/Y Q2
3.00%
3.10%
2.90%

1:30
AUD
CPI RBA Trimmed Mean Q/Q Q2
0.80%
0.60%
0.50%

1:30
AUD
CPI RBA Trimmed Mean Y/Y Q2
2.90%
2.70%
2.60%

1:30
AUD
CPI RBA Weighted Median Q/Q Q2
0.60%
0.70%
0.60%

1:30
AUD
CPI RBA Weighted Median Y/Y Q2
2.70%
2.70%
2.70%

8:30
GBP
BoE Minutes

0–0–9
0–0–9

8:30
GBP
BBA Mortgage Approvals Jun

43.4K
41.8K

10:00
GBP
CBI Reported Sales Jul

18
4

12:30
CAD
Retail Sales M/M May

0.60%
1.10%

12:30
CAD
Retail Sales Less Autos M/M May

0.30%
0.70%

14:00
EUR
Eurozone Consumer Confidence Jul A

-6
-7.5

14:30
USD
Crude Oil Inventories

-7.5M

21:00
NZD
RBNZ Rate Decision

3.50%
3.25%

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