Daily Report: Euro Steady in Range ahead of German ZEW

The financial markets are relatively steady today so far. Asian stocks opened higher today but Nikkei pared back the gains and is trading up around 0.2% at the time of writing. That followed slight gain in DJIA by 0.10% and SP 500 by 0.28%. In the currency markets, yen extends this week’s pull back against other major currencies but against loss is limited. Improvement in sentiments was also seen in the strong recovery in USD/CHF. Fresh selling is seen in Sterling in Asian session today with GBP/USD dipping through last week’s low. Meanwhile, Euro is mildly softer against the greenback as markets await German confidence data.

Released today so far, UK BRC retail sales monitor dropped -0.3% yoy in July. Japan industrial production dropped -3.4% mom in June. Australia NAB business confidence rose to 11 in July and house price index rose 1.8% in Q2, beating expectation of 1.1.%. Aussie received no support from the better than expected data and stays soft in tight range against the greenback. Sterling and Aussie are among the weakest currencies this month. Some time ago, we pointed out that GBP/AUD is in a consolidation pattern since 1.7735 and the fall from 1.9185 might resume soon. But that haven’t happened yet. Overall, we’re still favoring an eventual downside breakout. But it looks like the sideway pattern would continue for a while above 1.7735 in near term.

As for today, German ZEW economic sentiment is expected drop for the eighth straight month to 22.0 in August, from December’s top of 62.0. Current situation gauge is expected to drop for the second month to 55.0 after hitting a high of 67.7 in June. Eurozone ZEW is expected to drop for the seventh month to 41.3. Euro showed sign of reversal in crosses, against Sterling, Aussie and Canadian. Stronger than expected data today could trigger further rebound in the common currency.

Daily Pivots: (S1) 1.4432; (P) 1.4445; (R1) 1.4462; More

No change in EUR/AUD’s outlook. The rebound from 1.4197 is expected to extend higher to 1.4601 resistance next. Decisive break there will argue that the corrective fall from 1.5813 has completed and will turn near term outlook bullish. Break of 1.4197 will extend the correction but in that case, we’d expect strong support from 1.4050 to contain downside and bring reversal.

In the bigger picture, the choppy decline from 1.5831 medium term top is viewed a correction and target of 38.2% retracement of 1.1602 to 1.5831 at 1.4216 was already met. We’d expect strong support from 1.4050 to contain downside and bring up trend resumption eventually. Break of 1.4601 resistance will confirm completion of the correction and bring retest of 1.5831. Break there will extend the up trend from 1.602 to 50% retracement of 2.1127 (2008 high) to 1.1602 (2012 low) at 1.6365 and above. However, decisive break of 1.4050 will at least bring deeper fall to 61.8% retracement of 1.1602 to 1.5831 at 1.3217.

23:01
GBP
BRC Retail Sales Monitor Y/Y Jul
-0.30%

-0.80%

1:30
AUD
NAB Business Confidence Jul
11

8

1:30
AUD
House Price Index Q/Q Q2
1.80%
1.10%
1.70%
1.50%
4:30
JPY
Industrial Production M/M Jun F

0.50%
-3.30%

9:00
EUR
German ZEW (Economic Sentiment) Aug

22
27.1

9:00
EUR
German ZEW (Current Situation) Aug

55
61.8

9:00
EUR
Eurozone ZEW (Economic Sentiment) Aug

41.3
48.1

18:00
USD
Monthly Budget Statement Jul

-98.2B
70.5B

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