Daily Report: Sterling Gaps Lower as Scottish Pro-Independence Camp Leads in Poll

Sterling tumbles sharply as the week starts on increasing uncertainty over Scotland’s independence. According to a YouGov poll released on Sunday, support for independence of Scotland jumped again to 51% and surpassed the anti-exit camp for the time since the referendum campaign begins. Economists noted that the chance of independence creates a great amount of political and economic uncertainties which would at least continue to pressure the pound until the vote on September 18. In particular, UK chancellor of exchequer Osborne said over that weekend that a plan of actions will be announced in the next few days to “give more powers to Scotland; more tax powers, more spending powers, more powers over the welfare state.” And, major focus will be on whether such measures could turn the tide.

Technically, GBP/USD took out 1.6251 support zone and is heading to next fibonacci level of 1.6002. EUR/GBP recovers strongly today too but is staying in range of 0.7873/8035. EUR/GBP could stay directionless for a while as Euro is itself still feeling the pressure from last week’s surprised easing from ECB. GBP/JPY is having its sight of 169.53 key support level and decisive break there will turn medium term outlook bearish. GBP/CAD continues to head towards 38.2% retracement of 1.5424 to 1.8666 at 1.7428. GBP/AUD is heading to 100% projection of 1.9185 to 1.7735 from 1.8374 at 1.6924.

On the data front, Japan Q2 GDP was revised down to -1.8% qoq while GDP deflator was unchanged at 2.0% yoy. New Zealand manufacturing activity dropped -1.9% in Q2. Swiss data will be a focus in European session as unemployment and CPI will be released. Eurozone will release Sentix investor confidence and German trade balance. Canada will release building permits.

Looking ahead, the economic calendar isn’t too busy this week. New from UK regarding Scotland referendum will be the main focus. RBNZ will meet and would stand pat of rates. Australia employment data, US retail sales, and China inflation will also be watched.

  • Tuesday: Australia business confidence; UK production and trade balance
  • Wednesday: UK inflation report hearings; US wholesale inventories
  • Thursday: RBNZ rate decision; Australia employment; China inflation; US jobless claims
  • Friday: Eurozone industrial production; US retail sales, U of Michigan sentiment

Daily Pivots: (S1) 170.94; (P) 171.59; (R1) 172.25; More…..

GBP/JPY dives sharply to as low as 169.68 so far today and took out 170.42 support. Fall from 175.36 has resumed and intraday bias remains on the downside for 169.53 key support level. Sustained break there will carry larger bearish implication and will target 161.8% projection of 175.36 to 170.42 from 173.95 at 165.95. On the upside, above 171.67 minor resistance will turn bias neutral first.

In the bigger picture, the up trend from 116.83 (2011 low) continued to lose upside momentum. This could be seen in bearish divergence condition in daily MACD. And, weekly MACD continued to trend down. Sustained break of 169.53 support should confirm medium term topping at 1175.36 and turn outlook bearish for 38.2% retracement of 116.83 to 175.36 at 153.00. Before that, another rally cannot be ruled out. But in that case, we’d expect strong resistance below 50% retracement retracement of 251.09 to 116.83 at 183.96 to bring reversal.

GBP/JPY 4 Hours Chart

GBP/JPY Daily Chart

GMT
Ccy
Events
Actual
Consensus
Previous
Revised
22:45
NZD
Manufacturing Activity Q2
-1.90%

0.60%
0.00%
23:50
JPY
Current Account (JPY) Jul
0.10T
0.18T
0.13T

23:50
JPY
GDP Q/Q Q2 F
-1.80%
-1.80%
-1.70%

23:50
JPY
GDP Deflator Y/Y Q2 F
2.00%
2.00%
2.00%

CNY
Trade Balance Aug

$40.00B
$47.30B

5:00
JPY
Eco Watchers Survey: Current Aug

51
51.3

5:45
CHF
Unemployment Rate Aug

3.20%
3.20%

6:00
EUR
German Trade Balance (EUR) Jul

17.3B
16.2B

7:15
CHF
CPI M/M Aug

-0.10%
-0.40%

7:15
CHF
CPI Y/Y Aug

0.00%
0.00%

8:30
EUR
Eurozone Sentix Investor Confidence Sep

1.4
2.7

12:30
CAD
Building Permits M/M Jul

-5.00%
13.50%

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