EUR: Adjustment Higher In Full Swing Supported By Strong Euro-Zone Growth Data – BTMU

BTMU FX Strategy Research notes that the EUR has held at higher levels during the last few sessions supported both by the release yesterday of further encouraging signals that the economic recovery in the euro-zone continues to strengthen and by the relative lack of pushback against euro strength from key policy makers.

“The release of the latest euro-zone PMI surveys for August signalled that growth is course to expand solidly again by 0.5% in Q3 according to Markit.

…We see no immediate trigger to for a material slowdown in the near-term. The encouraging developments provide further justification for the ECB to move towards gradually tightening monetary policy in the year ahead.    

As a result of stronger growth, the ECB can be more tolerant of a stronger euro as well,” BTMU argues.

Source: BTMU Research

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Elliott Wave Analysis: GBPUSD and S&P500

Good day traders! Today’s focus will be on the GBPUSD and S&P500. Let’s jump in.

GBPUSD can be trading in a three-wave bullish reversal, with the first blue wave i/a trading in the final stages. As we can see cable found a base for the previous bigger wave 5) near the 1.2774 region, meaning if the price trades as planned, than a five-wave rally could follow rather than a three, which means the region near 1.2916 level would be in sight.

GBPUSD, 30Min

 

S&P500 made a new bounce, away from blue wave two correction which we now see as part of a minor red wave i) of three. Ideally blue wave two correction is now over and more gains may come. A breach above the upper channel line will be a confirmation for more upside.

S&P500, 30Min

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EUR: Investors Likely To Wait For More ECB Policy Clarity Before Buying Again – Credit Agricole

Credit Agricole CIB FX Strategy Research doesn’t expect any attempts by ECB President Draghi to talk down the single currency at his Jackson Hole Speech on Friday.

We doubt that Draghi will make any specific reference to the single currency on Friday when the President will be speaking at the Jackson Hole central bank symposium.

 While any lack of ECB jawboning of the EUR can prop it up, chances are that investors may wait for more clarity on the ECB’s policy outlook before buying the single currency in earnest yet again.

In addition, some concerns seem to be re-emerging ahead of the Italian parliamentary election. Indeed, recent comments by Italy’s ex-Prime Minister Berlusconi that seemingly endorsed the idea about funding government liabilities with paper denominated in a parallel currency have caught markets’ attention and triggered renewed widening of the BTP-Bund yield spread. Depending on the persistence of the move, EUR downside risks could grow in the very near term,” CACIB argues.

Source: Credit Agricole CIB Research

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US existing home sales miss with 5.44 million – USD ticks down

Sales of existing homes were expected to rise by 0.9% to 5.57 million in July, up from 5.52 million annualized (before revisions). Most transactions are for second-hand homes, but the sales of new units have a wider economic impact.

The US dollar was quite stable in a dull day in August. Political trouble had already taken its toll on the greenback, but it calmed down.

Earlier this week, new home sales disappointed[1] with only 571K. However, the figure for June was revised to the upside, to 630K. Markit’s PMIs were mixed.

The big event of the week is the Jackson Hole Symposium, but the key speeches are held very late on Friday: Yellen talks at 16:00 GMT, after Europe goes home for the day. Draghi talks at 19:00, just before the US closes.

More: EUR/USD: Overshoot; Technicals Point To A Tactical Retracement; Levels & Targets[2] – Barclays

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USD/CAD: Could Make Another Brief Foray Below 1.25 But Unlikely Sustainable – CIBC

The Canadian dollar had a huge run, made a significant correction and now seems to lift its head once again. What’s next? Here is the view from CIBC:

Here is their view, courtesy of eFXnews:

CIBC FX Strategy Research argues that while USD/CAD could see another brief foray below 1.25, it’s unlikely to see a sustainable break below that level.

“It’s not that we see a major bout of Canadian dollar weakness. It will garner some support from marginally higher oil prices and further rate hikes in the next two years. But with oil’s swings generally contained its interest rate differentials that these days are calling the tune for the C$.

On that score, we’re skeptical of the C$ bulls’ view that the Bank of Canada is prepared to outgun the Fed.

While neither country has a pressing inflation problem, there are other Made-in-Canada reasons for the Bank of Canada’s tightening strategy to be very measured. Canadian household debt is larger relative to income and it isn’t locked into a 30-year fixed rate mortgage. A tightening in mortgage and other housing-related regulations is doing some of the work in cooling that sector,” CIBC argues.

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UK revised GDP Q2 confirmed at 0.3% q/q, 1.7% y/y – GBP/USD retreats

The slow growth in the UK is confirmed in the second release: 0.3% q/q, 1.7% y/y. A disappointment was seen in the preliminary measure of investment: 0% against 0.2%. Services met expectations with 0.5%. Mortgage approvals came out at 41.6K, similar to previous levels.

GBP/USD is slipping under 1.28, which it struggled to recapture earlier. EUR/GBP is moving up from support.

Euro/pound remains at the highest levels since 2009. Here are the levels to watch on the cross[1].

The second estimate of UK GDP was expected to confirm the initial read of 0.3% q/q and 1.7% y/y. The level of investment was expected to rise by 0.2% and services by 0.5%.

GBP/USD was bouncing from the lows, moving above 1.28 ahead of the publication. But in general, Sterling is weak. EUR/GBP is trading at the highest level since 2009. The cross reached 0.9410 in October 2009 and now trades around 0.92.

The British economy enjoyed robust growth during 2016, before and after the EU Referendum around the middle of the year. Growth rates halved in 2017. Brexit begins biting: the lower value of the pound pushes inflation higher and consumption of non-essential products lower. The upside in exports is not enough to compensate.

The Bank of England is reluctant to raise rates despite higher inflation and rapid growth in private credit. The BOE does not want to hurt the economy.

More: GBP: Brexit Round 3 Showdown Weighing On GBP; What’s Next? – BTMU[2]

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UK revised GDP Q2 confirmed at 0.3% q/q, 1.7% y/y – GBP/USD retreats

The slow growth in the UK is confirmed in the second release: 0.3% q/q, 1.7% y/y. A disappointment was seen in the preliminary measure of investment: 0% against 0.2%. Services met expectations with 0.5%. Mortgage approvals came out at 41.6K, similar to previous levels.

GBP/USD is slipping under 1.28, which it struggled to recapture earlier. EUR/GBP is moving up from support.

Euro/pound remains at the highest levels since 2009. Here are the levels to watch on the cross[1].

The second estimate of UK GDP was expected to confirm the initial read of 0.3% q/q and 1.7% y/y. The level of investment was expected to rise by 0.2% and services by 0.5%.

GBP/USD was bouncing from the lows, moving above 1.28 ahead of the publication. But in general, Sterling is weak. EUR/GBP is trading at the highest level since 2009. The cross reached 0.9410 in October 2009 and now trades around 0.92.

The British economy enjoyed robust growth during 2016, before and after the EU Referendum around the middle of the year. Growth rates halved in 2017. Brexit begins biting: the lower value of the pound pushes inflation higher and consumption of non-essential products lower. The upside in exports is not enough to compensate.

The Bank of England is reluctant to raise rates despite higher inflation and rapid growth in private credit. The BOE does not want to hurt the economy.

More: GBP: Brexit Round 3 Showdown Weighing On GBP; What’s Next? – BTMU[2]

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EUR/GBP at 8 year highs – levels to watch

EUR/GBP is trading around the highest levels since 2009, in the immediate aftermath of the financial crisis. The cross reflects the weakness of the pound in light of Brexit uncertainty and the resilience of the euro ahead of Draghi’s expected pre-announcement of QE tapering.

0.9237 has been the highest level seen so far in 2017. It is the immediate level of resistance. The October 2009 high of 0.9410 is the next cap to watch, but the road to that level could be rough. The ultimate high was seen earlier that year: 0.98. Perhaps needless to say, parity between the euro and the pound is looming above.

Looking down, we can see clear levels. The round number of 0.92 was a low point earlier in the day. 0.9178 capped the pair before it made the latest, impressive break. 0.9150 served as resistance just before the previous break.

More: EUR/GBP: Mind The Divergence – Where To Target? – SocGen[1]

Here is the one-hour chart:

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USD/CAD: Could Make Another Brief Foray Below 1.25 But Unlikely Sustainable – CIBC

CIBC FX Strategy Research argues that while USD/CAD could see another brief foray below 1.25, it’s unlikely to see a sustainable break below that level.

“It’s not that we see a major bout of Canadian dollar weakness. It will garner some support from marginally higher oil prices and further rate hikes in the next two years. But with oil’s swings generally contained, it’s interest rate differentials that these days are calling the tune for the C$.

On that score, we’re skeptical of the C$ bulls’ view that the Bank of Canada is prepared to outgun the Fed.

While neither country has a pressing inflation problem, there are other Made-in-Canada reasons for the Bank of Canada’s tightening strategy to be very measured. Canadian household debt is larger relative to income and it isn’t locked into a 30-year fixed rate mortgage. A tightening in mortgage and other housing-related regulations is doing some of the work in cooling that sector,” CIBC argues.

Source: CIBC Economics – CIBC Capital Markets

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EUR, CAD: Stretched And Vulnerable To Correction; What's The Trade? – TD

TD FX Strategy Research notes that in-terms of current G10FX valuation, the convergence currencies (EUR, CAD and SEK) all looked stretched against the 1yma, especially as they approach multi-year highs.

Over the coming weeks, we think this group is most likely to correct on a squeeze in positioning and an upgrade to negative US news flow, with positioning skewed and US data inching higher,“ TD adds. 

"Still, the evolution of a multi-year regime shift in FX will render these the best “buy on the dips” currencies in the G10,” TD advises.

Source: TD Securities Research

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