CFD Markets News and Forecasts — 09-08-2021

FXStreet reports that in the view of economists at ING, USD/CAD should move slowly but surely to the 1.20 level in the coming months. 

“Domestically, fundamentals have remained very supportive for CAD. The Bank of Canada has kept tapering asset purchases as the Canadian economy recovered and we think they will end QE by year-end, which should allow markets to keep speculating that the first hike will come already in 2022.” 

“In the next months, USD resilience and uneven global recovery sentiment may keep USD/CAD around 1.25, but we still expect the pair to trend lower to the 1.20 area as some stabilisation in sentiment would allow CAD’s rate profile to support the currency.”

FXStreet reports that USD/JPY has posted a bullish “reversal day” to suggest the worst of its sell-off may be over. According to economists at Credit Suisse, a break above 110.60/70 is needed to clear the way for a move back to long-term resistance, seen starting at 111.66.

“USD/JPY maintains a strong tone following its bullish ‘reversal day’ last week. With 10-year US bond yields also rising from our 1.135/075% resistance/objective we maintain an immediate bullish bias.”

“Key resistance is seen at the highs posted in the second half of July at 110.60/70, a break above which is needed to open the door to a challenge on long-term resistance starting at the 111.66 July YTD high and stretching up to the 112.40 high of 2019.” 

“Support is seen at 109.89 initially, with 109.70 ideally now holding to keep the immediate risk higher."

The Job Openings and Labor Turnover Survey (JOLTS) published by the Labor Department on Monday revealed a 6.2 percent m-o-m surge in the U.S. job openings in June after a revised 3.2 percent m-o-m advance in May (originally a 0.2 percent m-o-m gain).

According to the report, employers posted 10.073 million job openings in June compared to the May figure of 9.483 million (revised from 9.209 million in the original estimate) and economists’ expectations of 9.281 million. This was the highest reading since the series began in December 2000. The job openings rate was 6.5 percent in June, up from a revised 6.1 percent in the previous month (originally 6.0 percent). The report showed that the job openings rose in several industries, with the largest gains in professional and business services (+227,000), retail trade (+133,000), and accommodation and food services (+121,000).

Meanwhile, the number of hires climbed 11.6 percent m-o-m to 6.719 million in June from a revised 6.022 million in May (originally 5.927 million). The hiring rate was 4.6 percent in June, up from a revised 4.2 percent in the prior month (originally 4.1 percent). Hires went up in retail trade (+291,000), state and local government education (+94,000), and durable goods manufacturing (+36,000).

The separation rate in June was 5.584 million or 3.8 percent, compared to 5.330 million or 3.7 percent in May. Within separations, the quits rate was 2.7 percent (+0.2 p.p. m-o-m), and the layoffs rate was 0.9 percent (flat m-o-m).

• She repeats that increasing or suspending debt limit does not increase government spending, nor does it authorize spending for future budget proposals
• It simply allows Treasury to pay for previously enacted expenditures; failure to meet those obligations would cause irreparable harm to U.S. economy 
• In recent years Congress has addressed debt limit through regular order, with broad bipartisan support
• Congress should do so again now by increasing or suspending debt limit on bipartisan basis
• This is shared responsibility, and I urge Congress to come together on bipartisan basis as it has in past to protect full faith and credit of U.S.

U.S. stock-index futures traded mixed on Monday, as investors responded to a sharp decline in oil and gold prices that was sparked by recent appreciation of the U.S. dollar, reflecting heightened bets on earlier-than-expected tapering of Federal Reserve stimulus, and demand concerns linked to rising COVID-19 cases.

Global Stocks:

(company / ticker / price / change ($/%) / volume)

Advanced Micro (AMD) upgraded to Market Perform from Underperform at BMO Capital Markets; target raised to $110

Tesla (TSLA) upgraded to Buy from Hold at Jefferies; target raised to $850

FXStreet notes that S&P 500 has reached the 4436/56 zone but strategists at Credit Suisse continue to not chase strength through here for now and look for a temporary and corrective pause to emerge. 

“S&P 500 has finally achieved our Q3 objective zone at 4436/56 and whilst we maintain our view of looking for a potential but temporary stall in the rally here, we continue to acknowledge the strong underlying momentum suggesting the ‘path of least resistance’ overall stays seen higher.”

“We look for the top of the range and trend resistance from April at 4455/59 to try and cap for now with support seen at 4416 initially, then 4402/00. Below this latter area is needed to ease the immediate upside bias for a fall back to more important price and gap support at 4381/64, but only below here would mark a near-term top for a corrective phase and a fall back to support at 4350, then 4331/21.”

• We will keep liquidity reasonably ample
• Says that prudent monetary policy should be flexible, appropriate, prioritize stability

FXStreet reports that EUR/USD is falling sharply post payrolls as the USD also strengthens and analysts at Credit Suisse look for a test of medium-term support at 1.1703/1.1695.

“We look for a clear break of the 1.1752 recent low for a test of medium-term support at 1.1703/1.1695. Although a rebound from here should be allowed for our broader bias is for an eventual clear and sustained break in due course.

“A break below 1.1703/1.1695 would mark the completion of a large and important bearish ‘head & shoulders top’ to mark a significant change of trend lower. We would then see initially at 1.1662 ahead of the September and November 2020 lows at 1.1612/04, which we would look to hold at first.” 

“Resistance moves to 1.1789 initially, then 1.1810, with 1.1831 ideally capping to keep the immediate risk lower.”

Tyson Foods (TSN) reported Q3 FY 2021 earnings of $2.70 per share (versus $1.40 per share in Q3 FY 2020), beating analysts’ consensus estimate of $1.67 per share.

The company’s quarterly revenues amounted to $12.478 bln (+22.1% y/y), beating analysts’ consensus estimate of $11.515 bln.

TSN rose to $72.50 (+1.94%) in pre-market trading.

USD traded flat against most of its major rivals in the European session on Monday, following a jump on Friday, when a better-than-anticipated U.S. employment report for July boosted expectations that the Federal Reserve might start paring back its extraordinary stimulus sooner rather than later.

The U.S. Dollar Index (DXY), measuring the U.S. currency's value relative to a basket of foreign currencies, edged down 0.01% to 92.79.

The Friday jobs report showed the nonfarm payrolls growing by 943,000 in July (versus economists’ forecast of 870,000), the unemployment rate declining to 5.4% (versus economists’ forecast of 5.6%) from 5.9% in June, and average hourly earnings rising by 0.4% m/m and 4.0% y/y (versus economists’ forecasts of 0.3% m/m and 3.8% y/y).

It is considered that the July jobs statistics, which pointed to a broad labor-market improvement, are removing the key formal obstacle for the U.S. central bank to take a decision to taper its asset purchases soon. Expectations have increased that the first cuts in the Fed’s bond purchases could come as early as September. 

Market participants are now awaiting the U.S. inflation data, set to be released on Wednesday, hoping to get further clues of when the Fed might start tapering.

FXStreet notes that gold struggled to reclaim the hurdle at $1835 last month and has experienced a sharp down move testing the lower band of a steep descending channel. As strategists at Société Générale note, XAU/USD needs to stay above the $1677/1670 area to avoid a deeper dive.

“Low formed in March near $1677/1670 which is also the 38.2% retracement of the whole uptrend since 2015 is a crucial support zone. Defending this will be pivotal for averting a deeper downtrend. 

“Should the $1677/1670 break, next projections will be at $1625 and $1585.”

FXStreet suggests that downside risk remains for the cable below the 1.4018 pivot. Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, expects the GBP/USD pair to fall towards the 1.3571 July low.

“GBP/USD spent last week consolidating below the 61.8% Fibonacci retracement at 1.3990. We look for the market to remain capped by the 1.4018 pivot and we would allow for failure.”

“Initial support is the 1.3786 21st June low ahead of 1.3735 2 nd July. The 200-day ma lies at 1.3760.”

“Our target is the 1.3571 July low.”

Barrick (GOLD) reported Q2 FY 2021 earnings of $0.29 per share (versus $0.23 per share in Q2 FY 2020), beating analysts’ consensus estimate of $0.26 per share.

The company’s quarterly revenues amounted to $2.893 bln (-5.3% y/y), roughly in line with analysts’ consensus estimate of $2.922 bln.

GOLD fell to $20.46 (-1.63%) in pre-market trading.

FXStreet notes that EUR/USD was unable to establish above 1.19 last week. On Monday, the pair is holding steady above 1.1750 but economists at Société Générale suggest that a dip below the 1.1745/1.1741 support area would likely imply a test of the 1.17 level.

“EUR/USD failed to maintain above short-term Moving Averages and struggled to cross 1.1900 last week. This has resulted in regain of downward momentum bringing the pair once again towards projections of 1.1745/1.1741.”

“Next support will be at March low of 1.1700.”

FXStreet reports that Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, said that the USD/TRY pair could see another attempt to hit the all-time high at 8.8057.

“USD/TRY has seen a strong rebound just ahead of the June low at 8.2735. Attention is back on the 4th June high at 8.7532 and the 8.8057 all-time high.”

“Support below the next lower 8.2056 May low is seen at the 8.1300 late April low and also at the late November and December highs and April low at 8.0530/7.9775.”

“If the all-time high at 8.8057 were to be overcome, the psychological 9.0000 mark may be reached.”

MarketWatch. reports that Goldman Sachs has cut its 2021 China growth forecast, citing the fast spread of the highly contagious delta variant of the coronavirus that causes COVID-19.

“With the virus spreading to many of China’s provinces and local governments reacting swiftly to control the spread of the highly contagious delta variant, we have begun to see softening in national aggregate data,” said a team of analysts.

Goldman slashed its third-quarter real gross domestic product forecast to 2.3% from 5.8%, but lifted its fourth-quarter growth forecast to 8.5% from 5.8%, leaving the full-year 2021 projection at 8.3% from a previous 8.6%.

FXStreet reports that economists at ING expect the cable to stay under the 1.40 level as the dollar enjoys bullish momentum.

“This week sees the release of the UK growth numbers for 2Q. Our economist expects to see a strong 5.0% QoQ read. Despite the high probability that the rebound in activity has paused in the summer months, the release should fuel expectations that the British economy will be back to pre-pandemic levels by year-end.” 

“After the Bank of England likely sounded less alarmed than feared about the Delta variant spread and the UK government that has continued to ease travel rules, the underlying narrative for GBP appears to be by and large positive. EUR/GBP could extend its downward trend after breaking below 0.8500, but cable may struggle to break above 1.4000 if the USD remains supported.”

Reuters reports that according to a Bank of France survey, the French economy ran at between 1.0-1.5% below pre-COVID-19 levels in July, as the euro zone's second biggest economy emerged from a lockdown but faced new protocols to tackle the virus.

The Bank of France expected activity to be stable in the services sector this month, but added that measures such as a COVID "health pass" - required by bars and restaurants - could impact the food services sector.

Data last month showed the French economy grew 0.9% in the second quarter from the previous quarter.

According to the report from Sentix, the eurozone economy is booming, but the pace is slowing noticeably. The enormous investments of the states, supported by a persistently expansive monetary policy of the European Central Bank, are driving economic activity in the Eurozone and have prevented anything worse from happening, despite the Corona lockdowns. The sentix surveyed investors' assessment of the current situation is rewarding this improvement and, at 30.8 points, has reached its best value since October 2018. However, the sentix overall economic index for the Eurozone is coming to an end and is now suffering a larger discount of 7.6 points. This is due to the significant losses in the expectations component. A decline of 15.8 points in this sub component is de facto more of a halving and thus already represents the third decline in a row. Since its high in May, the 6-month expectations index has already lost 22.8 points.

Economists traditionally recognise a trend reversal in a threefold decline. Accordingly, this decline should not be dismissed as a mere loss of momentum, but should be understood as a warning sign. As the "first mover" among the leading indicators, these developments herald significant declines in other leading indicators. The development is therefore likely to contribute to increased market volatility in the coming weeks. In 2006 and 2010, when we went through similar phases, interim stock market corrections of around 10% followed.

Bloomberg reports that ECB Governing Council member Jens Weidmann warned that inflation in the euro area could pick up faster than expected, and urged not to drag out the institution’s pandemic bond-buying program.

Weidmann will “urge to also keep a close eye on the risk of an inflation rate that is too high and not just look at the risk of an inflation rate that is too low,” he told German newspaper Welt am Sonntag.

The ECB expects inflation to average 1.9% in 2021, mainly reflecting temporary factors, before falling to 1.5% and 1.4% in 2022 and 2023. While underlying price pressures should strengthen as the economy recovers, the current outlook foresees inflation well below the ECB’s goal of 2%.

Weidmann also said the ECB’s emergency asset purchase program, known as PEPP, must end when the Covid-19 crisis is over.

FXStreet reports that economists at MUFG Bank expect the USD/CNY pair to enjoy upside momentum on divergent monetary policy between China and US. 

“The trade report revealed that both export and import growth came in weaker than expected. Softer than expected external demand becomes more of a concern at a time when market participants are fearful that domestic demand is already slowing and will take another hit from further COVID-related disruption in the near-term from the ongoing spread of the Delta variant.”

“A further loss of growth momentum will keep pressure on policymakers in China to provide more support. Our China analyst expects a further RRR cut. Headline inflation remained subdued at 1.0% in July leaving room for looser policy to support growth although producer price pressures were more elevated at 9.0%. Overall, we continue to expect the renminbi to weaken modestly against the US dollar heading into year-end as policies diverge between the Fed and PBoC.”

CNBC reports that according to Wells Fargo Securities’ Michael Schumacher, it’s premature to assume July’s strong numbers will push the Fed meaningfully closer to tapering its monthly bond purchases.

“This report was pretty strong. If there’s another strong one after it, it’s conceivable the Fed may start talking about tapering in a pretty serious way. Let’s say in October,” the firm’s head of macro strategy said.

Under Schumacher’s scenario, the Fed could start to implement tapering as soon as this November. The move would likely put upward pressure on the benchmark 10-year Treasury Note yield.

But there’s a wildcard to Schumacher’s forecast: Covid-19 delta variant cases. The surge could put negative pressure on yields.

“It’s an open question just how severely delta turns out to be and also how aggressively governments react to it,” he said.

Schumacher doubts the government will issue dramatic lockdowns, but he warns new constraints on movement would hurt economic activity.

FXStreet reports that economists at ING discuss EUR/USD prospects.

“The spread of the Delta variant may keep markets reluctant to unwind their defensive dollar trades in the week ahead. The silver lining here, which could limit the EUR downside, is that widely vaccinated eurozone countries are still refraining from imposing new draconian restrictions.”

“The expectation index of the German ZEW survey may fall for a third consecutive month, but the assessment of the current situation could continue to rise. Barring major surprises in the ZEW, and considering there are no other major data releases in the eurozone nor any scheduled ECB speakers, EUR/USD may break the lows (1.1750) of its recent trading range if the dollar draws some support from unstable risk sentiment.”

During today's Asian trading, the US dollar was trading steadily against the euro and the australian dollar, but declined against the yen and the pound.

The ICE index, which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona), fell by 0.04%.

The fall of the US dollar was limited by assumptions that the Federal Reserve System will soon begin a gradual curtailment of stimulus measures against the background of the recovery of the American economy.

The situation with the spread of coronavirus in the world remains in the center of attention. Meanwhile, more than 100 thousand new cases of infection were detected in the United States last Saturday, which was the highest figure in 6 months.

Officials from the United States health system have warned that the increase in the number of cases and deaths will continue to accelerate if the rate of vaccination is not increased.

According to the report from the National Bureau of Statistics (NBS), China’s factory gate inflation in July rose at a faster clip from the previous month and exceeded market expectations, adding to strains on an economy losing recovery momentum as businesses struggle with high raw material costs.

The producer price index (PPI) grew 9.0% from a year earlier, matching the high seen in May, the National Bureau of Statistics (NBS) said in a statement on Monday. Analysts had expected the PPI to rise 8.8%, unchanged from June.

The PPI, a benchmark gauge of a country’s industrial profitability, inched up 0.5% on a monthly basis, accelerating from a 0.3% uptick in June.

China’s economy has largely recovered from disruptions caused by the COVID-19 pandemic, but the expansion is losing steam as businesses face intensifying strains from higher commodity prices and global supply chain bottlenecks.

A separate NBS statement showed that the consumer price index (CPI) in July rose 1.0% from a year earlier, compared with a 1.1% gain in June and below the government target of around 3% this year. Economists had expected a 0.8% increase. On a month-on-month basis, the CPI rose 0.3%, compared with a 0.2% increase tipped by the poll and June’s 0.4% decline.

The core consumer price index, which strips out volatile food and energy prices, stood at 1.3% on year, versus a 0.9% rise in June.

According to the report from the Federal Statistical Office (Destatis), in June 2021, German exports were up by 1.3% and imports by 0.6% on a calendar and seasonally adjusted basis compared with May 2021. Destatis also reports that, after calendar and seasonal adjustment, exports were 1.1% and imports even 10.0% higher than in February 2020, the month before restrictions were imposed due to the coronavirus pandemic in Germany.

Germany exported goods to the value of 118.7 billion euros and imported goods to the value of 102.4 billion euros in June 2021. Compared with June 2020, exports increased by 23.6% and imports by 27.0% in June 2021.

The foreign trade balance showed a surplus of 16.3 billion euros in June 2021. In June 2020, the surplus amounted to 15.4 billion euros. The calendar and seasonally adjusted surplus of June 2021 was 13.6 billion euros.

The current account of the balance of payments showed a surplus of 22.5 billion euros in June 2021, which takes into account the balances of trade in goods (+16.2 billion euros), services (+0.5 billion euros), primary income (+8.6 billion euros) and secondary income (-2.9 billion euros). In June 2020, the current account showed a surplus of 20.3 billion euros.

EUR/USD

Resistance levels (open interest**, contracts)

$1.1851 (1063)

$1.1826 (261)

$1.1806 (103)

Price at time of writing this review: $1.1761

Support levels (open interest**, contracts):

$1.1732 (1594)

$1.1714 (2491)

$1.1690 (2234)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date September, 3 is 78177 contracts (according to data from August, 6) with the maximum number of contracts with strike price $1,2000 (8706);

GBP/USD

$1.4008 (1628)

$1.3980 (386)

$1.3936 (214)

Price at time of writing this review: $1.3870

Support levels (open interest**, contracts):

$1.3795 (619)

$1.3739 (1094)

$1.3705 (891)

Comments:

- Overall open interest on the CALL options with the expiration date September, 3 is 13739 contracts, with the maximum number of contracts with strike price $1,4300 (2190);

- Overall open interest on the PUT options with the expiration date September, 3 is 10836 contracts, with the maximum number of contracts with strike price $1,3800 (1094);

- The ratio of PUT/CALL was 0.79 versus 1.17 from the previous trading day according to data from August, 6

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.