News

Dollar Soft after Selloff, Euro Awaits GDP

Dollar suffered another round of selloff overnight and stays soft. Mild risk aversion in Asia is not helping the greenback much. But commodity currencies are following closely, in particular Aussie and Kiwi, as the next worst performers for the week. European majors look set to be the winners of the week, as led by Sterling. Nevertheless, a bunch of GDP data from Eurozone and Canada could change the picture before the weekend.

Technically, Euro’s decline against Sterling appears to be low as seen in 4 hour MACD. EUR/CHF is also approaching a 1.0737 cluster support. There is prospect of some recovery in both Euro crosses. That might help finally push EUR/USD through 1.1880 resistance decisively, towards 1.1974 resistance. This would be a focus in the European session.

In Asia, at the time of writing, Nikkei is down -1.34%. Hong Kong HSI is down -1.63%. China Shanghai SSE is down -0.58%. Singapore Strait Times is up 0.13%. Japan 10-year JGB yield is up 0.0004 at 0.022. Overnight, DOW rose 0.44%. S&P 500 rose 0.42%. NASDAQ rose 0.11% 10-year yield rose 0.008 to 1.269.

Japan industrial production rose 6.2% mom in Jun

Japan industrial production rose 6.2% mom in June, above expectation of 5.0% mom. Output also revised much of the -6.5% mom decline in May. Manufacturers expected production to fall -1.1% mom in July and then rise 1.7% in August.

A government official said, “we are continuing to see the impact of the global chip shortage but it’s moderating somewhat, mainly for automakers… But manufacturers’ August output plan may not fully reflect the impact of the spread of new COVID-19 variants on global and domestic economies, as well as the risk of a prolonged chip shortage.”

Also released, unemployment rate ticked down to 2.9% in June, down from 3.0%. Retail sales rose 0.1% yoy in May, slightly below expectation of 0.2% yoy.

ECB de Guindos: It’s medical question first and foremost

Vice President Luis de Guindos said yesterday that “substantial monetary support” is needed for the economy “for some time to come. He added, “even if recovery is successful, there is still a lot of uncertainty.” Pace of inflation will “slow down again” next year as a number of one-off factors wane, such as the temporary VAT cut in Germany last year.

He also said that when to end the PEPP is a “medical question first and foremost”. He added,  “it depends on whether the vaccination campaigns are successful in combating the Delta variant and whether new, more resistant variants appear.”

Elsewhere

Australia private sector credit rose 0.9% mom in June, above expectation of 0.4% mom. PPI rose 0.7% qoq, 2.2% yoy in Q2.

GDP from France, Germany, Italy and Eurozone are the main focuses in European session. Eurozone will also release unemployment and CPI flash. Swiss will release KOF economic barometer.

Later in the data, US will release personal income and spending, with PCE inflation. Canada will release GDP, IPPI and RMPI.

EUR/GBP Daily Outlook

Daily Pivots: (S1) 0.8502; (P) 0.8511; (R1) 0.8522; More…

EUR/GBP’s downside momentum diminished as seen in 4 hour MACD. But further decline is still in favor as long as 0.8555 resistance holds. Choppy corrective fall from 0.8718 is still in progress and could target a retest on 0.8470 low. On the upside, though, break of 0.8555 will turn bias back to the upside for 0.8668 resistance instead.

In the bigger picture, price actions from 0.9499 are still seen as developing into a corrective pattern. That is, up trend from 0.6935 (2015 low) would resume at a later stage. This will remain the favored case as long as 0.8276 support holds. However, firm break of 0.8276 support will suggest that rise from 0.6935 has completed and turn medium term outlook bearish.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
22:45 NZD Building Permits M/M Jun 3.80% -2.80% -2.40%
23:30 JPY Unemployment Rate Jun 2.90% 3.00% 3.00%
23:50 JPY Industrial Production M/M Jun P 6.20% 5.00% -6.50%
23:50 JPY Retail Trade Y/Y May 0.10% 0.20% 8.30%
01:30 AUD Private Sector Credit M/M Jun 0.90% 0.40% 0.40% 0.50%
01:30 AUD PPI Q/Q Q2 0.70% 0.50% 0.40%
01:30 AUD PPI Y/Y Q2 2.20% 0.20%
05:00 JPY Housing Starts Y/Y Jun 7.20% 9.90%
05:30 EUR France Consumer Spending M/M Jun 1.80% 10.40%
05:30 EUR France GDP Q/Q Q2 P 0.80% -0.10%
06:00 EUR Germany GDP Q/Q Q2 P 2.00% -1.80%
07:00 CHF KOF Leading Indicator Jul 133.4
08:00 EUR Italy GDP Q/Q Q2 P 1.40% 0.10%
09:00 EUR Eurozone GDP Q/Q Q2 P 1.50% -0.30%
09:00 EUR Eurozone Unemployment Rate Jun 7.90% 7.90%
09:00 EUR Eurozone CPI Y/Y Jul P 2.00% 1.90%
09:00 EUR Eurozone CPI Core Y/Y Jul P 0.80% 0.90%
12:30 CAD GDP M/M May -0.30% -0.30%
12:30 CAD Industrial Product Price M/M Jun -0.50% 2.70%
12:30 CAD Raw Material Price Index Jun 1.50% 3.20%
12:30 USD Personal Income M/M Jun -0.40% -2.00%
12:30 USD Personal Spending Jun 0.70% 0.00%
12:30 USD PCE Price Index M/M Jun 0.40%
12:30 USD PCE Price Index Y/Y Jun 3.90%
12:30 USD Core PCE Price Index M/M Jun 0.60% 0.50%
12:30 USD Core PCE Price Index Y/Y Jun 3.70% 3.40%
12:30 USD Employment Cost Index Q2 1.00% 0.90%
13:45 USD Chicago PMI Jul 64.0 66.1
14:00 USD Michigan Consumer Sentiment Index Jul F 80.5 80.8

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