Except for the Swiss franc, the foreign currency futures open lower in the US amid risk adversity due to ongoing concern about sovereign debt. All eyes are on the US markets’ reaction to news that the Senate-House of Representatives conference panel approved a landmark bill to overhaul financial regulations. The legislation will now head to the full Senate and House where it is expected to win final approval and President Obama could sign it into law before July 4.
Democrats agreed on a watered-down version of the so-called "Volcker rule," which would prohibit most trading and investment activity by banks. Under the deal, banks can trade in-house foreign exchange and interest rate swaps, gold and silver swaps, and derivatives designed to hedge their own risk. But banks will need to spin off dealing desks to affiliates to handle agricultural, energy and metals swaps, equity swaps, and uncleared credit default swaps. Please notice that our industry was rightfully not touched, as FX is the most transparent financial market.
The Asia/Pacific stock markets closed lower, the European bourses are trading slightly lower, while gold and oil but the gold/oil spread edged up. The US indexes are marginally lower in pre-open market.
The short-term outlook is slightly bearish for the European and commodity currencies and mildly bullish for the yen. The medium-term outlook is sideways for all of the foreign currencies futures. My model is long all of the foreign currency futures.
This Analysis Is Based On My Books, As Follows:
“Trading in the Global Currency Markets” - Prentice Hall Press, 3rd edition 2007
“Technical Analysis Applications” - McGraw-Hill, 2004
Overnight:
- Australia: No data
- Japan: The CPI eased 0.9% on year after the 1.2% fall in the previous month. Core inflation in was down 1.2% on year in May following the 1.5% fall in April. On a monthly basis, inflation added 0.1%. The Tokyo CPI – fell 1.3% on year in June after the 1.6% decline in May.
- France: The GDP for the first quarter was confirmed at +0.1%, but the fourth quarter GDP was revised up to +0.6% from +0.5%.
- Germany: The Government lowered its planned third quarter capital market issuance to EUR 44 billion in government bonds in the third quarter from the EUR 46 billion estimated in December, and signaled more cuts for the fourth quarter as the country's fiscal situation showed some improvements.
- UK: The Bank of England has warned that UK banks face a number of serious challenges ahead and that they must build up higher reserves to be more resilient to shocks.
Today’s Economic Calendar:
- US: A Senate-House of Representatives conference panel approved a landmark bill to overhaul financial regulations. The legislation next heads to the full Senate and House where it is expected to win final approval and President Barack Obama could sign it into law before July 4. Democrats agreed on a modified version of the so-called "Volcker rule," which would prohibit most trading and investment activity by banks. Under the deal, banks can trade in-house foreign exchange and interest rate swaps, gold and silver swaps, and derivatives designed to hedge their own risk. But banks will need to spin off dealing desks to affiliates to handle agricultural, energy and metals swaps, equity swaps, and uncleared credit default swaps.
- US: GDP for the first quarter (revision)
- US: University of Michigan confidence survey for June
- Canada: No data
EUR- March
Luca Model: Long since June 10
The September euro consolidated further around the 21-day moving average and opens slightly lower in the US. The short-term outlook is marginally bearish. The medium-term outlook is sideways and my model is long.
Immediate support is at 1.2251. Below 1.2201, distant support is at 1.2156.
Immediate resistance is at 1.2312 from the 21-day moving average. Above the declining trendline at 1.2371, Monday’s high is 1.2477.
INDICATORS
Fast stochastics: Slightly bearish
MACD: Bullish
Ichimoku: Bearish
OUTLOOK
NEAR-TERM: Slightly bearish
MEDIUM-TERM: Sideways
LONG-TERM: Bearish
JPY - March
Luca Model: Long since June 17
The September Japanese yen marked time overnight after closing off its one-month high on Thursday and opens nominally lower in the US. The short-term outlook is sideways to slightly bullish. The medium-term outlook is sideways and my model is long.
Thursday’s high is 112.33. Further resistance is seen at 112.60. Distant resistance is perched at 113.81.
Below 111.30 there is further support at 110.90. The 21-day moving average offers distant support at 110.21.
INDICATORS
Fast stochastics: Bullish (overbought)
MACD: Bullish
Ichimoku: Bullish
OUTLOOK
NEAR-TERM: Sideways to slightly bullish
MEDIUM-TERM: Sideways
LONG-TERM: Sideways
GBP - March
Luca Model: Long since June 9
The September pound remains under pressure after closing lower on Thursday. The short-term is slightly bearish. The medium-term outlook is sideways and my model is long.
Initial support is at 1.4854 from the 55-day moving average. Below the bottom of the rising channel at 1.4790, a distant floor is at 1.4753 from the 21-day moving average.
Immediate resistance is at 1.4947. Above 1.5006, the next caps are 1.5044 and 1.5079. Distant resistance is at 1.5218.
INDICATORS
Fast stochastics: Slightly bearish
MACD: Bullish
Ichimoku: Sideways
OUTLOOK
NEAR-TERM: Slightly bearish
MEDIUM-TERM: Sideways
LONG-TERM: Bearish
CHF - March
Luca Model: Long since June 8
The September Swiss franc opens slightly higher in the US after closing barely up on Thursday. The short-term outlook is sideways to slightly bearish. The medium-term outlook is sideways and my model is long.
Immediate support is at .9040. The 55-day moving average follows at .8995. Below .8930, distant support is seen at .8871.
Above the 100-day moving average at .9134, distant resistance is perched at .9247.
INDICATORS
Fast stochastics: Slightly bullish
MACD: Bullish
Ichimoku: Bearish
OUTLOOK
NEAR-TERM: Sideways to slightly bearish
Bullish MEDIUM-TERM: Sideways
LONG-TERM: Bearish
CAD – March
Luca Model: Long since June 8
The September Canadian dollar remained soft overnight after closing down on Thursday. This decline briefly penetrated the support line rising since May 25th.The short-term outlook is slightly bearish. The medium-term outlook is sideways and my model is long.
Below .9540, support is at .9513. Distant support is at .9464.
Immediate resistance is at .9615. The 21-day moving average resists at .9642. Above .9672, the next caps are .9715 and .9786.
INDICATORS
Fast stochastics: Bearish (oversold)
MACD: Sideways
Ichimoku: Bearish
OUTLOOK
NEAR-TERM: Slightly bearish
MEDIUM-TERM: Sideways
LONG-TERM: Bullish
AUD – March
Luca Model: Long since June 8
The September Australian dollar remained under pressure overnight, falling to an eight-day low, but opens off its lows in the US. The short-term outlook is slightly bearish. The medium-term outlook is sideways and my model is long.
The 21-day moving average supports at .8513. Further support is at .8432.
Initial resistance is at .8607 from the 55-day moving average. The next cap is .8659. Above .8706, there is resistance from Monday’s high at .8772.
INDICATORS
Fast stochastics: Bearish
MACD: Bullish
Ichimoku: Bearish
OUTLOOK
NEAR-TERM: Slightly bearish
MEDIUM-TERM: Sideways
LONG-TERM: Bullish
