Daily Forex Signals 16.08.2017
EUR/USD falls after ECB signals no shift likely in Jackson Hole
Macroeconomic overview: The euro fell by as much as half a cent on Wednesday, briefly dipping below 1.1700, after sources signalled European Central Bank chief Mario Draghi would not use his Jackson Hole appearance to signal policy change by the bank. On the other hand, the dollar held near a three-week high on Wednesday against a trade-weighted basket of its rivals as strong U.S. retail sales data boosted risk appetite.
U.S. retail sales jumped 0.6% in July, handily beating market estimate of a 0.4% reading, to post their biggest gain in seven months as consumers bought more cars and increased discretionary spending.
But despite the strong data, interest rate expectations remain broadly unchanged with markets expecting the Federal Reserve to raise rates only once over the next 12 months.
Attention will now shift to minutes of the Fed's July meeting due later in the day for clues on the timing of rate hikes as well as whether it is likely to announce a reduction in its balance sheet at its September meeting.
Eurozone GDP data were released today. Following individual country releases of GDP data, the Eurozone numbers have failed to provide anything particularly new. At 0.6% qoq and 2.2% yoy they are close to estimates of 0.6% and 2.1% yoy and 0.6% qoq and 2.1% yoy in the first quarter.
Technical analysis: The EUR/USD is back below 14-day exponential moving average and 23.6% fibo of June-August rally. We think EUR/USD has potential to close below these levels today, which would be an important bearish signal.
Short-term signal: We’ve got short at 1.1705. The target is 1.1575.
Long-term outlook: Bullish
GBP/USD: UK wage growth remains muted
Macroeconomic overview: Britain's labour market outperformed tepid growth in the rest of the economy in the second quarter as the unemployment rate unexpectedly fell to its lowest since 1975.
Sterling jumped nearly half a cent against the USD and British government bond prices slid after the jobless rate edged down to 4.4% in the three months to June, against expectations for it to hold at 4.5%.
Figures on wage growth also came in better than expected but they were flattered by bonus payments in the financial sector. The underlying picture still showed households feeling the strain of rising prices since last year's Brexit vote.
Inflation has eased slightly since May when it hit an almost four-year high of 2.9%, but prices are still rising faster than wages. The Office for National Statistics said workers' total earnings including bonuses rose by an annual 2.1%in the three months to June, compared with 1.9% in the period to May, boosted by a 27% surge in bonus payments in the financial sector. The market had expected wage growth of 1.8%.
Overall wage growth in real terms fell by 0.5%, the same as in the three months to May and one of the steepest declines in the past three years.
Excluding bonuses - which gives a better picture of the underlying trend - earnings in nominal terms rose by 2.1% year-on-year, the fastest rate since January and beating expectations for a 2.0% rise.
The Bank of England is watching wage growth closely as it gauges whether the increase in inflation is creating longer-lasting pressure on prices. It expects wages to rise by 2% this year before picking up in 2018 and 2019.
Separate figures showed productivity - perhaps Britain's biggest economic weak point since the financial crisis - fell by 0.1% in output-per-hours terms during the second quarter compared with the first quarter, when it fell 0.5%.
Technical analysis: Downside risk remains and GBP/USD made a new low for the move at 1.2842 in Europe. Further support is 1.2819, the daily cloud base. A break below the cloud looks a likely scenario.
Short-term signal: We got short today for 1.2730.
Long-term outlook: Bullish
AUD/JPY: Improving risk appetite pushes AUD/JPY up
Macroeconomic overview: Australian wages growth had languished at record lows for an entire year by the end of June quarter, an outcome that threatens to sap consumer spending by heavily indebted households and to drag on already-anaemic inflation.
The Australian Bureau of Statistics said that its wage price index rose just 0.5% in April-June, matching forecasts and compared with an upwardly revised 0.6% the previous quarter.
Annual wage growth held at 1.9%, the lowest on record. That was less than half the growth rate workers enjoyed a decade ago when a mining boom boosted pay across Australia.
The slowdown has contributed to an unwelcome decline in underlying inflation, which sits below the Reserve Bank of Australia's target band of 2-3%.
The RBA is worried about the impact on the economy from surging household debt, which is already at 190% of disposable income. Policymakers hope wages growth will eventually tick higher given a recent revival in employment and the end of a slump in mining investment.
AUD investors will watch for domestic jobs data on Thursday (1:30 GMT) for evidence that a revival in full-time work seen since the start of the year is continuing.
Technical analysis: The AUD/JPY rebounded from 50% fibo of April-July rise and broke above short-term moving averages today. In our opinion this is a strong bullish signal. A recent improvement in risk appetite suggests the AUD/JPY rise may be continued in the coming days.
Short-term signal: Technical analysis’ conclusions were not confirmed by Australian macroeconomic data. We are considering a long position, but we stay sideways for now.
Long-term outlook: Bullish