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Daily Market Analysis by Vinson Financials

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Old 19-08-2015, 09:58
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Default Daily Market Analysis by Vinson Financials

[COLOR=#ff0000]Financial News August 19, 2015
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JPY weakness may not prevent exports to fall

Japan's headline trade deficit widened in July to JPY268bn. The detail continues to show very weak underlying export performance. The country posted 7.6% year on year growth in exports. In volume terms, exports were down 0.7% y/y and the trend remains no better than flat.

The second leg of JPY weakness (from 100 to 120 in 2014 H2) appears to be bearing no more fruit than the first (from 80 to 100 in 2013), though the lack of evidence that JPY weakness is "working" will not stop it falling further, says RCB Capital Markets in a report on Wednesday.

ECB to revise macroeconomic outlook in September meeting

The July ECB minutes revealed cautious optimism, highlighting the fragility of the economic recovery, the weak inflation outlook and the balance of risks still tilted to the downside (even if these risks have not worsened since the June meeting).

Quite rightly, the members indicated that attention also needs to be paid to possible changes in commodity prices, to the slowdown in emerging markets and to exchange rate developments to the extent that they could affect the medium-term outlook for price stability. With the ongoing volatility in EM markets, the PBoC's decision to devalue the CNY and weakness in commodity prices, there is no doubt that the ECB will have to focus on these issues in the September policy meeting, possibly providing a revised macroeconomic outlook, including a lower inflation path, says Barclays.

[COLOR=#ff0000]Market Review August 19, 2015
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During the Asian session this morning, minimal market movement was noticed in the FX market, due to the lack of significant economic releases and despite the persisting worries over China's economy and on the timing of the Federal Reserve interest-rate hike. Moreover, the Asian stocks fell a fourth day as a deepening commodities selloff raised concern that growth may be slowing in China. Furthermore, the Shanghai Composite index plunged 6.2% to close at 3748.16, which is the biggest drop since July 27.

Released during the Asian session, New Zealand’s PPI Input dropped -0.3% versus the estimated -0.5% while PPI Output dropped -0.2%. In addition, Japan’s Trade Balance came in at -0.37T versus the estimated -0.16T and All Industries Activity rose 0.3% versus the estimated 0.4% causing insignificant impact on the USD/JPY, which remained near the 124.25 area.

Elsewhere, the European Central Bank reduced the maximum level of emergency aid available to Greek banks in a sign the country's financial tensions are easing after a rescue package was agreed with creditors. More specifically, ECB decided to cut the ceiling on Emergency Liquidity Assistance provided by the Bank of Greece to EUR 89.7 billion from EUR 90.4 billion.

The main event for the day will be the FOMC Meeting Minutes, where the focus will be turned on the policy makers comments regarding the timing of the first rate hike and whether September is the appropriate time.

Additional economic releases will be the United States Core CPI, CPI and the ECB Current Account.

Data releases to monitor:

EUR: Current Account.

USD: Core CPI, CPI, FOMC Meeting Minutes, Crude Oil Inventories.

[COLOR=#ff0000]Trade Idea of the Day

EUR/AUD
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Currently the pair is trading at 1.5031. Traders must monitor the 1.5296 resistance level and the support level of 1.4825 for possible breakouts. A possible scenario would be a movement towards the 1.5005 support level where a break may lead to the 1.4935 area. An alternative scenario could be a movement towards the 1.5115 resistance level where a break could lead to the 1.5160 area.
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