David Long

No Change to the Stance of Draghi – Forex Trading News – Aug 8th 2014

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Forex Market News

Draghi made no change to his stance, but listening to his speech was revealing, especially during question time. He expects inflation to remain low in the short term and move towards 1% in the mid-term. He also maintained that they will do everything required to do to kick-start the economy. He is concerned about escalating geopolitical tensions and sanctions but cannot control that. Asked what is he doing to be prepared, he said that he has employed someone to get the ball rolling on QE or asset purchases style stimulus (finally!), he said he may not use it but wants to have that card ready to play when he needs it….asked if 0.4% inflation is not low enough to need it now? He replied well, take away energy costs and inflation is at 0.8%….that to me is dodging the question because energy costs will only get worse with winter coming and Russia now imposing sanctions back on others.

Laughably Putin banned imports from AU (as well as US, EU, Canada and Norway) of food. I laugh because he has shot himself in the foot with that one. We sell to him only $700M worth of food but buy $1B from Russia in goods and services. We haven’t banned Russian goods (that I have heard of) but if we do, Russia is at a net loss. I feel for the Russian people, shelves on the supermarkets will look decidedly bare for the Russians who will have a nasty winter ahead of them. It is an interesting play by Putin, he is putting his people at a big loss for his ego. He cannot back down now and this move suggests things will only deteriorate until Ukraine is settled. He is also expanding into other countries. Azerbaijan/Armenia has some serious infighting fuelled by Russia and one can easily see Russia stepping in saying they are there to calm things down and simply stay. How far will Putin’s desire to expand Russia and its influence I can only guess at. He is fighting on many fronts, militarily, geographically, politically and economically.

All this put pressure on stocks overnight as the equity market continued to peel off its highs. A volatile night with markets pushing higher on US dole queue drop before the Russian’s reverse sanctions pushed markets to new lows. VIX is slowly climbing and sits mid 16’s. Safe haven flows continued as gold moved higher again. Oil had a positive day as threats from the US to bomb ISIS in Iraq hit the newswires.

DATA HIGHLIGHTS TODAY – RBA Statement. BOJ Statement & conference. Chinese Trade balance. Canadian unemployment. Chinese CPI (Saturday)

AUDUSD – An unexpected flat unemployment figure, and rise in % saw the battler pushed back towards support levels. Still faffing about really, but a break of 92cents could see this head to where it should be, sub 90. A large 100pip bear bar is good to see, but I need more price action to be convinced of the sellers’ commitment to the direction.
Resistance: 9460/9522
Support: 9200/9085/8900

EURUSD – Mario’s speech did little to convince investors of anything and so we have a bar that is a HHHL but closed balanced in the middle of the day’s range. US dollar strength looks set to continue to dominate things at this stage. i.e this still looks weak and not yet ready to run up and test resistance at 1.35.
Resistance: 13500/13650/13890/14050
Support: 13416/13300/13170

GBPUSD – An inside seller bar and is being pushed around by all that is happening around her. Could also see new lows being created here before we get a decent pullback.
Resistance: 1.7183/1.731.7370
Support: 1.66/1.63

NZDUSD – 2 low test bars now, but US$ has its hold on the market right now. Could be frothy before we get another run.
Resistance: 8745/8842
Support: 8434/8090

USDCAD – A swing high, with a LHLL bar, but a buyer bar. Again, more froth I see coming. Their building permits and Ivey data was strong so, again, I would prefer to be long the Loonie.
Resistance: 10855/10950
Support: 10683/10655/10486

USDJPY – Inside high test bar as battle between safe haven and greenback strength pushed it around. No clear indication of direction, so staying out of this.
Resistance: 105.57/108.35/110.50
Support: 101.30/100.62/100/99.80

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