US macro – NY Fed lowest in more than a year

Regional activity indices in the US aren’t among the key market movers yet they often provide some indication for the national ISM. However, recently the regional NY and Philly Fed pointed to a significant deterioration in activity, while the ISM held up quite well (actually it rose in August). This dichotomy is unlikely to last so regional indices for September were expected to inch up to close the gap. To the contrary, the NY Fed fell from 7,1 to 4,1 pts. – the lowest since July 2009. If this is about to be confirmed by the Philly Fed (today, 10.00 ET, 16.00 CET, consensus +2 pts.) investors will have something to worry about.

USDJPY – so far so good

The Japanese intervention took reportedly at least 1 trillion JPY but so far it is a success. Not only the Japanese moved the market by nearly 3 figures but the move hasn’t been so far reversed – a sign that some on the market treat Japanese plea seriously. The pair moved above the resistance of 85,20 and now faces an upper line of the mid-term declining channel (encompassing the pair for more than 4 months). A successful test of the line and 85,93 level could spark a larger upward correction (it is still too early to definitely call it a trend reversal, as this relies mostly on the US labor market and the Fed policy). In that case the pair could eye at least 88,00. Supports are provided by 85,20 and 84,35.  

EURUSD – waiting for an impulse

Investors took an attempt to continue gains on the EURUSD and even made a fresh 5-weeks high (1,3037) but ultimately the pair bounced of the resistance in this area, confirming a selling pressure around 1,3030/35. The level is important, since the next crucial resistance lays three whooping figures higher (August’s high of 1,3334). Support is provided by 1,2920. Perhaps the pair will receive an impulse from the equity markets which so far have been rather calm this week.

Events to watch – US claims, Philly Fed and PPI, UK sales, SNB statement

An importance of the Philly Fed today is matched by the US initial claims (8.30 CET, 14.30 CET, consensus 460k) expected to rise after a surprisingly large decline last week. PPI will be released along the claims (consensus +0,3% m/m) but it doesn’t attract that much of attention at the moment. In the UK, retail sales data (4.30 ET, 10.30 CET, consensus at +0,2% m/m) will follow a weaker than expected claimant count released yesterday. Finally, CHF investors shouldn’t miss the SNB quarterly monetary policy assessment (8.00 ET, 14.00 CET). The bank issued a very supportive statement for the frank in June, showing expectations for a robust growth, virtually no deflation risks and a sanguine stance on the CHF’s strength. However, that was with the EURCHF still above 1,40. Moreover, this statement spurred a rally on the CHF which probably wasn’t intended. Now, with the pair around 1,30 the SNB may take the opportunity of the Japanese intervention and issue a much softer communiqué.

Przemysław Kwiecień, Chief Economist

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