Risk Aversion Across The Board As Equities Turn South Yet Again

Daily Forex Fundamentals | Written by Saxo Bank | Jul 25 08 06:41 GMT |

Wakeup Call: Risk Aversion Across The Board As Equities Turn South Yet Again Further direction to the health of U.S. economy will be gained with the release of June Durable Goods Orders, scheduled for 12:30 GMT. Overnight News Bullets GE PMI Manufacturing (Jul A) out at, 50.9 vs. 52.0 exp. 52.6 prior. GE PMI Services (Jul A) out at, 53.3 vs. 51.5 exp. 52.1 prior. SW PPI MoM/YoY (Jun) out at, 0.5%/3.0% vs. 0.4%/2.9% exp. 0.1%/2.9% prior. SW Unemployment (Jun) out at, 8.1% vs. 7.3% exp. 5.9% prior. GE IFO – Business Climate (Jul) out at, 97.5 vs. 100.1 exp. 101.3 prior. GE IFO – Current Assessment (Jul) out at, 105.7 vs. 106.5 exp. 108.3 prior. GE IFO – Expectations (Jul) out at, 90.0 vs. 93.2 exp. 94.7 prior. E-Z Euro-Zone Current Account SA/NSA (May) out at, -7.3B/-21.4B vs. --/-21.4B exp. -0.3B/-9.2B prior. E-Z PMI Manufacturing (Jul A) out at, 47.5 vs. 48.7 exp. 49.2 prior. E-Z PMI Services (Jul A) out at, 48.3 vs. 48.8 exp. 49.1 prior. E-Z PMI Composite (Jul A) out at, 47.8 vs. 49.0 exp. 49.3 prior. UK Retail Sales MoM/YoY (Jun) out at, -3.9%/2.2% vs. -2.6%/4.4% exp. 3.5%/8.1% prior. US Initial Jobless Claims (Jul 19) out at, 406K vs. 380K exp. 366K prior. US Continuing Claims (Jul 12) out at, 3107K vs. 3160K exp. 3122K prior. US Existing Home Sales (Jun) out at, 4.86M vs. 4.94M exp. 4.99M prior. US Existing Home Sales MoM (Jun) out at, -2.6% vs. -1.0% exp. 2.0% prior. US EIA Natural Gas Storage Change (Jul 18) out at, 84 vs. 80 exp. 104 prior. JN Tokyo CPI (Jul) out at, 1.6% vs. 1.8% exp. 1.5% prior. JN National CPI (Jul) out at, 2.0% vs. 1.9% exp. 1.3% prior. Markets FX: EURUSD well supported, ahead of Durable Goods, Carry trades getting hit on return of risk aversion. Fixed Income: Treasuries stronger as equities are back under pressure, and economic sentiment is weak Stocks: Equities selling off across the board, as sentiment turns negative yet again. Commodities: Commodities recover as USD is weakened, Crude back above $126. O/N Data Heat map: EU US JP UK SZ AU CA NZ NO SE FR - - - - Calendar Today's Highlights: Time (GMT) Region Release Consensus 07:30 SE Trade Balance (Jun) 08:00 E-Z Euro-Zone M3 3.mth/YoY (Jun) 10.4%/10.3% 08:30 UK GDP QoQ/YoY (2Q A) 0.2%/1.6% 08:30 UK Index of Services (May) 0.4% 12:30 US Durable Goods Orders (Jun) -0.3% 12:30 US Durables Ex Transportation (Jun) -0.2% 14:00 US U. Of Michigan Confidence (Jul F) 56.4 14:00 US New Home Sales (Jun) 503K 14:00 US New Home Sales (Jun) -1.8% 17:00 US Baker Hughes U.S. Rig Count (Jul 25) This and Next Week’s Highlights: Date Region Release Jul 28 JN Jobless Rate, Household Spending, Retail Trade, Jul 28 GE GfK Consumer Confidence Survey Jul 29 SE Retail Sales Jul 29 UK M4 figures, Net Consumer Credit, Mortgage Approvals Jul 29 US S&P/CS Composite Home Prices, Consumer Confidence, ABC Consumer Confidence Jul 29 JN Industrial Production Jul 30 AU Building Approvals Jul 30 NZ Money Supply Jul 30 E-Z A string of Euro-Zone confidence figures Jul 30 SZ KOF Swiss Leading Indicator Jul 30 US MBA Mortgage Applications, ADP Employment Change, DOE/API Inventories Jul 30 CA Industrial Product Price, Raw materials Price Index Jul 30 UK GfK Consumer Confidence Survey What's going on? Following substantial losses in the U.S. equities on Thursday, Asian stocks have dropped the most in a 6-wk period in overnight trading. National Australia Bank, largest bank in Australia, sold off heaviest since September 2001 on credit concerns, dragging the rest of financials down. Sudden reversal in the equity market sentiment has also reversed the formation of carry trades, pushing for yen for a first weekly gain against euro in 3-month period. As we expect the European session to see continued losses today, we expect the carry trades to remain under pressure in today’s trading. Further direction to the health of U.S. economy will be gained with the release of June Durable Goods Orders, scheduled for 12:30 GMT. While the median surveyed expectation points to a -0.3% figure, the analyst estimates display a wide spectrum, ranging from a high of 1.0% to a low of -2.5% FX EUR USD JPY GBP CHF AUD CAD NZD NOK SEK PLN + + FX Trading Strategies Pair Supp. Resis. Comments EURUSD 1.5760 1.5670 while the pair failed to close below 1.5670 in yesterday trading, we are looking for further downside to open at the break pivot support at 1.5673 which also coincides with 50-day MA. We place an order to sell at 1.5670 offered. Stop at 1.5695 bid, Targeting 1.5580 area. Equities Negative Sentiment Heading Into The Weekend We expect the European indices to open around 1% lower Friday. The US equity indices lost 1.1% after the European close and the S&P 500 future is flat. The main driver for the losses in the US late session were financials with a decline of 3.6% after home sales slid more than forecast and investor Bill Gross predicted the housing slump will cost banks and brokerages $1 trillion. This will spill over into the European session and send the financials south. Our favorite short positions for today are UBS, Barclays, Royal Bank of Scotland, Bank of Ireland and Deutsche Bank. Watch out for Q2 reports from Scania, ABB Ltd, Danone and Belgacom. DAX UKX CAC OMX KFX OBX SMI NDX DJI SPX NKY - - - - - - - - - - - Equity Trading Strategies Trade Idea (Equities - TrendSpotter – Sell Muenchener Rueckversicherung (MUVGn:xetr)): The current rebound in the German reinsurer is starting to look exhausted, and probable to return to the longer term down trend, a break of 115.00 would be a confirmation of a new wave down. We place an order to sell at 115.00 with a stop at 117.00 targeting a test of the recent lows at 109.00.