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CAD/JPY upside breakout, targets 108.52, then 109.93

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    ActionForex.com
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    CAD/JPY breaks through 107.62 high today on broad based Yen selloff. The break of near term channel resistance also indicates upside acceleration. Further rally is expected now as long as 106.55 minor support holds. Next near term targets are 161.8% projection of 101.39 to 105.07 from 102.57 at 108.52, and then 200% projection at 109.93.

    Current development also indicates resumption of long term up trend from 73.80 (2020 low). Next medium term target is 161.8% projection of 73.80 to 91.16 from 84.65 at 112.73.

    RBA hikes 50bps to 2.35%, more over the months ahead

      By
      ActionForex.com
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      RBA raises cash rate target by 50bps to 2.35% as widely expected. The Board “expects to increase interest rates further over the months ahead”, but it’s “not on a pre-set path”. The size and timing of future hikes will be “guided by the income data and the Board’s assessment of the outlook for inflation and the labour market.”

      Regarding inflation, RBA expects it to peak “later this year”. The central forecasts is for CPI to be around 7.75% over 2022, a little above 4% over 2023, and then around 3% over 2024.

      The economy is “continuing to grow solidly” as boosted by a “record level of the terms of trade”. Labor market is “very tight” while wages growth “has picked up”.

      It maintained that an important source of uncertainty is household spending, which is facing pressure from higher inflation and higher interest rates.

      Full statement here.

       

      Yuan hit fresh 2-yr low, shrugging PBoC actions

        By
        ActionForex.com
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        The People’s Bank of China announced yesterday to cut the foreign exchange reserve requirement ratio (RRR) to 6% from 8% beginning September 15. That is, the amount of foreign-exchange deposits banks need to set aside as reserves will be lowered, freeing up funds to buy Yuan.

        The move, together with a string of stronger-than expected exchange rate fixings, are seen as a strong signal on PBoC’s stance to at least slow Yuan’s depreciation. That came when Yuan hit fresh two-year low and with USD/CNH approaching psychological important 7 handle.

        But USD/CNH’s rally (Yuan’s depreciation) is continuing. There is no sign of topping in USD/CNH as long as 6.8877 support holds, technically. It’s still on track to 61.8% projection of 6.3057 to 6.8372 from 6.7159 at 7.0444.

        BoE Mann: Fast and forceful monetary tightening superior to gradualist approach

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          ActionForex.com
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          In a speech, BoE MPC member Catherine Mann said, “inflation today does not simply depend on past inflation but depends as well on markets, firms, and household’s expectations, and crucially, how these expectations react to each other, are formed over time, and interact with our and others’ policy choices. ”

          “In this more complex and arguably more realistic and relevant version of the inflation model, a fast and forceful monetary tightening, potentially followed by a hold or reversal, is superior to the gradualist approach.”

          “This policy strategy would reduce the risks of a more extended and costly tightening cycle later that depends primarily on shrinking aggregate demand.”

          Full speech here.

          Eurozone retail sales volume rose 0.3% mom in Jul, EU up 0.3% mom

            By
            ActionForex.com
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            Eurozone retail sales volume rose 0.3% mom in July, below expectation of 0.6% mom. volume of retail trade increased by 0.4% for automotive fuels and by 0.1% for food, drinks and tobacco, while it decreased by -0.4% for non-food products.

            EUR retail sales volume rose 0.3% mom. Among Member States for which data are available, the highest monthly increases in the total retail trade volume were registered in Germany (+1.9%), the Netherlands (+1.7%), Luxembourg and Poland (both +1.5%). The largest decreases were observed in Austria (-1.8%), Finland (-1.7%) and Spain (-1.0%).

            Full release here.

            Eurozone Sentix investor confidence dropped further to -31.8, a significant recessionary trend already set in

              By
              ActionForex.com
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              Eurozone Sentix Investor Confidence dropped further from -25.2 to -31.8 in September, below expectation of -27.5. That’s also the lowest level since May 2020. Current Situation Index dropped from -16.3 to -26.5, lowest since February 2021. Expectations index dropped from -33.8 to -37.0, lowest since December 2008.

              Sentix said: “It is very likely that a significant recessionary trend has already set in… In historical retrospect, it is clear that the extent of the current economic dislocation exceeds the collapse of tech stocks (2003), the euro crisis (2012) and even the collapse in the course of the Corona lockdowns (2020).”

              “Although the collapse in 2020 was even sharper, the monetary policy response in the form of trillion-dollar money-printing programmes by central banks quickly led to a turnaround in economic expectations. There are no signs of this at present. Worse still, a look at the sentix thematic indices shows that investors cannot expect any help from either inflation or the central banks.”

              Full release here.

              UK PMI services finalized at 50.9 in Aug, composite at 49.6

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                ActionForex.com
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                UK PMI Services was finalized at 50.9 in August, down from July’s 52.6. PMI Composite was finalized at 49.6, down from prior month’s 51.2, the first contraction reading in 18 months.

                Chris Williamson, Chief Business Economist at S&P Global Market Intelligence:

                “UK private sector business activity fell for the first time in a year-and-a-half in August as an increasingly severe downturn in manufacturing was accompanied by a near-stalling of the vast services sector…

                “Although the survey data are currently consistent with the economy contracting at a modest quarterly rate of 0.1%, deteriorating trends in order books suggest the incoming prime minister will be dealing with an economy that is facing a heightened risk of recession, a deteriorating labour market and persistent elevated price pressures linked to the soaring cost of energy.”

                Full release here.

                Eurozone PMI composite finalized at 49.8, economy undergoing its weakest spell for nine years

                  By
                  ActionForex.com
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                  Eurozone PMI Services was finalized at 49.8 in August, down from July’s 51.2, a 17-month low. PMI Composite was finalized at 48.9, down from prior month’s 49.9, a 18-month low.

                  Looking at some member states, Ireland PMI Composite dropped to 51.0 (18-month low). Spain dropped to 50.5 (7-month low). France dropped to 50.4 (17-month low). Italy recovered to 49.6, (2-month high). Germany dropped to 46.9 (27-month low).

                  Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said:

                  “A second month of deteriorating business conditions in the euro area adds to the likelihood of GDP contracting in the third quarter…. The deterioration is also becoming more broad-based, with services now joining manufacturing in reporting falling output..”

                  “Although the overall rate of decline remains only modest, commensurate with GDP falling at a quarterly rate of just 0.1%, the latest data point to the economy undergoing its weakest spell for nine years, excluding the downturns seen during the height of the pandemic.”

                  Full release here.

                  Swiss GDP grew 0.3% qoq in Q2, strong private consumption

                    By
                    ActionForex.com
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                    Swiss GDP grew 0.3% qoq in Q2, below expectation of 0.4% qoq. Looking at some details, manufacturing contracted -0.5%. Construction contracted -1.7%. Trade dropped -2.1%. However, accommodation and food grew strongly by 12.4%.

                    By expenditure approach, private consumption rose 1.4%. Government consumption was flat. Equipment and software investment rose 2.5%. Exports of goods dropped sharply by -11.5%. Import of goods dropped -0.6% too.

                    Full release here.

                    China Caixin PMI services dropped to 55 in Aug, PMI composite down to 53

                      By
                      ActionForex.com
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                      China Caixin PMI Services dropped slightly from 55.5 to 55.0 in August, above expectation of 54.2. Caixin added that business activity growth held close to July’s 15-month high. total new orders rose despite stronger fall in new export business. Optimism around outlook was highest since November.

                      Wang Zhe, Senior Economist at Caixin Insight Group said: “In August, the Caixin China General Composite PMI dropped to 53 from 54 the previous month. The reading, while marking the second straight monthly drop, remained in expansionary territory. Both supply and demand continued to expand, albeit at a slower pace, with services outperforming manufacturing. Employment remained weak and input costs experienced the slowest increase in 27 months. Market confidence remained stable.”

                      Full release here.

                       

                      Australia AiG construction rose to 47.9, pull back continued

                        By
                        ActionForex.com
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                        Australia AiG Performance of Construction Index rose 2.6 pts to 47.9 in August. Activity rose 3.5 to 46.2. Employment dropped -5.3 to 47.7. New orders rose 7.9 to 51.0. Supplier deliveries rose 3.4 to 45.6. Input prices dropped -1.2 to 92.6. Selling prices dropped sharply by -18.6 to 68.5. Average wages rose 1.2 to 77.6.

                        Peter Burn, Chief Policy Advisor at Ai Group said: “The pull back of the Australian construction sector continued in August with three of the four industry segments recording falls in activity and employment across the industry dropping in the month…. Builders and constructors link much of the fall in activity to rises in interest rates in recent months….. Softer demand was also reflected in the steep fall in the selling price index even though input prices and wage increases remain elevated.”

                        Full release here.

                        US NFP grew 315k in Aug, unemployment rate rose 0.2% to 3.7%

                          By
                          ActionForex.com
                          -

                          US non-farm payroll employment grew 315k in August, slightly above expectation of 300k. Total employment was 240k above the pre-pandemic level.

                          Unemployment rose 0.2% to 3.7%, above expectation of 3.5%. Number of unemployed persons increased 344k to 6m. Labor force participation rate rose 0.3% to 62.4%, but remained -1.0% below its pre-pandemic level.

                          Average hourly earnings rose 0.3% mom, 5.2% yoy, matched expectations.

                          Full release here.

                          Eurozone PPI up 4.0% mom, 37.9% yoy in Jul

                            By
                            ActionForex.com
                            -

                            Eurozone PPI rose 4.0% mom in July, up from June’s 1.3% mom, above expectation of 2.5% mom. For the year, PPI rose 37.9% yoy, accelerated from 36.0% yoy, well above expectation of 35.8% yoy.

                            For the month, industrial producer prices increased by 9.0% mom in the energy sector, by 1.2% mom for non-durable consumer goods, by 0.9% mom for durable consumer goods, by 0.8% mom for capital goods and by 0.1% mom for intermediate goods. Prices in total industry excluding energy increased by 0.6% mom.

                            EU PPI rose 3.7% mom, 37.8% yoy. The highest monthly increases in industrial producer prices were recorded in Ireland (+26.1%), Hungary (+9.4%) and Bulgaria (+8.0%), while the largest decreases were observed in Portugal (-1.5%), Sweden (-1.2%) and Luxembourg (-0.9%).

                            Full release here.

                            US to release NFP today, EUR/USD ready for breakout?

                              By
                              ActionForex.com
                              -

                              The US non-farm payroll day is today. Markets are expecting 290k job growth in August, slowed from July’s 528k. Unemployment rate is forecast to be unchanged at 3.5%. Average hourly earnings growth are expected to slow from 0.5% mom to 0.3% mom.

                              Looking at related economic data, ADP reported showed only 132k private job growth, well below expectations of 300k. However, ISM manufacturing employment improved notably from 49.9 to 52.8, back in expansion. Four-week moving average of initial jobless claims ticked down to 247k.

                              A disastrous NFP print is not expected today. Anything between 150 and 350k wouldn’t alter the current paths of the markets. However, another month of strong earnings growth should reinforce Fed’s swift tightening path with another 75bps hike this month.

                              As for market reactions, a major focus is on whether EUR/USD would finally break out from range to resume larger down trend, and accelerate away from parity.

                              BCC expects negative UK GDP growth in Q2, Q3, Q4, inflation to peak at 14%

                                By
                                ActionForex.com
                                -

                                The British Chambers of Commerce said in a release that the UK economy is expected to “plunge into recession” before the end of 2022, with inflation “spiking to 14%”. Also, “lingering weakness in growth expected to continue into 2024”.

                                BCC downgraded UK GDP growth forecast for 2022 from 3.5% to 3.3%. Also, a recession is forecast for the UK this year, with negative economic growth for Q2, Q3, and Q4. It expects the economy to return to 0.2% growth in 2023, and 1% growth in 2024.

                                Inflation is projected to reach 14% in Q4 2022, upgraded from prior forecast of 10%. CPI is forecast to slow to 5% in 2023, and then return to BoE’s 2% target in 2024.

                                BCC also expects BoE interest rate to increase from 2% in 2022 to 3% in 2023 and 2024.

                                Full release here.

                                Fed Bostic: Soft landing is a very hard thing to do

                                  By
                                  ActionForex.com
                                  -

                                  Atlanta Fed President Raphael Bostic said yesterday that “Inflation is high, inflation is too high and we have got to bring it down to our target… So we have got some work to do. We have got to figure out how fast we are going to move our policy to try to arrest that inflation and to wrestle it back down to 2%.”

                                  “When you bring demand down, that has the risk of slowing the economy down so that the economy stops growing, where it loses all of its momentum, and then you might get to a situation that some would describe as recessionary,” he said.

                                  He added that soft landing is “a very hard thing to do. I think it’s only happened maybe once or twice in the history of this country. Ultimately that’s the best of all possible worlds.”

                                  US ISM manufacturing unchanged at 52.8, prices dropped to 52.5, employment jumped to 54.2

                                    By
                                    ActionForex.com
                                    -

                                    US ISM Manufacturing PMI was unchanged at 52.8 in August, slightly above expectation of 52.6. Looking at some details, new orders rose from 48.0 to 51.3. Production dropped from 53.5 to 50.4. Employment jumped from 49.9 to 54.2. Prices dropped sharply from 60.0 to 52.5.

                                    ISM said: “Manufacturing performed well for the 27th straight month. With (1) supplier delivery performance recording its fourth straight month of improvement, (2) price increase growth slowing significantly for the second consecutive month, (3) hiring and total employment both positive and expanding and (4) lead times easing across all three categories of purchasing activity, the sector is at or approaching supply/demand equilibrium.”

                                    Also, “the past relationship between the Manufacturing PMI and the overall economy indicates that the Manufacturing PMI for August (52.8 percent) corresponds to a 1.4-percent increase in real gross domestic product (GDP) on an annualized basis.”

                                    Full release here.

                                    US initial jobless claims dropped to 232k

                                      By
                                      ActionForex.com
                                      -

                                      US initial jobless claims dropped -5k to 232k in the week ending August 27, below expectation of 250k. Four-week moving average of initial claims dropped -4k to 241.5k.

                                      Continuing claims rose 26k to 1438k in the week ending August 20. Four-week moving average of continuing claims rose 4.5k to 1428.5k.

                                      Full release here.

                                      Eurozone unemployment rate dropped to 6.6% in Jul, EU down to 6.0%

                                        By
                                        ActionForex.com
                                        -

                                        Eurozone unemployment dropped from 6.7 to 6.6% in July, matched expectations. EU unemployment dropped from 6.1% to 6.0%.

                                        Eurostat estimates that 12.959 million men and women in the EU, of whom 10.983 million in the euro area, were unemployed in July 2022. Compared with June 2022, the number of persons unemployed decreased by 113 000 in the EU and by 77 000 in the euro area. Compared with July 2021, unemployment decreased by 1.854 million in the EU and by 1.576 million in the euro area.

                                        Full release here.

                                        UK PMI manufacturing finalized at 47.3 in Aug, steepest downturn since first lockdown

                                          By
                                          ActionForex.com
                                          -

                                          UK PMI Manufacturing was finalized at 47.3 in August, down sharply from July’s 52.1. That’s also the lowest level in 27 months. S&P Global added that output, new business and new export orders contracted sharply. Still elevated input cost and selling price inflation eased further.

                                          Rob Dobson, Director at S&P Global Market Intelligence, said: “August saw the UK manufacturing sector suffer its steepest downturn since the first COVID-19 lockdown. Output and new orders contracted at the fastest rates since May 2020, as inflows of work from both domestic and export markets slumped sharply lower. There were reports of clients postponing, rescheduling or cancelling agreements due to increased economic uncertainties, recession warnings, rising prices and component shortages, while port congestion and Brexit complications constrained export opportunities.”

                                          Full release here.

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