USDCHF
Franc strength was meant on the day, but fell short, as economic data was in favor of further rate hikes in the Swiss economy. For the month of July, the economys trade surplus increased to 1.42 billion francs as export figures were notably higher on the month. Exports outpaced imports and increased by 15.5 percent on the annualized figure. A convincing piece of data, the report lends to further growth expectations in the economy and increases the likelihood that SNB Chairman Roth will be considering further rate hikes in the short term to curb any looming inflationary pressures. However, contrary to market sentiment, the underlying currency failed to reach higher as the Euro remained a short opportunity following the mornings disappointing sentiment report. With a falling ZEW survey, it remains to be seen if the European Central Bank will indeed raise interest rates three more times heading into year end. Subsequently, a halt here may prompt the SNB to consider a possible slowdown as well, quelling further hike decisions.
Already taking out the 1.2330 stops above the 1.2300 handle, the current price action seems to be consolidating at the 1.2350 figure where some sellers are emerging to take profits on the days move. Should momentum side with bulls, the run looks to continue above, with barriers likely to cap gains just below the 1.2450 figure on the 240-minute picture. Downside potential comparatively exists with bears eyeing an imminent retest of the channel support at 1.2200.
EURCAD
Traders shorted the Euro on the day, especially on the EURCAD cross, plunging the pair down by 0.8 percent on the day. The largest basis point mover of the three, the cross was subject to massively bearish sentiment as the German ZEW survey failed to agree with central bankers in their assessment of the economy. According to the ZEW economic research institutes survey, investor sentiment dropped in the month of August to the lowest level in more than five years as the consensus continues to be concerned over the ill-effects of higher rates and weaker fundamental data. Dropping to a negative 5.6 print, the report remains the softest since June 2001 and follows a 15.1 seen in July. A concern for policy makers, the report could be reflective of slower consumer spending, which would adversely affect consumption and subsequent growth in the region.
Conversely, the Canadian dollar was bolstered on the day preceding the announcement of Irans response to potential UN sanction regarding continued uranium enrichment programs. Purely an oil speculative trade, the market favored the Canadian dollar leg as contracts for the September contract traded higher on the day. Additionally, the currency was supported by higher consumer prices in the worlds ninth largest economy. For the month, gasoline prices boosted inflationary pressures to reflect a 0.1 percent rise in consumer prices in July. As a result, speculative players are fiddling with the notion of higher rates, albeit not in the short term.
Finding considerable resistance at the 1.4400 figure, current price action is reflecting a consolidation just above a floor at 1.4300. Should the close break below the August 14th low of 1.4280, bears look to push price through to the 1.4200 figure in the daily perspective. Subsequent capping looks abated should the floor fail till the 1.4100 figure (61.8 percent fib from the June 06 August 06 move).
CADJPY
Speculation kept the CADJPY bid on the session as crude oil prices continued higher on geopolitical concern over Irans reply to UN sanction potentials. Additionally, and sparking the somewhat optimistic tone, was a higher than expected consumer prices report in the morning. According to Statistics Canada, consumer prices rose 0.1 percent in the month of July, fueled by higher gasoline prices. The monthly differential adds to a higher annualized report, which pits consumer inflation at a 2.4 percent clip. Although not likely to change the minds of policy makers, Bank of Canada Governor David Dodge is likely to keep a watchful eye on such a development as rates will likely have to be hiked in curbing inflation. This notion is not as far from the truth considering the still relatively tight labor market and an economy continuing to run at a relatively full capacity.
Comparatively, yen fundamentals are relatively unchanged. Firing up yen bears in the New York session, however, were less than exemplary supermarket sales figures. For the year, sales actually declined further by 3.2 percent, past the 2.5 percent decline seen earlier. Evidence of the lack of consumer spending, reports like this are likely to keep policy makers in sticking with a slower implementation of higher rates as central bankers remain cautious of economic weakness.
