Intraday Market Thoughts

Swissy and CAD in Focus, Beware Durable Goods

by Adam Button
Aug 25, 2014 22:20

The Swiss franc and Canadian dollar are near medium-term extremes as the market prepares for what could be the most-volatile durable goods orders report ever. The pound was the top performer Monday while the kiwi lagged. NZ trade and the Japanese services PPI are up next.  In our existing Premium Insights, 1 of our 2 EURAUD shorts hit its final target with 380 pips profit,  while our long AUDNZD long is currently netting 60 pips. The current USDCHF long is now netting 150 pips. GBPUSD and USDJPY were both stopped out. All details are in the Premium Insights.

EUR/CHF is back in focus as the sleepy pair nears the 3-year anniversary of the 1.20 floor. The growing potential for ECB quantitative easing is putting downward pressure on the pair and it fell as low as 1.2070. That's the worse level since January 2013.

The SNB has been out of the market since around that time and now the guessing game about when and where they return will begin. There were rumors of SNB bids at 1.2060 but it's likely the central bank will do all it can to stay out of the market until the 1.2010 zone.

With the ECB potentially printing and deflationary forces in Europe there is justification for weaker euro and intervention could trigger the politicization of the 1.20 floor.

USD/CAD is the other pair flirting with interesting levels. It closed at the highest level since April and is very close to breaking the 1.0986 August high. Beyond that 1.10 is a key level and a break could signal a re-test of 1.1250.

The New Zealand dollar fell Monday on political worries ahead of the Sept 20 election but economic data will be back in focus with trade balance at 2245 GMT. A deficit of NZ$475m expected. The other number to watch is Japan's Corporate Services Price Index at 2350 GMT.

Some real intrigue comes on Tuesday when US durable goods orders are due. July was a record month for Boeing orders and that will spark a huge skew in the headline number. Economist estimates range from +0.5% to +38.1%. Fade any move if it conflicts with the component for capital goods orders non-defense ex-air. The consensus is +0.2% and it aligns much better with the underlying trend in the economy.


Act Exp Prev GMT
Durable Goods Orders (JUL)
7.5% 1.7% Aug 26 12:30
Durable Goods Orders ex Transportation (JUL)
0.5% 1.9% Aug 26 12:30
Trade Balance (JUL) (m/m)
$-475M $247M Aug 25 22:45
Trade Balance (JUL) (y/y)
$1.49B $1.20B Aug 25 22:45

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