FX Updates today via the FXWW Chatroom

GS:
G10 FX SPOT TRADER VIEWS
POSITIONING => We maintain our short EURUSD and short NZDUSD. We took profit in our short NZDJPY position.
Short EURUSD => The pair should stay rangy for the time being with support at 1.2605 and any move towards 1.2690/1.2700 is a good opportunity to sell. S/L at 1.2800 (above 1.2791 last week’s high).
Flat USDJPY => Levels to watch: first support at 106.76 (overnight lows) with resistance at 107.60 then 108.20. We took profit in our short NZDJPY on the break of the 84.00 level.
Short NZDUSD => Levels to watch: support at 0.7795 (week lows), and on the topside resistance at 0.7920/30.
Flat AUDUSD => Levels to watch: big supports at 0.8652 (week lows) then 0.8643 (YTD lows). First resistance at 0.8820/30.
Flat GBPUSD => First support to watch in case of disappointing UK weekly earnings this morning: 1.5855 (Nov 2013 lows). Any spike above 1.5950 should be a good opportunity to sell. Big resistance at 1.6010.
 
DB on energy and impact on economy 

How much will falling gasoline prices aid household cash flow?
Commentary for Wednesday: September retail sales are a first tier economic release, accounting for roughly one-quarter of total consumer spending. As always, watch for revisions, as they can be quite sizeable. Headline retail sales are expected to be unchanged in the month, dampened primarily by projected declines in motor vehicle and gasoline sales, the latter of which is due to falling prices. As we discuss below, this should be a boon to US households and is a reason why we see the economy maintaining noticeably above-trend second half real GDP growth. Retail sales ex motor vehicles and gasoline are estimated to rise a moderate 0.4%, aided by iPhone 6 sales, which could add a couple of tenths to overall retail sales. Sales of the iPhone would show up mostly in the electronics/appliances stores category.

After peaking at around $3.70 per gallon around the end of June, retail gasoline prices have fallen sharply. As of October 6, gasoline prices were down to $3.30 gallon. If sustained, this 40 cent decline in prices will give US households a significant lift to their cash flow. How much of a boost to cash flow will consumers see? According to our calculations, every one cent annual change in gasoline prices is worth approximately $1 billion in annual US household energy consumption. This can be seen in the chart below, which shows a near perfect one for one change between the two series. For example in 2009, gasoline prices fell 91 cents and household energy consumption was down $105 billion. In the following year, gasoline prices rose 44 cents, and energy consumption was up $49 billion. In 2011, gasoline prices increased 74 cents and household energy spending went up $76 billion. Over the last two years, there has been little movement in energy prices and hence household energy spending. The bottom line is that if the current 40 cent decline in energy costs is maintained, then consumer cash flow would improve by roughly $40 billion; 

USDCAD has traded to levels not seen since July 2009 this morning as Asia reacts to another large sell-off in Oil overnight, with crude down over 4% as our commodities team highlight the move sliding through put strikes and further –‘ve gamma.  The price of Oil (WTI) has closed the gap to the start of the year when geopolitical tensions sent it rising and places it at a key juncture where further declines would threaten capital spending in the Canadian resource sector and could impact the growth outlook for 2015-16 as a result.  Technically, the move shows signs of a further continuation down to at least $75/bbl where stand-alone mine projects become unprofitable and some in-situ projects become too costly (current industry estimates are for $85-55/bbl break even).  APAC G10 FX trading expect this to be another catalyst for USDCAD to trade much higher with BofAML’s year-end target of 1.1400 within striking distance.
Cad$..barrier at C$1.1350… C$1.1364 highlighted, corresponds to US$0.88c 
MNI… CHINA: The Chinese government isn’t going to respond with stimulus to
September’s steeper-than-expected fall in inflation, government sources have
told MNI. They said the consumer inflation picture is set to improve in the
final months of 2014 thanks to base effects, seasonal factors and signs of
rising sequential inflation, dismissing any market talk about the threat of
deflation. 

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