And Draghi show again: the autumn season is open

Weekly data on inventory levels of crude oil unexpectedly showed extremely sharp fall on 14.5 million barrels

Last week was active: oil fell, the dollar was nervous, the ECB promised, but all main trends are kept. On Friday the head of FRB of Boston Rozengrin categorically supported increase a rate, as determines movement of the main couples at the end of the week. Therefore now we listen so carefully performances of all characters.

The European Mario turned out not «super» again - the market heard nothing new. Policy of low rates – for a long time, the prospects of growth of the EU - are foggy, the QE program - without specific terms and figures, but in general - everything is good, all are recommended to keep calm. The line item of the ECB is clear, wait for real improvements in economy, and inflation stands still, unemployment doesn't decrease, industrial production falls many months in a row though the credits are issued to business under the minimum percent. Even the engine of the European Union - Germany - on Friday disappointed with the economic indicators again (import in July was reduced by 0.7%, and export - for 2.6%.).

The ECB have to explain somehow this enforced idleness by virtuosity and promises: there is no direct threat for the EU yet, to reduce rates there are no bases, it is not allowed to increase amounts of the redemption of assets, and the announcement of APP prolongation at the moment you will frighten nobody. So there are no reasons for growth of euro, and all attempts - only speculation.

America is in the pre-election home stretch. Next series of placement of US treasurer notes is to occur current week (slightly less, than last month), and it means that the dollar will get support. In the sense of expectations of FRS the fact is interesting that the American production index ISM which left on Thursday caused weaker reaction of dollar, than its non-productive analog though production assessment reflects status of the economy more precisely in general.

Both indexes turned out not just worse than estimation, and very bad. Production index ISM: last - 52.6, the estimation - 52.0, the fact - 49.4, composite ISM for the non-productive sphere (similarly): 55.5/55.4/51.4. It means that nearly two years not alone there are no improvements in production, but it falls every month. In any report on employment the industry loses workplaces practically every month and the non-productive sphere closes these vacancies.

FRS, obviously, knows everything, the subject is actively discussed out of official protocols, obviously, this recession in the industry is included in those future data whereby the next excuses of the Federal Reserve will be formulated. By itself, after such data from the USA a number of fans of rates raising in September will be strongly reduced. FRS still has in reserve a statistics (on September 16) on a consumer price index for August which can displace expectations of the market and create an intrigue before a meeting.

Weekly data on inventory levels of crude oil unexpectedly showed extremely sharp fall on 14.5 million barrels (thus growth by 905 thousand barrels was expected), the official reason - concerns about consequences of the tropical hurricane Germina. Experts connect it with a partial stop of works because of whole gales. In general the downward trend of oil production in the USA remains. The moment of a meeting of the largest oil-producing countries comes therefore any information on oil should be studied attentively.

Some other interesting news:

  1. The exchange Book of FRS reported about "moderate" growth in 8 of 12 regions of the USA, demand in the labor market remains active, expectations of the wages rise - within a regulation, increase in prices remained «insignificant». Risks grow only in real estate and constructions sphere - normal reaction in connection with the upcoming elections in the USA.
  2. The parliament of Ireland approved the decision of the government to challenge the decision of European Commission to fine Apple for optimization of taxes. In due time the country provided to the company illegal tax benefits to tighten Apple on the territory - today it is the mass of workplaces, infrastructure, consumption and taxes. Three years of investigations of European Commission led to the claim of compensation to Ireland more than $13 billion - all budget of health care of the country, 7 years living in a regime of economy. Nevertheless, the Minister of Finance Nunan refuse it - the country won't take money from Apple. Socialists demand to receive the money, Apple is silent so far.
  3. The head of ESM fund Regling declares that Greece executed only 2 of 15 required reforms and practically doesn't conduct privatization therefore won't receive payment this month. Nevertheless Greece promised to satisfy conditions for payment of the following tranche in the amount of €2.8 billion by October 1, the Eurogroup waits for the interim statement at a meeting on Friday.
  4. The Central Bank of Japan tries to come to consensus concerning review of monetary policy against the background of the growing shortcomings. At least, discussion of this subject is planned at a meeting on September 21. Kuroda supports more negative rates, Ivata - QE building-up, others oppose additional mitigation. Purchase of additional foreign bonds isn't discussed yet. The confusion and turmoil around intentions of the Bank of Japan developed into a sale of 30-year bonds.

The next two weeks a general background will be expectations of FRS, we don't lose sight of the English statistics, and also potentially significant meeting of the Bank of England.

EUR/USD: Intraday: resistance: (1.1260) (strong) - (1.1290/1.1300) - (1.1360/1.1370) (very strong); supports: (1.1200/1.1190) - (1.1105/1.1076) (strong) - (1.1043/1.1039) (protection of market makers). The minimum is at the level of 1.1020/1.1000. In case of breakdown up and steady trade in higher than 1.1300 following purpose there can be 1.1426. So far direction up stronger.

GBP/USD: Intraday: supports: (1.3230/1.3200) (strong) - (1.3170/1.3150) - (1.3095); resistance: (1.3300/1.3389) (very strong - 1.3350) - (1.3470/1.3490) (protection of level 1.3500). Special attention to level 1.3450 where strong resistance is formed remains.

Author: Navsher Bartash,
ForexChief Currency strategist