Your forexlive.com ENewsletter

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• USD/JPY climbs higher as dollar finds a footing
• Bean says QE reamins an option for Bank of England
• Hint from the Fed’s Williams on where tapering will be focused
• This is the headline the Bernanke didn`t want to see
• Talk that rising rates are undercutting housing recovery
• Fed’s Williams expects ‘significant’ uptick in GDP later this year and in 2014
• Nearby orders as the US dollar rout continues
• US dollar slumps and gold breaks out after new home sales crumble
• European August consumer confidence -15.6 vs -16.5 expected
• US July new home sales 394K vs 487K expected
• S&P 500 treading water, technical analysis
• Windows 8 is terrible, Steve Balmer finally falls on his sword
• Normal is getting worse and worse
• BNP still forecasting big GBP/USD decline, says Carney will be dovish
• Canada July CPI +1.3% vs 1.4% expected
• Fed’s Bullard sees no rush to taper
• Fed’s Lockhart ‘would be supportive’ of Sept taper if data strong
• Cable still clinging to support around 1.5550
• UK’s Hague says chemical weapons attack in Syria perpetrated by supporters of Assad
• US Fed’s Lockhart sees GDP growth of 2-2.5% for remainder of 2013

USD/JPY climbs higher as dollar finds a footing Posted: 23 Aug 2013 09:27 AM PDT USD/JPY was able to slide one pip below a thick set of bids at 98.40 but no lower. The pair has turned around to 98.73 as we see some back-and-fill heading into the weekend. For ‘dead’ Summer week there were some pretty good moves over the past 5 days. It will get even better from here and the fireworks will next week. No one will want to show bond on month-end books and understaffed desks will begin to wake up to the stress in emerging markets.

Bean says QE reamins an option for Bank of England Posted: 23 Aug 2013 08:54 AM PDT Forward guidance is an evolution at BOE Clear guidance is a useful policy tool Not surprised by long Gilt response to Fed UK recovery to continues in the second half He spoke with CNBC.

Hint from the Fed’s Williams on where tapering will be focused Posted: 23 Aug 2013 08:50 AM PDT Speaking in an interview with Bloomberg TV, the Fed’ Williams says the MBS part of QE is ‘obviously’ helping. Look for a disproportionate taper in Treasuries.

This is the headline the Bernanke didn`t want to see Posted: 23 Aug 2013 08:38 AM PDT ‘Economists in Jackson Hole Say QE Less Potent Than Fed Believes’ – Bloomberg This is some great Monday morning quarterbacking from the economists in academia. The wonks have now decided, with the Fed balance sheet at $3.65 trillion and nearly at its peak that maybe this wasn’t such a great idea. "The portfolio balance channel of QE works largely through narrow channels that affect the prices of purchased assets, with spillovers depending on particulars of the assets and economic conditions," Northwestern University finance professor Arvind Krishnamurthy and University of California-Berkeley professor Annette Vissing-Jorgensen wrote in the paper. "It does not, as the Fed proposes, work through broad channels such as affecting the term premium on all long-term bonds."   Here is the full story.

Talk that rising rates are undercutting housing recovery Posted: 23 Aug 2013 08:00 AM PDT There is some chatter that the drop in new home sales is a reflection of higher US mortgage rates. This week the 30-year fixed rate rose to 4.58% from 4.40%. Relief may be coming quickly as the bond market starts to have a re-think on tapering. Yields are dropping fast with 10-year yields down to 2.84% from 2.92% before the data. US 10-year yields intraday The downdraft in yields is pulling down USDJPY.

Fed’s Williams expects ‘significant’ uptick in GDP later this year and in 2014 Posted: 23 Aug 2013 07:52 AM PDT San Fran Fed President Williams appeared on CNBC: Market expectations are largely in line with the Fed Low level of inflation a concern but progress encouraging Current level of bond purchases by Fed doesn’t create any dysfunction in financial markets CNBC will also interview Bank of England chief economist Charles Bean at about 11:25 ET (1525 GMT).

Nearby orders as the US dollar rout continues Posted: 23 Aug 2013 07:38 AM PDT The dollar is under assault as a slump in new home sales point to a muddling economy. The first taper might not be pushed back beyond September but it may be a token move and the horizon for QE could be extended. USD/JPY low of 98.47 was bid up by strong real money demand that extends to 98.40. It suggests buying the dip here with a tight stop. More demand at 0.98.10/00 EUR/USD the 20-week MA at 1.3386 broke. Offers at 1.3400 with stops above. Strong offers from 1.3410-20. AUD/USD medium sized offers at 0.9045/50 more at 0.9075/80 Gold is through the mid-June highs with resistance at $1400 and the June high of $1425

US dollar slumps and gold breaks out after new home sales crumble Posted: 23 Aug 2013 07:09 AM PDT EUR/USD rose to a session high of 1.3374 after the 13.4% drop in new home sales. Gold catapulted above resistance at $1384 to $1389 which is the highest since mid-June. This pretty much sums up the market’s reaction.

European August consumer confidence -15.6 vs -16.5 expected Posted: 23 Aug 2013 07:02 AM PDT Data from the European Commission: Prior reading was -17.4 Best reading in two years

US July new home sales 394K vs 487K expected Posted: 23 Aug 2013 07:00 AM PDT Prior revised to 455K from 497K Prior three months were all revised lower Month’s supply rose to 5.2 from 4.3 Huge miss in home sales, falling 13.4% compared to a 2% decline expected. New home sales rolling over

S&P 500 treading water, technical analysis Posted: 23 Aug 2013 06:43 AM PDT The S&P 500 climbed back above the 55-day moving average with a 4 point gain shortly after the open. I expect resistance in the 1676 zone to cap any rebound as tapering and 10-year yields near 3% continue to add uncertainty. I look for an eventual test of the zone of support between 1617-1635. SP 500 daily chart with 55-day and 100-day moving avgs

Windows 8 is terrible, Steve Balmer finally falls on his sword Posted: 23 Aug 2013 06:07 AM PDT Microsoft CEO Steve Balmer announced he will step down within 12 months after repeated failures in just about everything the company has tried in the past two years. You know you’re a bad CEO when Microsoft shares rise as much as 8.2% on your retirement announcement.

Normal is getting worse and worse Posted: 23 Aug 2013 06:02 AM PDT The new normal of 2% US growth has just been downgraded by economists at JPMorgan. They say the new, new normal is long-run US growth of 1.75%. The "U.S. future isn't what it used to be," said Michael Feroli, chief U.S. economist at JPMorgan in New York. Declining productivity gains and a slower expansion of the labor force "should limit the U.S. average growth pace" in the long run. Feroli cites an aging workforce and lower productivity. The current consensus for 2013 is 1.60% and 2.70% for 2014. With the Fed basically out of bullets and Congress utterly dysfunctional it’s growing difficult to see how 2014 will be much better than this year.

BNP still forecasting big GBP/USD decline, says Carney will be dovish Posted: 23 Aug 2013 05:48 AM PDT FX analysts at BNP re-iterated their expectations for a big drop in cable this year, targeting 1.43 at year end (spot at 1.57). They say Carney will push back against rising UK yields with dovish rhetoric and the focus on upbeat UK data will fade. Rather than cable shorts, they prefer to take advatage of pound weakness with EUR/GBP longs.

Canada July CPI +1.3% vs 1.4% expected Posted: 23 Aug 2013 05:30 AM PDT Prior was 1.2% exp Overall CPI at 123.1 vs 123.2 exp Core CPI 1.4% vs 1.5% y/y exp Core CPI 0.0% vs 0.1% m/m exp Nothing is working for the Canadian dollar these days as USD/CAD rises for the sixth consecutive day, touching 1.0569 but it has quickly come off, down to 1.0546. relentless USDCAD as shown on the hourly chart

Fed’s Bullard sees no rush to taper Posted: 23 Aug 2013 05:18 AM PDT St. Louis Fed President Bullard says the FOMC need not be ‘in any hurry’ to taper QE and that the Fed should take its time when assessing QE taper. Bullard dissented at the June FOMC because of disinflation concerns. Update: Bullard adds that QE3 has been very successful in easing market conditions but the effect on the economy has been less clear. That comment speaks to the academic debate on the effectiveness of QE that’s the underlying focus at Jackson Hole. I wouldn’t say conditions were tight at the start of QE3.

Fed’s Lockhart ‘would be supportive’ of Sept taper if data strong Posted: 23 Aug 2013 05:17 AM PDT Lockhart doesn’t have a vote this year ‘Confident’ in moderate growth path for US I can’t anticipate what Fed will do in Sept First step to taper is not pledge to final end The usual wait-and-see rhetoric.

Cable still clinging to support around 1.5550 Posted: 23 Aug 2013 05:10 AM PDT Buy orders at 1.5550 now soaked up Low traded so far 1.5547 but the under-pressure pound is hanging on for dear life still at 1.5550 General USD demand still adding to the pair’s woes as is EURGBP which is still trying to chew through the raft of offers through to 0.8630 USDJPY having another look upstairs  at 99.10 ahead of the strong sell interest between 99.20-50 that I’ve been highlighting

UK’s Hague says chemical weapons attack in Syria perpetrated by supporters of Assad Posted: 23 Aug 2013 05:01 AM PDT will seek stronger mandate from UN if inspectors not allowed to investigate attack site in coming days says the attack is not something the civilized world can ignore You can follow the ongoing Syria thread here

US Fed’s Lockhart sees GDP growth of 2-2.5% for remainder of 2013 Posted: 23 Aug 2013 04:52 AM PDT Being interviewed on CNBC needs to see data showing ” sustainable”economic growth in order to reduce QE3 in september too early to tell whether recent private-market rate rises will create economic contraction pending leadership change at Fed is not a factor in policy-setting More of the same from the dovish Lockhart

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