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All eyes on the USD/CHF downtrend

Four key markets in focus today.

USD/CHF

USD weakness has been seen most pronounced against the CHF. The pair is in a downtrend and after having hit a low of 0.9079, it could be eyeing a test of the year’s low of 0.9022. Daily stochastics are showing oversold readings at present, so we feel selling rallies to 0.9150 could be the way to go. Rebounds have been fairly limited at present; therefore the risk is the pair doesn’t trade to our suggested limit in the short-term.

GBP/USD

At 18:30 we get the final read on UK Q2 GDP and the market is expecting no change to the previous read of 1.5% growth (year-on-year). We also get readings on Q2 current account balance and the market is looking for a slight narrowing of the deficit to $11 billion. A number lower than this on the current account balance could put upside risks in to future GDP reads and therefore cable could rally back above 1.61.

US 500 cash

The S&P 500 cash market has now fallen for five straight days, although it has only dropped 2.1% in the process. This is the smallest five day decline since February 2004. In upcoming US trade we get the weekly jobless claims (expecting a slight uptick to 325,000 fresh claims), Q2 GDP revisions (anticipating 2.6% year-on-year growth), pending home sales (expecting 6.3% growth). We also get to hear from the Fed’s Jeffrey Lacker. The fiscal issues are still very much the key subtracter of sentiment right now and unless an agreement by Monday the government will have to reduce its services from Tuesday.

National Australia Bank (NAB)

Trade flows into NAB were the talk of the desk yesterday, given the stock rallied 2% on no news flow. The trend is clearly up and looking at daily MACD, RSI and stochastics, trying to short sell this name is fraught with risks given the power behind the move. Value-focused investors will be shying away from this name though given it’s trading on 13.2x forward earnings, a significant premium to its long-term average; at $35.30 it is trading 1% above the consensus twelve month price target.

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