2 Days Of Central Banks

August is seasonally one of the worst months in Wall Street and on the currency front, commodities and emerging currencies are suffering while JPY is strengthening. Therefore we should carefully look at the meeting of July 31st of the Federal Reserve, when the FOMC will have to afford clarity to markets about what will happen in September to the Quantitative Easing. Tapering or not, the week will also be full of relevant macroeconomic data including the ISM manufacturing on August 1st and Non Farm Payrolls on August 2nd. These will be joined by other important data on employment (July 31st ADP survey and weekly requests for subsidies), consumer confidence (July 30th) and the real estate market (homes for sale on July 29th and Shiller home price index on July 30th ).

IT’S THE TURN OF THE ECB AND THE BOE

In addition to the Fed, the Bank of England and especially the ECB will also provide new material to give volatility to the currency market. If the Boe will also have to be clear about its own QE, the ECB may include market liquidity measures aimed at making more credit available to businesses. Among the most important macroeconomic data, inflation in Euroland on July 31st and the confidence of businesses and consumers on July 30th.

THE EFFECTS OF THE SEASONALITY OF AUGUST

Last week we mentioned the very favorable seasonality of Jpy in August and the data during these weeks as unemployment, retail sales and industrial production could provide some form of support for the Japanese currency. Furthermore, EUR/NOK closes its exceptional seasonal trend (down 10 times in the last 10 years and unless unexpected trend reversals it should close at 11 out of 11), a drop of more than 1% in this July 2013, in line with the historical average of seasonal appreciation. At this point, however, the EUR/NOK correction is becoming quite interesting and the coming week might provide some bullish opportunities thanks to unemployment and PMI manufacturing. Using the technique of Ichimoku cloud, it is really on the support.

TRADE OF THE WEEK

August is a very negative month for the South African rand too, as over the last 10 years USD/ZAR rose 9 times by an average of 1.9%. So we just get to this seasonal window with USD/ZAR on the support and it is not unlikely that a bear trap occurs, as already happened during this solid bull market. On August 1st, the important data on the business confidence Kagiso will be published and the day before the data on the trade balance. These market movers could clarify the intentions of USD/ZAR in the medium term, but we could certainly try to go long here. The same consideration can be made for EUR/ZAR whose fall could at most reach area 12.50 before a trend reversal.