Dollar down after Yellen testifies

Dollar down after Yellen testifies

Dollar down after Yellen testifies

 

  Janet Yellen’s dovish slant returned in her testimony to Congress even as she expressed optimism on the economy. Stocks soared and yields fell. The Dow closed at a fresh record high. Yellen emphasized the Federal Reserve’s gradual approach to monetary policy with inflation remaining persistently below target.

The Bank of Canada raised it’s deposit rate by 0.25 % to 0.75% as expected. It was the first rate rise in seven years.

The Dollar Index (USD/DXY), a measure of the US Dollar against a basket of foreign currencies finished flat at 95.76. The Euro which is 57% of the basket closed lower. The US Dollar fell against most of it’s Rivals.

The yield on Ten Year US Treasuries dropped four basis points to 2.32%. In contrast, the German Ten year bund yield closed higher at 0.57% from 0.54% yesterday.

UK Unemployment in June fell to 4.5% from 4.6%.
UK Claimant Count Change (the number of people 
claiming unemployment related benefits) fell to 6,000 against a forecast of 10,500 and a previous 7,500. The improvement in the jobs numbers buoyed the Pound.

The Federal Reserve Beige Book Economic Survey – mostly positive, citing

slight to moderate economic growth in recent weeks.

EUR/USD – finished down 0.55% at 1.1415 (1.1467 yesterday). The Euro traded to 1.14895 highs.
GBP/USD – rose to close at 1.2990 (1.2948 yesterday) buoyed by the improvement in UK Jobs.
USD/JPY – slipped 0.46% to 113.23 (113.93). Japanese Ten Year JGB yield was steady a 0.08%.
USD/CAD – slumped to close down 1.23 % at 1.2750 (1.2920 yesterday) after the BOC hiked rates.
AUD/ USD – closed at 0.7677 (0.7637 yesterday). The Aussie closed higher for the fourth day running and all but erased losses following the RBA meeting.
USD/MXN – finished at 17.7800 from 17.9050 yesterday. The Emerging Market currencies all finished higher against the US Dollar. Emerging Market Equities rose.

Outlook: The rest of the currency world played catch-up to the Euro after Yellen’s dovish slant. Yellen Part 2 continues with her semi-annual testimony to the Senate Banking Committee. She is likely to reinforce what she already told markets.

The Federal Reserve’s Beige Book Economic Survey results provided the Dollar with support into the close.
Data out today:
China June Trade Balance – (GMT 3.30 am, July 13/Local Time 1.30 pm, July 13) – In USD terms, the Surplus is expected to improve to +USD 42.44 billion from USD 40.81 billion.
Total Exports are expected flat at 8.7%
Total Imports are forecast lower to 13.1% from 14.8%.
German Final CPI June – (GMT 6 am, July 13/Local Time 4 pm, July 13) – expected 0.2, unchanged from previous 0.2%
US June PPI (Headline) – (GMT 12.30 pm, July 13/Local Time 10.30 pm, July 13) – forecast 0.0 from 0.0.
US June PPI (Core) – (same time as Headline PPI) – forecast 0.2% from 0.3%.
US Weekly Jobless Claims – (same time as PPI data) – forecast 245,000 from 248,000.

Trading View: The Dollar had a more broad-based decline after Yellen’s testimony. The Fed’s Beige Book was viewed as mostly positive and gave the Dollar support at the close. It’s difficult to see much more downside to the Greenback. We can expect the recent trading ranges to hold until more economic data is released. Friday sees crucial US Retail Sales data.

EUR/USD – closed lower in spite of a narrowing gap in the yield differentials. The Euro feels exhausted from the price action. This may be the beginning of a corrective pull back lower. There is resistance at 1.1480/90 (overnight high of 1.14895). Immediate support lies at 1.1390, near last night’s low. There hasn’t been much Euro economic data out lately. Next week sees crucial Euro zone final CPI. Likely range today 1.1370-1.1430. The specs are still long. Prefer to sell Euro rallies.

 

EUR/USD

 

USD/JPY – We could see more downside first. Good support lies at 112.80/90 (overnight low of 112.927). There is immediate resistance at 113.50 and then 113.70. While the US Ten year yields dropped 4 basis points to 2.32%, it’s Japanese counterpart (US 10 year JGB) was flat at 0.08%. This should limit any Dollar gains above 114.00 for now. Likely range today 112.80-113.40.

 

USD/JPY

 

GBP/USD – the rally against the US Dollar failed to clear 1.2900 in spite of the better UK Unemployment data. The uncertainty of Brexit on the economy has been highlighted by some BOE officials. This has offset the recent hawkish bent of their colleagues. Sterling has good support at 1.2840 and at 1.2810. Resistance is found at 1.2910/20 (overnight high was 1.2907). Likely range 1.2860-1.2920.

 

GBP/USD

 

AUD/USD – closed higher, grinding up in true Aussie fashion. The overnight high was 0.7682, falling Just short of crucial resistance at 0.77 cents. The Australian Dollar has benefited from twin supports of higher metals and a lower US Dollar. Last night Copper and other metals steadied. AUD/USD has immediate support at 0.7630 (overnight low was 0.76346). The breakdown of today’s Chinese trade numbers could impact the Aussie. The resistance at 0.77 cents is unlikely to break unless we see a much weaker US Dollar and much higher metals from here. Likely range 0.7630/90.

 

AUD/USD

 

NZD/USD – Immediate resistance lies at 0.7280 (overnight high of 0.72806). There is immediate support at 0.7260 and 0.7240. The move down that began on Tuesday does not appear to be over with. This was most likely a liquidation of longs. It’s likely that more lies ahead. Likely range today 0.7220/70. Prefer to sell rallies

 

NZD/USD

 

 

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***Information contained in this news letter are gathered from third parties and should not be regarded in any way as trade advice or recommendations by CM Trading. CM Trading does not recommend or advise traders or investors in their decision making, but merely provides information from the market for its clients as additional information being made available as per the events occurring in the financial markets.

 

 

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Trading Foreign Exchange (Forex) and Contracts for Differences (CFD’s) is highly speculative, carries a high level of risk and may not be suitable for all investors. You may sustain a loss of some or all of your invested capital, therefore, you should not speculate with capital that you cannot afford to lose. You should be aware of all the risks associated with trading on margin.

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