Dollar Falls against the Currencies and Turkish Lira is falling again and the markets are waiting for heavy economic events this week
The Dollar fell across the board as speculative long bets headed for the exits. Market positioning from the latest CFTC/Reuters report saw net total long US Dollar bets at their largest since Q1 2017. Optimism on US-China trade talks proved the catalyst for the Greenback’s reversal. Emerging market currencies ended mixed with the Turkish Lira weaker and the Chinese Yuan stronger.
Outlook: While today’s data calendar is light, the week ahead sees monetary policy meeting minutes from the RBA (tomorrow), the Fed (Wednesday) and ECB (Thursday). The week culminates with the Fed’s annual Jackson Hole conference on Friday. Against the backdrop of the calm and majestic Wyoming mountains, the world’s top central bankers and finance ministers attempt to fix the globe’s rocky setting and Emerging market turmoil. This year’s conference could be huge for the markets amid the current background. I’ve enclosed below a brief on what Jackson Hole is
What is the Jackson Hole Symposium ?-The Jackson Hole Economic Symposium is an annual symposium, sponsored by the Federal Reserve Bank of Kansas City since 1978, and held in Jackson Hole, Wyoming, since 1981. The symposium focuses on an important economic issue that faces the U.S. and world economies. Participants include prominent central bankers and finance ministers, as well as academic luminaries and leading financial market players from around the world.
The symposium proceedings are closely followed by market participants, as unexpected remarks emanating from the heavyweights at the Symposium have the potential to affect global stock and currency markets.
Trading View: The Dollar’s reversal which began Friday has further to go. The latest CFTC/Reuters report (week ended 14 August) showed that total net speculative Dollar longs are at their largest since early 2017. Speculators were long of the Greenback against every individual major currency on the report (EUR, JPY, AUD, GBP, CAD, CHF, NZD).
The data calendar is light today. Data released on Friday saw New Zealand Producer Prices and Canada’s inflation numbers beat forecasts. While the US University of Michigan Consumer Sentiment Index came in weaker than expected.
USD/DXY – The Dollar Index closed 0.53% lower at 96.132 (96.587 Friday). After trading to 96.984 on Thursday, the weight of long Dollar bets pushed the Index lower. Overnight low traded was 96.092. We can find immediate support at 96.00 and then 95.75. Immediate resistance lies at 96.20/30. The reversal from the high just under 97.00 could see the Dollar Index correct further to 95.50 where the topside break-out began. Likely range today 95.85-96.35. Prefer to sell rallies.
AUD/USD – Aussie shorts chased the Battler higher to an NY close of 0.7315, up 0.67 % from 0.7263 Friday. Commodity prices extended their rally with Copper gaining a further 0.3%. AUD/USD traded to an overnight high of 0.73193 overnight. The immediate resistance can be found at 0.7320, followed by 0.7350. Immediate support lies at 0.7290 and then 0.7260. The latest CFTC/Reuters report saw net speculative Aussie shorts pared to -AUD 51,783 contracts from -AUD 54,540. The total number of short bets are still the largest since November 2015. That’s huge and we could potentially see further short-covering back to 0.7450/0.7500. Today should see a likely range of 0.7285-0.7345 with the preference to buy on dips. RBA meeting minutes from their last meet are due tomorrow.
EUR/USD – had a good bounce back to 1.14448 overnight from 1.1378 Friday. EUR/USD closed at 1.1442 in New York, not far from its highs. Euro Zone CPI data released Friday were exactly as forecast. The weaker trend of Euro Area data has stopped for the time being… Tomorrow sees French, German and Euro area Manufacturing PMI’s as well as the ECB Meeting minutes on Thursday. EUR/USD has immediate resistance at 1.1450 and then 1.1480 followed by 1.1500. A corrective move back to 1.1500 cannot be ruled out. The first break lower from 1.1500 ended briefly at today’s current rate of 1.1445. Immediate support can be found at 1.1400 and then 1.1380. Look for consolidation with today’s likely range 1.1390-1.1460. Prefer to buy dips.
USD/JPY – slip-sliding away. The Dollar closed at 110.53 in New York, down 0.49% from Friday’s 110.92. Overnight low traded for USD/JPY was 110.315. Immediate support can be found at 110.30 and then 110.10. Immediate resistance lies at 110.70 and then 111.00. The Japanese will have much on their minds as they prepare for Jackson Hole. Japan’s exports to the US slumped 5.2% in July. Trump’s best friend today remains Japanese PM Shinzo Abe. Car exports to the US plummeted over 12 % even before Trump’s 25% tariffs have been enacted. With that kind of numbers on the trade front, Japan will not want to see its currency depreciate any further. Likely range today 110.00-110.70. Look to sell rallies.
GBP/USD – Brexit headwinds continue to dog the Pound which managed a mild rally against the overall weaker Dollar to 1.2752 from 1.2717 Friday. GBP/USD traded to an overnight high of 1.27527 which is not far from current levels. Immediate resistance can be found at 1.2760 and then 1.2790. Immediate support lies at 1.2725 followed by 1.2705. Latest UK retail sales data has shown some momentum come back to the British economy. Look for a likely range today of 1.2710-1.2810. Prefer to buy dips, with a bigger squeeze of shorts closer to reality.
USD/ZAR – The rand remained volatile on Friday morning, first strengthening by 0.75% before weakening by 1.7% to briefly trade under R15/$.
The local currency, which has been experiencing large swings in recent days on the back of broad emerging market weakness and local economic concerns, opened at R14.73/$ and strengthened to R14.62/$ before falling back to change hands at R14.80/$ at 10:54. In then quickly lost 20c to the dollar to fall under R15/$ before pulling back to trade at R14.94 at 11:29.
Events and economic data releases for the week ahead: Tuesday: RBA Meeting Minutes; UK Public Sector Net Borrowing. Wednesday: NZD Headline and Core Retail Sales (July); Canadian Headline and Core Retail Sales for July; US Existing Home Sales; FOMC Meeting Minutes. Thursday: French, German Manufacturing and Services PMI, Euro Zone Services PMI; ECB Monetary Policy Meeting Accounts; US Flash Manufacturing and Services PMI and New Home Sales. Friday: Jackson Hole Symposium starts; NZ Trade Balance, US Headline and Core Durable Goods Orders. Fed Chair Jerome Powell to speak at the Jackson Hole conference.
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