Dollar is stabilizing after losses and the Euro is awaiting the European Central Bank meeting on Thursday
The Dollar Index (USD/DXY) steadied after hitting a 10 month low to finish flat at 95.124 (95.11 yesterday). Friday's release of weaker than expected US inflation data had markets doubting that the Fed would raise rates again this year. Traders jettisoned the Greenback in favor of it’s Rivals.
The Australian Dollar starred, testing at over2 year highs on the back of robust Chinese GDP data. Emerging Market assets and currencies rose.
China Q 2 GDP was 6.9% against expectations of 6.8% and Q1’s 6.9%
China June Industrial Production – rose to 7.6% from the previous 6.5% and a forecast 6.5%
China June Retail Sales – climbed to 11% from 10.7%
Euro Zone Final CPI – printed at 1.3% from the previous 1.3% and a median forecast of 1.3%.
US Empire State Manufacturing Index for June – printed at 9.8 vs expectations of 15.2
Wall street stocks retreated. The US S&P 500 slipped to close down 0.03%.
Treasury prices gained while yields slipped further. The yield on the benchmark US Ten year bond closed down 2 basis points at 2.31%. The German Ten Year bund yield finished at 0.58% from 0.59% yesterday.
EUR/USD – saw a mild rally to close at 1.1479 from 1.1468 yesterday.
GBP/USD – weakened to finish at 1.3057 from 1.3105. Brexit negotiations resumed.
AUD/USD – soared to trade at 0.7839, over2 year highs before retreating to close at 0.7798.
USD/JPY – ended little-changed at 112.62 from 112.52 yesterday.
NZD/USD – retreated from an overnight high of 0.7361, finishing at 0.7325 (0.7348 yesterday).
Outlook: The Dollar will consolidate as traders await key inflation data and central bank meetings this week.
New Zealand Q 2 CPI (quarterly and annually) – coming out soon (GMT 10.45 pm, July 17, Local Time 8.45 am, June 18) – Q/Q is forecast at 0.2% from the previous 1.0%. The annual rate is expected at 1.9% from the Q1’s 2.2%.
The RBA releases it’s meeting minutes from July 4) – (GMT 1.30 am, July 18/Local Time 11.30 am, July 18) –
UK Q2 CPI (monthly and annually) – (GMT 8.30 am, July 18/Local Time 6.30 pm, July 18) – Median expectations for the annual CPI are at 2.9% which is the same as the previous number.
German ZEW Economic Sentiment Index – (GMT 9 am, July 18/Local Time 7 pm, July 18) – forecast range is from 17.8-18.0 from previous 18.6
Trading View: Inflation data from New Zealand and the United Kingdom will impact the Kiwi and Sterling. The Bank of Japan and the European Central Bank hold their policy meetings tomorrow. The RBA releases it’s meeting minutes from the last meeting which was on July 4. Apart from the data, market positioning will also determine the currency’s moves.
NZD/USD – The Kiwi slumped to 0.7275 from 0.7322 after a flat (0.0) NZD Q2 CPI quarterly print (vs a forecast of 0.2%). Annualized NZD rate of inflation fell to 1.7 % from Q1’s 2.2% and a median forecast of 1.9%. Current immediate support lies at 0.7260. The previous short term support level of 0.7300 cents is now resistance. The Kiwi speculative market is long and we could see a further slide in the NZD/USD to 0.7230 if we break 0.7260.
AUD/USD – after trading to over 2 year highs (0.7838) the Aussie retreated to finish at 0.7798. Robust Chinese economic data yesterday saw iron ore prices soar over 5%. Copper and zinc also had strong price rises which enabled the Australian Dollar to test highs. The RBA releases the minutes of it’s recent July 4 meeting today. Traders will scrutinize the minutes and search for any clues as to whether the Australian central bank is about to switch from it’s neutral stance. Market positioning is not extreme although the specs are long. There is immediate support at 0.7780 and 0.7760. Near term resistance has formed at 0.7810. It’s time to get cautious up at these levels when some commentators are calling 0.80 to 0.81 cents. Not long ago there were calls for 0.60 cents.
EUR/USD – struggled to gain higher in spite of a strong bullish sentiment. Euro zone CPI was as expected at 1.3%. Traders now shift their focus on Thursday’s ECB meeting. While the bullish sentiment for the Single currency is strong, speculative Euro longs are at 6 year highs. This is an extreme. Strong resistance lies at 1.1490/1.1500 while immediate support is found at 1.1440. Likely range today 1.1445-1.1495.
GBP/USD – retreated as Brexit negotiations resumed. Sterling’s rise above 1.3100 proved short-lived in spite of the US Dollar’s weakness. Tonight’s UK annual Q2 inflation rate is expected at 2.9%, the same as Q1’s 2.9%. Anything less than that could see the Pound lose ground against the US Dollar and other Rivals. Immediate resistance lies at 1.3080 and 1.3100. There is short term support at 1.3030 and 1.2980. Likely range today 1.3030-1.3080.
USD/JPY – saw mild gains to close at 112.62 from 112.52 yesterday. The support at 112.30/40 level is strong (overnight low was 112.33). Immediate resistance has formed at 112.90/113.00. The Bank of Japan is not expected to change it’s policy settings in it’s meeting this Thursday. Likely range today 112.30-113.00
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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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