Dollar still on ten month lows while AUD gains, Euro waiting ECB today
The Dollar Index (USD/DXY) rose from ten month lows to 94.82 from 94.66 following stronger US Building Permits and Housing Starts data. European and Emerging Market currencies retreated against the Greenback, the Yen ended little-changed while the Aussie rally extended.
US June Building Permits rose to 1.25 million units, higher than the expected 1.22 million units.
US Housing Starts in June rose 8.3 % to 1.22 million units against a forecast of 1.16 million.
US Crude Oil Inventories dropped -4.7 million barrels from the previous -2.6 million barrels.
Global stocks rose as risk appetite increased. The US S&P 500 closed up 0.45% after hitting a fresh all-time high.
The yield on the US Ten Year Treasury bond climbed 1 basis point. The German Ten Year Bund yield slipped to 0.54% from 0.55%. The Japanese Ten Year JGB yield was unchanged at 0.07%.
EUR/USD – slipped 0.3% to close at 1.1517 (1.1555 yesterday). The Euro traded to 1.1556 highs.
USD/JPY – finished little-changed at 111.90 from 112.04 yesterday.
AUD/USD – closed up at 0.7955 (0.7920 yesterday), supported by an increase in risk appetite.
GBP/USD – ended lower at 1.3023 from yesterday’s 1.3043. UK Retail Sales data is released later.
Outlook: Traders will turn their attention to the Bank of Japan and European Central Bank rates meetings today. Australian Employment and UK Retail Sales data are also due out later. The Dollar has fallen a long way in a short period of time due to weak economic data, benign inflation and an administration struggling to implement it’s policy. This has enabled the Euro to trade to it’s highest since August 2015. The Australian Dollar traded to an overnight high of 0.7959, which was last traded in June 2015. The Dollar has fallen over 7 % in 2017. The negative Dollar sentiment is still strong. Speculative positions in the Euro and Kiwi are overextended. The Australian Dollar is not far behind.
Events and Data Out Today:
Australian Employment Change (June) (GMT 1.30 am, July 20/Local Time 11.30 am, July 20) – Forecasts +14,500 from May’s +42,000. The forecast for the Unemployment Rate is 5.5-5.6% from the previous 5.5%.
National Australia Bank’s Quarterly Business Confidence Diffusion Index for Q2 (same time as Australian Jobs data) is also released. The previous reading was 6.
The Bank Of Japan Policy Rate and Statement as well as the BOJ Economic Outlook (GMT 2 am, June 20/Local Time 12 pm, June 20). The BOJis expected to maintain it’s Policy Rate at -0.1%.
The Bank Of Japan Press Conference (GMT 6.30 am, July 20/Local Time 4.30 pm, July 20)
UK June Retail Sales (GMT 8.30 am, July 20/Local Time 6.30 pm, July 20) – Month on month retail sales is forecast to rise to +0.4% from the previous -1.2%. The Annual Rate is expected to print at 2.5% from the previous 0.9%.
The European Central Bank Minimum Bid Rate Decision (GMT 11.45 am, July 20/Local Time 9.45 pm, July 20) – The ECBis expected to keep its minimum bid rate at 0.00%
The ECB Press Conference (GMT 12.30 pm, July 20/Local Time 10.30 pm, July 20)
Trading View: Markets are in for volatile 24 hours. Bearish Dollar sentiment is at its highest since April 2009. At the beginning of the week, we highlighted the extreme nature of speculative positioning in the Euro and New Zealand Dollar. Clearly these are overextended. Conditions are ripe for a correction. The events and data releases today could be the catalyst for this corrective move.
EUR/USD – slipped at the close to 1.1517 after trading to an overnight high of 1.15562. Markets will look to the ECB for any clues to the fate of its ultra easy monetary policy. Some expect the ECB to adjust its language as it gets closer to normalising policy. Given the recent strength of the Euro, Draghi may refrain from delivering anything concrete in terms of tapering. EUR/USD has resistance at 1.1560 with immediate support at 1.1500. Speculators are overextended in the Euro and the conditions are ripe for a correction. Likely range until the ECB 1.1460-1.1540.
AUD/USD – climbed to 0.7959. highs not seen since early June 2015. The Australian Dollar has also soared on its Trade Weighted Basis to 67.30 from 64.70 (June 22). AUD/TWI is at the highest since December 2014 (when it was at 67.10). Market sentiment is extremely bullish on the Aussie with some calling it to 0.81 cents. Like the Euro, the Aussie is ripe for a correction. Any disappointment on the Jobs data could be the catalyst for a corrective move. An employment change of +10,000 or less (forecast is for +14,500) could see the Aussie slip. Resistance lies at 0.7960/70. There is immediate support at 0.7900 and 0.7870. Likely range today 0.7850-0.7950.
USD/JPY – The Yen is one of two Major currencies where the speculators are long of US Dollars. The other is the Pound. The BOJ is expected to keep it’s Policy Rate at -0.1%. There is good support for USD/JPY at 111.50 (overnight low of 111.55). Immediate resistance lies at 112.30. Likely range 111.70-112.70.
GBP/USD – slipped off its highs to finish lower at 1.3023. The market’s sentiment toward Sterling has switched to neutral after Bank of England officials signaled that any rate policy changes would be data dependent. UK CPI released this week saw Q2 annual inflation fall back to 2.6% from 2.9%. The UK Retail sales number will be closely watched tonight. Analysts are expecting a rise to 0.4% from the previous fall of 1.2%. Any rise less than 0.4% could see Sterling pressurised. A correction in the US Dollar weakness would see GBP/USD lower. Resistance lies at 1.3060. There is immediate support at 1.3000 and then 1.2980. Likely range today 1.2970-1.3070.
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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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