Dollar waiting Janet Yellen Testifies on Wednesday
The Dollar Index (USD/DXY) ended at 96.045 (96.00) up 0.02% in quiet trading. Volumes were low and ranges were narrow. Volatility dropped. The US Dollar ended marginally higher against the Japanese Yen and Singapore Dollar. The Euro, Sterling and Aussie finished flat.
Treasury prices rallied and yields slipped. The benchmark US Ten year yield fell 2 basis points to 2.37%. The German Ten Year Bund yield closed at 0.54% from 0.57% yesterday.
Global stocks steadied. The US S&P500 finished up 0.06%.
The G20 Meeting ended without much fanfare, unable to accomplish any political solution to the North Korea’s nuclear intent.
Trading ranges narrowed right down yesterday. The average trading range in the Majors was a mere 40 pips. The next big event that should move markets will be Janet Yellen’s testimony (GMT 10 am Wednesday, July 12/Local Time 12 am/Thursday, July 13). The Fed Chair speaks on the Semiannual Monetary Policy Report to the US House Financial Services Committee. These ranges should hold for the most part of our day.
The next set of upcoming data/events are:
Australian May Home Loans (GMT 1.30 am, July 11/Local Time 11.30 am, July 11) – Forecasts are for a 1.5% rise against the previous months fall of 1.9%.
NAB Business Confidence Diffusion Index (GMT 1.30 am, July 11/Local Time 11.30 am, July 11)
The previous reading was 7, which dropped from 13 (the highest for this year). While any reading above 0 is positive, a number lower than 7 would show that improving conditions are slowing.
BOE MPC Member and Chief Economist Andy Haldane speaks at a Bank of England panel discussion in London (GMT 10 am, July 11/Local Time 8 pm, July 11). Haldane was one of the 3 dissenters who voted for a rate hike in the last BOE meeting.
BOE MPC Member and Deputy Governor Ben Broadbent speaks before the Scottish Council for Development and Industry in Aberdeen, Scotland (GMT 11 am, July 11/Local Time 9 pm, July 11). Although Broadbent is not a known dove, his views are considered “dovish”.
US JOLTS Job Openings for May – (GMT 2 pm, July 11/Local Time 12 am, July 12). Job Openings (apart from farming) for May are expected to decrease to 5.89 million from April’s record 6.04 million.
FOMC Voting Member Lael Brainard speaks to the Columbia School of International and Public Affairs on Monetary Policy (GMT 4.30 pm, July 11/Local Time 2.30 am/ July 12)
Trading View: The market took a breather last night as volatility fell and volumes declined. The Dollar ended little-changed, unable to build on it’s gains after Friday’s mixed payrolls number. The growth in Job gains was impressive however wages fell. Yields slipped across the board last night.
Markets will look to the next set of events/data as the catalyst for larger moves.
Based on market positioning from the latest CFTC/Reuters report, the Dollar should holdit's
EUR/USD – finished in the middle of it’s trading range right around 1.1400. There is immediate support at 1.1380 and this should hold during our day. Resistance lies at 1.1420 which is equally strong. Both US and German yields fell last night. The latest CFTC/Reuters report saw speculative net long Euro positions at 4 year highs, which is extreme. Looking to sell on any rallies to 1.1420 today.
USD/JPY – The divergence between the monetary policies of the Fed and BOJ will continue to be the main driver of this currency pair. USD/JPY closed at 114.05, up slightly from 113.95 yesterday. There is strong resistance at 114.30 which was the overnight and near two months high. There is good support at 113.30/40. The yield on the Japanese Ten Year JGB bond closed unchanged at 0.08%. The US Ten Year bond yield ended lower at 2.37% from 2.39 % yesterday. Likely range 113.70-114.20.
GBP/USD – closed virtually flat at 1.2880 from 1.2879 yesterday. GBP/USD has immediate resistance at 1.2920 and support at 1.2850. Recent economic data out of the UK has been disappointing and this has weighed on the Pound. This has cast doubts over the recent BOE hawkish talk as the economy shows signs of slowing. GBP/USD has not been able to climb above 1.3000 since we came off that level. The comments of Haldane and Broadbent (both speaking later) will be scrutinised by the markets. Likely range 1.2850-1.2900.
AUD/USD – Immediate resistance lies at 0.7620, then 0.7650. Overnight high last night was 0.7615. Good support lies at 0.7580 (overnight low was 0.7585). Most industrial metal prices were higher yesterday and this supported the Aussie. The latest CFTC/Reuters report saw speculators increase their AUD longs to +AUD 32,414 from +AUD 19,749 contracts. Likely range today is 0.7590-0.7630. While the speculative market is long, prefer to sell rallies to 0.7640/50.
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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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