Euro is falling after the ECB meeting and the pound is trading at 1.3245 as the lowest price
The ECB set December as the timetable to wind down it’s QE program as markets expected. However, Mario Draghi and his colleagues vowed to keep interest rates at current ultra-low levels until at least mid-2019. Which gave the green light for traders to belt the Euro which fell 2% to 1.1578 (1.1788), its biggest one-day loss since June 2016. The Dollar Index (USD/DXY) soared 1.42% on broad-based gains to 94.87 (93.59 yesterday). Wall Street closed mixed. European stocks rose.
Outlook: Traders woke up to the fact that the Fed decision to raise interest rates and boost its outlook to 4 rate hikes this year is hawkish. This contrasts with a dovish bent from the ECB who vowed to maintain their ultra-low interest rates until the middle of next year. US data continue to outperform with Headline and Core retail sales both beating forecasts.
Australia’s Employment saw fewer jobs created than analysts expected.
The ECB also cut the Euro Zone’s growth forecast this year to 2.1% from 2.4%. The Fed upgraded its assessment of the US economy. This saw the EUR/USD fall to fresh 2-week lows.
Global bond yields dropped with those in Europe falling sharply. The yield on the US Ten-year bond fell 3 basis points to 2.94%. German 10-year bond yield dropped to 0.42% from 0.48% yesterday.
The Dollar was also aided by robust retail sales data which beat expectations by twice.
UK May Retail Sales beat forecasts, surprising on the upside although the gains were mostly due to better weather and the Royal wedding.
Emerging Market assets and currencies extended their sell-off following the Fed’s hawkish bent.
Further depreciation of currencies from developing countries could force them to raise interest rates.
Events and economic data releases today: BOJ Monetary Policy Statement, Policy Rate and Press Conference, Euro-Zone Core and Final CPI for May (annual), Euro-Zone Trade Balance, Canadian Manufacturing Sales, US Empire State Manufacturing Index, Capacity Utilisation Rate, Industrial Production and University of Michigan Inflation Expectations Index.
The Dollar Index (USD/DXY) – rose 1.42%, to close at 94.870, just at its highs and up 1.42%. The Greenback’s rally this time was broad-based. The Dollar hit a high at 94.931 before settling. Immediate and strong resistance lies at 95.00. The high on May 30 was 95.025. A sustained break of could see 97.00. Immediate support can be found at 94.60 and then 94.30. Likely range today 94.50-95.00. Trade the range, there are lots of opportunities with conditions likely to be volatile.
EUR/USD – dipped to an overnight low of 1.15757 before settling at 1.1580. The Euro had a volatile session trading to an overnight high of 1.18516. EUR/USD slumped initially to 1.1675 following the ECB decision where it settled. Follow through selling saw the shared currency drop further to 1.1620 and then 1.1580. Immediate support lies at 1.1550 and then 1.1520. Immediate resistance can be found at 1.1600 and 1.1630. Any corrective bounce would be limited to that 1.1675 level. Likely range today 1.1550-1.1650.
USD/JPY – gained 0.35% to close at 110.65 from 110.35 yesterday. USD/JPY moves were rather subdued considering the volatility in the other currencies. Markets are expecting the BOJ to keep maintain policy and keep rates unchanged today. The fall in the US ten-year yield by 3 basis points cushioned the fall of USD/JPY. The yield on Japan’s ten-year bond closed at 0.03% from 0.04% yesterday. Markets are also wary that Donald Trump is ready to impose trade tariffs on Chinese goods anytime soon. The Emerging Market sell-off also sees a demand for haven Yen. USD/JPY has immediate resistance at 110.70/80 (overnight high traded 110.692). The next resistance level is at 111.10. immediate support lies at 110.40 and then 110.20. Likely range today 110.20-111.20. Prefer to sell rallies.
AUD/USD – slumped to a low of 0.7467 this morning from 0.7575 yesterday. The Aussie was the second worst performer among the Majors. Australia’s Employment Gain printed less than forecast. The fall in the Unemployment rate to 5.4% (5.5%) was due to fewer people looking for work. Chinese Retail Sales and Fixed Asset Investment missed expectations. Metals were mostly down. The Aussie has immediate support at 0.7450 and then 0.7430. Immediate resistance lies at 0.7500 and then 0.7530. Likely range today 0.7455-0.7515. Prefer to buy dips, the speculative community is still short Aussie.
GBP/USD – fell under the weight of an overall strong Greenback. GBP/USD traded to a low of 1.32613 before settling at 1.3270. The surprise rise in UK May Retail Sales was due to warm weather and the Royal wedding. Brexit will continue to hang heavy on the British Pound. The speculative community is long Sterling bets. Sterling has immediate support at 1.3250 and 1.3230. Strong support lies at 1.3200. A sustained break of 1.3200 could potentially see the Pound at the 1.3000 level. Immediate resistance lies at 1.3300 and then 1.3340. Likely range today 1.3250-1.3350. Just trade the range shag on this one.
USD/ZAR – The rand (USD/ZAR) strengthened by 0.94% against the dollar in early afternoon trade on
Thursday, with economists saying the relative strength was caused by greater market certainty after
the US Federal Reserve announced an interest rate hike on Wednesday.
The local unit was trading at R13.18/$ at 13.28 on Thursday, up 0.94% on the day.
Now is your chance to make a profit!
Open an account here!
***Information contained in this newsletter 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 is made available as per the events occurring in the financial markets.
Trading Forex (Foreign Exchange) 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.
© Copyright 2015 – CM Trading – All rights reserved