Euro jumped to highest level since September 2015 after ECB meeting yesterday
The Euro lifted after Mario Draghi said that policy makers would review tapering it’s QE in the autumn. In volatile trade, the Euro initially slumped after the ECB announced that there would be no changes to its guidance on monetary policy. The Dollar Index (USD/DXY) dropped 0.5% after testing lows not seen in a year.
The Japanese Yen ended little-changed after the BOJ kept monetary policy steady but delayed the time frame to reach their inflation target.
Global stocks finished mixed. The US Dow slipped 0.13%. Germany’s DAX ended flat.
The US Ten year bond yield was down 1 basis point to 2.26%. The yield on the German Ten Year Bund finished at 0.53% from 0.54% yesterday.
Australian Employment saw an addition of 14,000 Jobs against an expected 14,500. Australian Unemployment rate was unchanged at 5.6%. There was a fall in part-time jobs.
UK Retail Sales rose to 0.6% against a forecast rise of 0.4%.
US Weekly Jobless Claims improved, falling to 233,000. from the previous 248,000.
US Philadelphia Fed Manufacturing Index missed with a print at 19.5 against a forecast 23.4.
EUR/USD – closed up 0.9% at 1.1632 from 1.1517 yesterday
GBP/USD – fell to 1.2975 at the close (1.3023 yesterday). Sterling was sold against the Euro as the EUR/GBP broke up through 0.8900
USD/JPY – finished little-changed at 111.91 from 111.89 yesterday.
AUD/USD – closed flat at 0.7955 (0.7955 yesterday). The Aussie traded to an overnight high of 0.7989.
Outlook: The Dollar finished little-changed against most of its Rivals apart from the Euro. While the market sentiment remains bearish on the Greenback it has failed to push much lower. The Australian Dollar stopped from breaking higher. Emerging Market currencies were mostly down against the US Dollar.
Events/Data out today:
RBA Assistant Governor Guy De Belle speaks in Adelaide to the Committee for Economic Development on “Global Influences On Domestic Monetary Policy” (GMT 3.40 am, July 21/Local Time 1.40 pm, July 21)
Canadian June CPI and Core Retail Sales (GMT 12.30 pm, July 21/Local Time 10.30 pm, July 21) June monthly CPI is forecast to print at -0.1% from May’s 0.1%. The annual June CPI rate is forecast at 1.0% from 1.3%. Core Retail Sales are expected at 0.0% from the previous 1.5%.
Trading View: The Dollar has steadied after consolidating its losses yesterday. The Euro was the only currency that really appreciated against the Greenback. While the Dollar’s tone is still soft, there is a growing likelihood of a corrective pull back.
EUR/USD – The Euro move was accelerated from buying the Single Currency against the Pound and the Yen. The cross buying enabled EUR/USD to lift 0.9% and trade to over 1 year highs. Immediate resistance is found at 1.1660 (overnight high was 1.1658). There is short term support at 1.1580 and then at 1.1560. There were no widening in the differentials between the US and German Ten year yields. And keep in mind that speculative Euro longs are close to 6 year highs. It’s difficult to see the Euro much higher given these facts. Likely range today 1.1550-1.1650
AUD/USD – traded to an overnight high of 0.79886 which is just under the 0.80 cent mark. Most metals slipped yesterday. The CRB Index (Commodity Research Bureau), which is an index of the base and industrial metals closed down 0.14%, it’s the first drop in this month. For the Aussie to break above 0.80 cents we would need a more sustained rally in the industrial metals. RBA Assistant Governor De Belle is due to speak later on the global influences on domestic monetary policy. Traders will be closely scrutinising what he says. The Australian Dollar has risen 3 % in five days. A corrective pull back is a strong possibility. There is immediate and strong resistance at 0.7970/80. Support is now formed at 0.7880/90. Likely range today 0.7880 and 0.7850. Likely range today 0.7870-0.7970. Look to sell rallies.
USD/JPY – The BOJ delayed it’s time frame to reach its aggressive inflation target. This enabled the USD/JPY to hold that strong support level of 111.50 (overnight low 111.482). Immediate resistance can be found at 112.40/50. The yield on the Japanese Ten Year JGB closed flat at 0.07%. The yield differentials between US and Japanese Ten year bonds will continue to drive this currency pair. Likely range today 111.70-112.70.
NZD/USD – traded to 0.7416 overnight high before settling at 0.7400 cents at the close. The Kiwi played catch-up with the Aussie. NZD/USD is currently at one year highs. Current resistance can be found at 0.7410. Immediate support lies at 0.7380 and then 0.7350. Net speculative NZD longs are at their highest in 8 years. That’s very extreme positioning. Look to sell rallies. Likely range today 0.7350/0.7420.
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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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