Euro up again, Dollar shows weakness and markets are waiting for the annual Jackson Hole Symposium this week
The Euro climbed above the 1.18 barrier as the US Dollar eased further in subdued trading. Volumes were light ahead of the Jackson Hole central bank policy forum, the week’s key event. Global bond yields slipped, extending their losses. Geopolitical tensions rose as the US and South Korea began their annual joint military exercises.
Japan July All Industry Activity Index: 0.4% against a forecast 0.5% and previous -0.8%
Canadian Wholesale Sales: -0.5% against a forecast 0.6% and a previous 1.0%
US Chicago Fed Activity Index: 0.15 from previous 0.16
The yield on the benchmark US Ten Year Treasury slipped 1 basis point to 2.18%, the lowest in 8 weeks. Germany’s Ten Year Bund yield fell to 0.40% from 0.41%. Japan’s Ten Year JGB yield was flat at 0.02%.
Global stocks were mixed. Wall Street stocks lifted at the close with the US Dow finishing up 0.13%.
Brent Crude Oil prices fell back 2% to US$51.28 (US$52.65 yesterday). American oil output continued to expand in spite of the fall in the US oil rig count.
USD/DXY – eases further, closes at 93.091, down 0.41 % (93.42 yesterday).
EUR/USD – closed up 0.49% to 1.1813 from 1.1763 yesterday.
USD/JPY – extends losses to finish at 109.00 (109.20 yesterday).
GBP/USD – little-changed, mild rise to 1.2898 from 1.2878 yesterday
AUD/USD – up slightly at 0.7938 from 0.7928. Metals were higher led by a 2.6% rise in Iron Ore.
Outlook: The Dollar’s rally has faltered led by the resurgent Euro. Traders chose to ignore the ECB’s concern about the Single Currency’s strength. The markets main focus is on Draghi’s address at the upcoming Jackson Hole, even with Janet Yellen scheduled to speak first on financial stability. Meantime US political woes have continued to weigh on Trump’s approval rating according to the latest opinion polls. Markets are concerned about the effect on his fiscal agenda. US bond yields extended their slide. The US data improvement of late has been forgotten or set aside for now. And the market positioning, while adjusting, is still at extremes in some currencies. Be mindful of this for the week.
Economic data out today:
UK Public Sector Borrowing (GMT 8.30 am, Aug 22, Local Time 6.30 pm, Aug 22): forecasts are for GBP 0.0 billion, from the previous GBP 6.3 billion.
German ZEW Economic Sentiment Index: (GMT9am, Aug 22/Local Time 7 pm, Aug 22): forecasts at 14.8 from the previous 17.5
Canadian July Headline Core Retail Sales: (GMT 12.30 pm, Aug 22/Local Time 10.30 pm, Aug 22): Headline Retail Sales forecast 0.2% from the previous 0.6% while Core Retail Sales is forecast at 0.0% from the previous -0.1%.
US House Price Index: (GMT 1 pm, Aug 22/Local Time 11 pm, Aug 22): forecast 0.5% from the previous 0.4%
Trading View: The Dollar will struggle against its Rivals today. The failure for the Greenback to extend its gains from last week has seen the market turn bearish… for the short term. This ongoing fight to determine the real value of the Dollar continues. The Euro has taken the lead with the ECB expected to begin winding down its asset-buying program soon. Will policy makers be able to pull the currency down if it becomes too strong for the ECB’s liking? Many are doubtful. Sometimes the many are not necessarily right. Time will tell.
EUR/USD – rose to trade to an overnight high of 1.1828, just under the resistance of 1.1830. This should continue to provide immediate resistance. Short term support can be found at 1.1680. The release of German ZEW Economic Sentiment diffusion index will be closely watched. Of late, European economic data has disappointed. An improvement here could see the Euro test higher. The drop in the US Ten year yield was matched by a 1 basis point slip in the German’s Ten year Bund yield. Likely range today 1.1780-1.1830.
USD/JPY – fell to an overnight low of 108.64 as the US and South Korean began their joint annual military exercise. There is good support at the 108.60/70 level. Immediate resistance lies at 109.40 which was basically the overnight high. Expect USD/JPY to trade in a 108.70-109.30 range today.
AUD/USD – rallied to an overnight high of 0.7951 before settling around 0.7940 this morning. The rise in metals prices as well as a weaker US Dollar supported the Australian Dollar. Base metal prices were up led by zinc, currently at 10 year highs. Iron Ore prices rose 2.6% overnight. The Aussie held it’s strong support at 0.78 cents in the midst of the Dollar’s strength last week. The big resistance level is at 0.80 cents. There is immediate resistance at 0.7950/60. Short term support is found at 0.7920 and then 0.7900. Likely range 0.7920-0.7970
GBP/USD – Sterling benefited from a weaker US Dollar but was little-changed. The Pound continues to trade sideways but is weaker against the Euro. Today sees the release of UK Public Sector Net Borrowing data with an improvement forecast. GBP/USD has immediate resistance at 1.2920. There is good short term support found at 1.2880 and then 1.2860. Likely range today 1.2870-1.2920.
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