Gold falls to 1314 in Asian markets and traders are waiting for the rate decision on the dollar on Wednesday
The Dollar eased against most of its Rivals weighed by weak US retail sales in August. Sterling soared to pre-Brexit levels on hawkish comments by a Bank of England policy maker. The Yen eased against the Dollar as markets shrugged off Korea’s missile launch on Friday.
Bank of England MPC member Gertjian Vlieghe said in a scheduled speech to a Society of Business Economists that the time was ripe for a “rise in the bank rate in coming months”.
US Headline Retail Sales rose 0.2% against a forecast rise of 0.5%
US Core Retail Sales fell to -0.2% against a forecast rise of 0.1%
US Capacity Utilisation: 76.1% against a forecast of 76.8 %
US Industrial Production: -0.9% against a forecast of 0.1% and previous 0.4%
Global stocks rose. Investor appetite for risk returned, shrugging off Friday’s North Korean missile launch and a terrorist attack in London. The US S&P 500 rose to close above 2,500 for the first time, ending up 0.13%.
The yield on the Ten Year US Treasury climbed to 2.2% (2.18% Friday). The UK Ten Year Gilt yield was up 9 basis points to 1.3% after Vlieghe’s remarks.
USD/DXY – eased to close down 0.22% at 91.845 (92.131 yesterday)
EUR/USD – finished up at 1.1948 from 1.1912 Friday.
GBP/USD – soared to end at 1.3589, 1.3% up from Friday’s 1.3403. Sterling traded to pre-Brexit highs not seen since July 2016.
USD/JPY – higher, closes at 110.85 (110.45 Friday)
AUD/USD – little-changed, closes at 0.8000 (0.7993 Friday).
NZD/USD – rises to 0.7285 from 0.7220 on Friday. The New Zealand general election is on Sept 23.
Outlook: The weaker than expected US retail sales and industrial production data saw the Dollar ease against most of its Rivals. The effects of the Hurricane Harvey were likely felt in both sets of data. In spite of this, US stocks and bonds closed higher. The Dollar’s fall was generally mild and not broad-based. Market’s will turn their focus to this week’s FOMC meeting where the Fed is expected to start reducing the balance sheet.
Today’s events and economic data are light:
Euro Zone Final Headline and Core CPI: (GMT 9 am, 18 Sept/Local Time 7 pm, 18 Sept): forecast for Headline CPI m/m: 0.3% from previous -0.5%; forecast for Headline CPI y/y: 1.5% from 1.5%; forecast for Core CPI y/y: 1.2.% from previous 1.3%
Bank Of England Governor Mark Carney is scheduled to speak in Washington DC later today at an IMF event. He also meets with IMF head Cristine Lagarde.
Trading View: The Dollar’s easing on Friday was not broad-based and far from conclusive. While the US data surprised on the downside, part of the fall would be attributed to Hurricane Harvey. The week ahead is crucial with the FOMC meeting (Wednesday/Thursday) as the highlight. The RBA releases its latest meeting minutes tomorrow. The Bank Of Japan’s Interest rate and policy statement, as well as NZ GDP, are due on Thursday. New Zealand holds its general election on Saturday (23 Sept).
The North Korean threat is far from over and an escalation is possible, even probable.
EUR/USD – The strong support at 1.1875 held well last week. On Friday the overnight high traded was 1.19872. The Single Currency closed at 1.1948. Immediate resistance can be found at 1.1975 and then at 1.2000. Strong resistance is found at 1.2040. Short term support lies at 1.1910 (overnight low was 1.19012) and then 1.1875. Likely range today 1.1910-1.1970. Sell rallies, the speculators are still long.
GBP/USD – Sterling has had a meteoric rise following last week’s BOE meeting. Remarks from MPC policy maker Vlieghe on the timing of a rate hike “coming months” saw the Pound spike over 1.3%. The BOE is preparing the markets for a gradual move higher in interest rates … not an immediately imminent hike. Brexit negotiations have been delayed until September 25. Prime Minister Theresa May is due to speak this week on Brexit. GBP/USD traded to 1.3617 highs on Friday before settling at 1.3595 close. Gains in GBP/USD will be limited from here. There is immediate resistance at 1.3610/20. Immediate support can be found at 1.3560 and 1.3500. Likely range 1.3510-1.3610.
USD/JPY – The Dollar managed to close higher against the Yen after a brief drop following Friday’s North Korean missile launch. This morning, USD/JPY jumped to 111.15 from Friday’s close of 110.85. There was a time when any eruption in the Korean peninsula was a negative for the Yen due to the proximity theory. There is immediate resistance at 111.30. Short term support can be found at 110.75 and 110.45. Likely range today 110.75-111.45.
NZD/USD – The Kiwi finished up strongly on Friday at 0.7290 from 0.7220. There is immediate resistance found at 0.7300 and 0.7320. Immediate support lies at 0.7270 and 0.7250. Latest polls suggest that the New Zealand election on September 23 is too close to call. While the incumbent right of centre National Party is expected to be returned to power against the main centre-left Labour opposition. However, the final result is expected to be close. A Labour win would affect much of New Zealand’s current policies in important areas Sell rallies with the likely range 0.7220-0.7320.
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***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.
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