The dollar is regaining its strength this morning and gold reaches the level of 1273
The dollar rally paused on Friday and looked poised to finish its best weekly gain of the year with a whimper when in a repeat of the Thursday session the, Bloomberg dollar index first rose more than 0.1% during Asia hours before slumping around the European open as month and quarter-end flows came into play again.
U.S. stock-index futures were little changed as investors awaited data on personal spending, which however is likely to be distorted by Hurricanes Harvey and Irma, while both European and Asian shares were in the green. European equities drifted higher, headed for the best month this year.
After an initial bout of euphoria over Trump’s tax plan – which still needs approval from Congress although it currently lacks detail, leaving investors guessing which parts of the package will be prioritized by the administration – the renewed “Trump trade” paused as profits were taken on some of the recent reflation trades. Though with the chances of higher U.S. interest rates by the end of the year now at about 65%, they have driven equities higher and taken money out of gold, which was on track for its worst month this year, suggesting that the Fed has once again failed to send a tightening message to markets.
In currencies, the EUR drops under the level of 1.18 reaching 1.1770 as a low till now, However, the undertone for EUR remains weak, following Merkel’s wobble in the German Elections, while the inflation readings from Germany had also been relatively subdued.
The USDJPY nursed some of the prior day’s declines last week, which was slightly aided by the release of the BOJ’s Summary of Opinions from the September meeting which suggested to patiently maintain current easy policy and that further policy easing may be needed to support demand on the impact from the scheduled sales tax hike. However, price action was contained as participants also digested a slew of mixed Japanese data in which Core CPI printed its firmest YTD of 0.7% but was in-line with estimates and still a distance from the 2% target, while Industrial Production surged and Retail Sales disappointed.
Cable saw some volatility amid the month-end flow, alongside comments from BOE’s Carney with the Governor noting that the committee has seen a downtick in productivity due to Brexit uncertainty. Carney also reiterated that most members may see a need to raise rates if the economy stays on track. A slew of data this morning further pressured GBP with the current account deficit ballooning to GBP 23bln, while service sector output fell -0.2%
Dollar Rally pauses as greenback consolidates best weekly gain of the year, fueling a retreat in option volatility across major currencies; euro briefly rises above $1.18;ast week while pound resumes decline after data shows large U.K. current-account deficit. Swedish krona slides as Stefan Ingves appointed to a third term as Riksbank governor. Ten-year Treasury yields stabilize just above 2.3% while bunds get a boost from month-end duration extensions.
GBPUSD – The pound resumed its downward decline as it dropped below the $1.3400 as it reached the short-term support of $1.3350. MACD continues to show a downward sloping trajectory on the histogram which points to a lower exchange rate, as the RSI has dipped below the 60, effectively showing that momentum on the upside has dissipated.
USDJPY – The RSI on the pair remains just above the 60-Level showing a decrease in the momentum of the pair. The continuation of the uptrend of the pair is very unlikely as the MACD is also starting to show some decrease in the positive momentum.
EURUSD – A bounce from the 40-Level on the RSI on the daily chart indicates that there is still some positive momentum on the pair. It is only if the pair drops below the 40-Level RSI, then it would indicate a decreasing positive momentum and the start of a negative one.
AUDUSD – RSI continues the decrease below the 40-Level, there is also the fact that the MACD has dropped considerably below zero which points to a big decline in momentum. The 200-DMA representing the 0.7705 remains the next level of important support on the pair.
USDCAD – Bouncing off the 55-DMA at 1.2480, the pair has started to move back lower, but the negative momentum won’t return until the pair is able to break below the 1.2380 and continue lower.
Dow Jones – Consolidation remains on the futures index as it was unable to break above the 60-Level on the RSI and continues to move lower. The index continues to trade near the 25-DMA at the 22310.
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