Daily Analysis & Insight By realtradercommunity.com

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Risk Sentiment Shifts

The New York trading session was a tale of two greenbacks. It started at the open with the dollar that no one wanted and finished the day with the dollar that everyone wanted. There wasn’t a particular reason for the shift in sentiment but rather a couple of different concerns spooking traders during a day devoid of economic data.

Sentiment was positive at the open thanks to a conciliatory tweet from President Trump about putting “China’s ZTE Corp back to work.” The US had levied sanctions on the company that was forcing it to close. The tweet led to conclusions for a positive outcome to the China/US trade talks. Currency converter

EURUSD inched higher from the New York opening level of 1.1978 to 1.1994 by 10:00 am EDT, which is also FX option expiry time. Prices fell immediately afterwards and never recovered, extending the decline until it closed at 1.1938. EURUSD sentiment is bearish following the break of 1.2260, the uptrend line from April. A move through 1.1920 points to a retest of 1.1830.

Chart: EURUSD daily showing break of uptrend

Source: Mocaz charts

GBPUSD continues to bounce inside a 1.3460-1.3630 band with a bearish bias. Sentiment may turn more negative after Monday’s negative Brexit headlines. According to Reuters, Scotland’s leader is warning of a catastrophe if a Brexit deal isn’t achieved. Meanwhile, the European Union negotiator Michel Barnier complains he hasn’t seen big progress on Brexit since March. In addition, broad US dollar strength has weighed on the currency pair. GBPUSD is vulnerable to a retest of support at 1.3460 on a break of support in the 1.3540-50 area.

Chart: GBPUSD 1 hour

Source: Mocaz charts

USDJPY is riding the 10-year Treasury wave. US 10-year yields are bumping around 3.0%, supported by the outlook for US growth and the prospect of higher interest rates. USDJPY rallied in tandem with those rates on Monday, climbing from the low of 109.22 to 109.65 at the end of the day. Resistance is at 110.00

Chart: USDJPY

Source: Mocaz Charts

AUDUSD broke major support at 0.7650 and has been under pressure ever since. The recent rally from the May 9 low of 0.7015 stalled at 0.7563 and with the retreat under 0.7530 suggests a visit to 0.7490 is likely. Weaker than expected China Retail Sales, and Industrial Production data could be the trigger. On the other hand, if the China data posts a large upside surprise, AUDUSD could take out resistance at 0.7560 and rally to 0.7605.

Chart: AUDUSD 4 hour

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Treasury Yields and US Dollar Soar

A mundane European FX session turned ugly in New York. Mediocre results for Eurozone data, slightly better US data, and firmer US treasury yields combined to spark a feverish US dollar rally.

Eurozone GDP and ZEW data were in line with forecasts. US Retail Sales data was as predicted but were positive because of upward revisions to the March results. Business Inventories and NY Empire State Manufacturing Index were higher than forecast. (both 3rd tier data) Normally, a nonevent. However, bond traders didn’t see it that way. US 10-year Treasuries soared to levels last seen in 2011 and traders scrambled to buy dollars.

EURUSD, which had traded in a narrow 1.1911-37 range in Europe crashed through the bottom and dropped to 1.1821. The afternoon bounce was shallow, and it finished in New York at 1.1842. EURUSD has strong support in the 1.1790-1.1810 area which if broken would target 1.1710

Chart: EURUSD daily

Source: Mocaz Charts

USDJPY soared alongside the US Treasury yield rally, rising from 109.97 to 110.44. The outlook for higher US interest rates while the Bank of Japan continues with ultra-easy monetary policy has underpinned the currency pair. Weaker than expected Japan Q1 GDP data (forecast 0.0%, vs previous 0.4%, q/q) could be the catalyst to propel USDJPY through resistance at 110.50 to 111.10. The uptrend from April 17 is intact while prices are above 109.50.

Chart: USDJPY 4 hour

Source: Mocaz charts

Kiwi got squeezed hard. NZDUSD has been under relentless pressure since the middle of May. The latest RBNZ meeting exacerbated the slide when the OCR statement said rates were staying “at 1.75% for some time to come.” The rally in US Treasury yields underscored the widening interest rate differentials between the US and New Zealand. NZDUSD dropped from 0.6922 to 0.6856 and closed in New York at the bottom. A break below 0.6820 would target 0.6775.a 1.9% rise in the GlobalDairyTrade auction results was ignored.

Chart: NZDUSD daily

Source: Mocaz charts

Gold prices got hammered during the New York session, losing nearly 2% as prices plunged from $1,314.70 to $1,288.93. Oil prices fared better. Early losses were mostly recovered due to ongoing concerns of supply disruptions from the Iran/US feud.


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FX Traders Ignore Spike In Treasury Yields

European FX markets were lethargic, and the lethargy was contagious. New York opened on a mixed note. EURUSD, GBPUSD and GBPUSD were very near to unchanged compared to the previous day’s close. AUDUSD and USDCAD were a tad firmer while NZDUSD lost a little ground. FOMC members and economic reports were unable to create any interest.

The day wasn’t without its highlights. US Treasury yields surged. 10-year Treasuries clocked a high of 3.122 while the 30-year bond hit 3.255. USDJPY traders noticed and lifted the currency pair from 110.57 to 110.84 The top-side remains vulnerable especially if today’s April CPI data (Forecast 0.7%, vs March 1.1%) is weaker than expected. The short-term and intraday technicals are bullish while prices are above 110.50 looking for a test o resistance at 111.25.

Chart: USDJPY Daily

Source: Mocaz charts

AUDUSD lost a bit of ground in the past 24 hours despite a reasonably upbeat employment report. Prices have been trading higher, erratically since May 9th and that uptrend is intact while prices are above 0.7500. A break above 0.7520 will extend gains to 0.7545 while a break below 0.7495 will lead back to 0.7475

Chart: AUDUSD 30 minutes

Source Mocaz charts

USDCAD did not live up to the hype. There was no announcement of a new NAFTA deal. Instead, Canada’s Prime Minister blamed the American’s for insisting on a “sunset clause”, meaning a predetermined expiry date. He said a “good deal is on the table right now.” Higher oil prices and the still valid hope for a NAFTA deal offset the jump in Treasury yields, leaving USDCAD mired in a 1.2750-1.2820 range.

Chart: USDCAD 30 minute

Source: Mocaz charts

The GBPUSD slide that has occurred since April 18 remains valid while prices are below 1.3550. However, GBPUSD needs to break below support at 1.3450 to kick-off another decline to 1.3340. The jump in US interest rates and the dovish Bank of England stance combined with negative Brexit headlines argues for further losses. Nevertheless, it is a long weekend in many parts of Europe which may encourage some profit-taking.

Chart: GBPUSD daily

Source Mocaz charts

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Trade Tensions spook Wall Street

Trade tensions spooked Wall Street and Opec production increases made oil traders nervous. FX markets were an oasis of tranquility in comparison.

The Wall Street Journal, citing “unnamed sources” said the US would place restrictions on Chinese investments and block new technology exports to China. US stock markets got hammered. The Dow Jones Industrial Average (DJIA) closed with a loss of 1.33%, the S&P 500 was down 1.37%, and tech-heavy NASDAQ dropped 2.07%. The closing prices were above their worst levels.

The US dollar is opening in Asia with a mixed note. Euro, Yen and Sterling have posted small gains; the Swiss franc is unchanged, and the commodity currency bloc is down.

USDJPY had the most dramatic move. Prices were swinging back and forth in a 109.35-109.68 range until just before the New York close when they spiked to 110.03 before settling back at 109.70. The catalysts for the move were comments by White House Director of Trade Policy Peter Navarro aimed at Wall Street. He said “today’s market reaction is a very large over-reaction.” and added that the administration does not have any plans to restrict investment. USDJPY top side gains will be limited due to concern about China’s reaction to the US trade hostilities.

The break above 109.70 snapped the intraday downtrend. A break above 110.10 would suggest further gains to 110.40. However, US Treasury yields are soft, and trade tensions are still elevated leaving the longer term 109.20-110.80 range intact.

Chart: USDJPY 30 minute

Source: Mocaz charts

EURUSD ignored mildly poor German IFO data and better than expected US economic data including a 6.7% surge in US New Home Sales. The single currency opened the New York session with a bid at 1.1637 and climbed steadily throughout the day. It started trading in Asia at 1.1702, just below the day’s high of 1.1712. Today’s Eurozone and US data cupboard is bare leaving rumours and equity market performance to drive direction. The intraday EURUSD technicals are bullish while prices are above 1.1640, looking for a break of resistance in the 1.1730-40 area to extend gains to 1.1810.

Chart: EURUSD hourly

Source: Mocaz charts

Kiwi is still getting squeezed. Trade war fears, widening NZ/US interest rate differentials and bearish technicals are weighing on the currency. Thursday’s RNBZ meeting is not likely to offer the currency a reprieve. The market expects a dovish statement due to soft Q1 GDP growth. The bounce from last weeks 0.6825 low is merely a correction while prices are below 0.6910

Chart: NZDUSD hourly

Source: Mocaz charts

 

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Trump, Putin, Trade, and Brexit

The Trump/Putin meeting, global trade concerns and Brexit issues will still be in the forefront for traders this week, with trading volatility similar to last week. The US dollar closed the week on Friday with gains against all the G-10 major currencies led by a rise in USDJPY, which rose 1.68% between the close on July 6 and July 13. The gains would have been larger except FX traders booked some profits on Friday.

GBPUSD churned in a frothy session, and it was President Trump stirring the pot. The UK Sun quoted the President saying Theresa May’s Brexit plan would kill any chance of a US/UK trade deal GBPUSD plunged to 1.3105 from 1.3178. Later, following his meeting with Ms May, Mr Trump called the Sun “Fake News.” He complained that they omitted writing the nice things he had said. At the post-meeting press conference, the President said the UK relationship is the “highest level of special.” GBPUSD rallied and closed at 1.3234. It is a big week for UK data. May wages and jobs reports are due on Tuesday followed by Inflation on Wednesday and Retail Sales on Thursday.

The intraday GBPUSD technicals are bullish while prices are above 1.3190, looking for a break above 1.3250 to extend gains to 1.3330. A break below 1.3190 shifts the focus to 1.3105.

Chart: GBPUSD 30 minute

Source: Mocaz charts

President Trump and Russia President Putin are meeting later today. On Friday, the US Special Counsel investigating Russian interference in the 2016 election issued an indictment of 12 Russians for hacking into the Clinton campaign. The timing of the move is curious. However, if Trump’s performance in the UK can be used as a guide, FX markets could be choppy. Eurozone inflation data is due on Wednesday. June CPI is forecast at 0.1%, down from the 0.5% seen in May. EURUSD is bouncing in a 1.1645-95 range. A move below 1.1645 targets 1.1610. A break above 1.1695 targets 1.1720 and then 1.1770.

Chart EURUSD 1 hour

Source: Mocaz charts

USDJPY traded in a 112.20-112.80 range last week. Traders are torn between the risk of a faster pace to US interest rate increases and the possibility of safe-haven demand from trade war fears. The uptrend line from the July 11 low is intact while prices are above 112.20, looking for a break of 112.80 to extend gains to 113.50.

Chart: USDJPY 1 hour

Source: Mocaz charts

 

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Retail Sales Halts US Dollar Retreat

The June Retail Sales report stopped the dollar’s retreat in its tracks. The US dollar was under pressure (modestly) when New York opened, but that pressure quickly abated after the release of a somewhat robust June Retail Sales report. (Actual 0.5% vs forecast 0.6%) The May headline data was close to expectations, but May’s stellar results were revised 0.5% higher. The data lifted the Atlanta Fed’s Q2 GDPNow estimate to 4.5%. EURUSD had risen from a US opening level of 1.1703 to 1.1724, dropped to 1.1702 after the data. Prices drifted in a 1.1695-1.1717 range for the rest of the session. Brent crude was down 4.43% while WTI fell 4.24%.

The Trump/Putin summit meeting in Helsinki, Finland lived up to its advanced billing. It just wasn’t an issue for FX markets. The media is having fits because President Trump seemed to take President Putin at his word that Russia did not meddle in the US election rather than believe US authorities. Mr Trump doesn’t care. He tweeted after his press conference “I would rather take a political risk in pursuit of peace, than to risk peace in pursuit of politics.”

FX trading volumes were subdued, evidence of a summer market and concern about upcoming events and economic data. Traders may also have been put-off by the International Monetary Fund (IMF) World Economic Outlook. They said trade conflict is the top threat suggesting that tariffs could knock 5% off global growth.

Oil prices got hammered again today. Prices have been undermined due to a combination of fears including: a) US government officials talking of releasing oil from the Strategic Reserves. b) trade tariffs triggering a global economic slowdown. c) increased production by Saudi Arabia and Russia. d) reports the USD would grant waivers to certain countries importing Iranian oil

Traders are looking ahead to Fed Chairman Jerome Powell’s quarterly Congressional testimony, later today. The Fed Chairman is expected to stick to the statements he made after the recent FOMC meeting. The only wrinkle will come from his answers on the impact of trade tariffs. He is likely to be non-committal.

GBPUSD opened in New York with a bid. Prices climbed from 1.3266 to 1.3291 and then dropped to 1.3219 after the Retail Sales report. UK employment data is due today. The jobs, and wage data are expected to help confirm a rate hike at the August 2 Bank of England (BoE) policy meeting. BoE Governor Mark Carney’s speech will be closely watched. GBPUSD is in a weak uptrend while prices are above 1.3220 looking for a retest of 1.3290. However, a break of support at 1.3215 suggests a steep drop to 1.3110.

Chart: GBPUSD 30 minute

Source: Mocaz charts

 

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BoE Carney Kicks Off US Dollar Rally

European FX markets traded quietly until Bank of England (BoE) Governor Mark Carney started speaking. The UK employment report came in near expectations. The unemployment rate was unchanged at 4.2%, and Average hourly earnings were 2.5%. The data was supportive of a rate hike on August 2. GBPUSD climbed to 1.3265 on the news but drifted lower when Mr Carney started talking. When the Governor said Britain would face “big economic” consequences, requiring emergency interest rate cuts under a “no-deal” Brexit scenario, Sterling collapsed. GBPUSD dropped to 1.3078 before drifting higher and opening in Asia at 1.3116. Meanwhile, Prime Minister Theresa May dodged and bullet. She narrowly won a vote on the customs union, averting a leadership challenge. Traders ignored the development and remained focused on Carney’s remarks. Today’s UK economic reports will be important. Better than expected Retail Price, PPI, DCLG House Price Index data and CPI could shift the focus back to the August 2 BoE policy meeting.

GBPUSD is in a downtrend while prices are below the 1.3290-1.3310 area. Yesterday’s break of support at 1.3145 is targeting major support in the 1.3020-30 area, last tested between October and November 2017. The magnitude of yesterday’s decline leaves plenty of room for GBPUSD to bounce while leaving the downtrend intact. GBPUSD has support at 1.3080 and 1.3030. Resistance is at 1.3150 and 1.3190.

Chart: GBPUSD 4 hour

Source: Mocaz charts

Sterling’s collapse triggered widespread US dollar buying, and by the time Asia opened this morning, only the New Zealand dollar was better off than it was the day before. But it wasn’t all Sterling. Fed Chairman Jerome Powell’s testimony to Congress helped. Mr Powell said that the job market would stay strong, inflation will remain around 2% and that for now, the Fed will continue to gradually raise interest rates. US economic reports, including Industrial Production, Capacity Utilization and NAHB Housing Market Index were all as expected, and kept the growth narrative alive.

Eurozone inflation data, US Housing reports and day two of Fed Chair Powell’s testimony are ahead.

NZDUSD gains from a short squeeze, yesterday following a weaker-than-expected inflation report were fully retraced in the New York morning. The GlobalDairyTrade auction results were down 1.7% from the previous event which should help reaffirm the negative tone to Kiwi. NZDUSD is bearish while prices are below 0.6810 with a break below 0.6760 targeting 0.6720 and then 0.6680.

Chart: NZDUSD 1 hour

Source: Mocaz charts

 

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Dollar rallies in London and Retreats in New York

It was an up and down day for US dollar traders. The dollar rallied in London and retreated in New York. There were top-tier economic data releases in Europe and far less important ones in the US which led to the greenback’s roller coaster ride. Inflation readings from Great Britain and the Eurozone were worse than expected while US Housing Starts and Building permits were well below forecasts as well.

Day two of Fed Chairman Jerome Powell’s Congressional testimony didn’t reveal anything new but admitted that prolonged tariffs would not be good for growth. Oil prices rallied despite the Energy Information Administration (EIA) reporting a 5.836 million barrel increase in US crude inventories for the week. Wall Street closed flat to slightly higher with strong earnings reports and trade tensions vying for dominance.

Once again, Sterling was in the spotlight. Former Foreign Secretary Boris Johnston kept the risk of a leadership challenge on the table. He said that Prime Minister Theresa May was “dithering,” but it wasn’t too late to save Brexit. GPUSD was already under pressure from soft Retail Prices, PPI, and CPI. GBPUSD plummeted from 1.3092 to 1.3012 on the news. Prices drifted higher throughout the New York session, helped by the soft US data, and opened in Asia at 1.3069. UK June Retail Sales data is released later today and expected to rise 0.4% compared to a 1.3% rise in May. Weak data, a dovish sounding Bank of England Governor and British politics will limit GBPUSD gains. For today, a break above minor resistance in the 1.3090-1.3110 area suggests further gains to 1.3140 and then 1.3180. Below 1.3010 targets 1.2950.

Chart: GBPUSD 1 hour

Source Mocaz

The Australian dollar may be in for an active day thanks to today’s employment report. Often, the data triggers volatile swings in the currency. June unemployment is expected to rise 17,000 while the unemployment rate stays unchanged at 5.4%. The previous results were below forecasts which could mean today’s result surprise to the upside. AUDUSD in a long-term downtrend that started in February. The downtrend line has survived numerous tests, but it doesn’t come into play until 0.7570 on a daily chart. AUDUSD prices have been consolidating in a 0.7300-0.7485 band since the middle of June. Today’s rally from 0.7340 broke minor resistance at 0.7380. A break above 0.7405 would target 0.7435. A move below 0.7380 would lead to 0.7340.

Chart: AUDUSD 30 minute

Source: Mocaz charts

 

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Trump takes a Shot at the Fed

London traders had already left for the day when President Trump took a shot at the Federal Reserve and Chairman Jerome Powell, for raising interest rates. He told CNBC; “I put a very good man in the Fed. I don’t necessarily agree with it because he is raising interest rates. I don’t like all of this work that we’re putting into this economy, and then I see rates going up.” His comments about the Fed drew the ire of the media outlets.

More importantly, at least to FX traders, were his comments about currencies. He said that EU nations have an advantage “because their currency is falling,” and added “Look at China. Their currency is dropping like a rock.”

The US dollar dropped like a rock after the president’s remarks. EURUSD soared to 1.1678 from 1.1600. GBPUSD rallied to 1.3048 from 1.2977. USDJPY tanked, falling from 112.85 to 112.05. The commodity currency bloc traded in lockstep, rising, and then retreating. Trump’s comments also boosted gold and oil prices off the day’s lows. Wall Street

EURUSD dropped from 1.1740 on Tuesday to 1.1585 yesterday. Prices may trade with a bullish bias today as traders lighten positions or book profits ahead of the weekend. Arguably, Trump’s comments are just “hot air”, and the threat of EU/US auto tariffs should limit gains. Today’s US economic reports (Jobless Claims, Philadelphia Fed Manufacturing Survey) were better than expected, providing more support to Fed Chair Powell’s optimistic economic outlook. EURUSD is in a downtrend while prices are below 1.1750, looking for a break below 1.1575 for a move to 1.1510. For today, EURUSD support is at 1.1610 and 1.1575. Resistance is at 1.680 and 1.1705.

Chart: EURUSD 30 minute

Source: Mocaz charts

USDJPY technicals turned negative with the post-Trump collapse below support at 112.60. S break below 111.80-112.00 would extend losses to 111.20. The catalyst for a drop could come from today’s Japan inflation report. June CPI is expected to rise 0.8%, y/y, up from May’s 0.7% increase. Better than expected data could spark USDJPY selling

Chart: USDJPY

Source: Mocaz charts

USDCAD will be in the spotlight later today. Canadian CPI and Retail Sales reports are due. Retail Sales are forecast to rise 1.0% in May after April’s weather-related 1.3% drop. The risk is for a higher than forecast number. CPI, in contrast, may be flat, as according to economists June is the start of a seasonally soft period. An upside surprise would drive USDCAD down to 1.3150, where buyers are expected to be lurking.

Chart USDCAD daily

https://blog.realtradercommunity.com/wp-content/uploads/2018/07/19Jul19-USDCAD.H4-Mocaz-3.png

Source: Mocaz charts