FOMC Archives - The Industry Spread

Sterling Slips Pre-Open, Brexit Deal Hopes Pared

October 14, 2019 by Michael Moran Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: AUD/USD, EUR-USD, Fintech, FOMC, FX trading, GBP-USD, Retail Fx, USD/JPY

Summary: After rocketing a total of 3.7% in 2 sessions on fierce short-covering, Sterling slipped 40 points from its NY close at 1.2645 to 1.2605 in pre-Sydney open. Britain and the EU on Sunday said that a lot more work would be needed to secure a Brexit agreement. Elsewhere the Dollar eased after China and the US made progress on their trade talks. China agreed to buy more US agricultural products while President Trump suspended a threatened tariff hike. The Dollar Index (USD/DXY) retreated 0.37% to 98.332 (98.715 Friday). The Greenback eased against Major currencies with the notable exceptions the Japanese Yen and Swiss Franc. The Euro was up 0.19% to 1.1035 (1.1005). Optimism on the partial trade China-US deal lifted the Australian Dollar to a 0.6795 finish, up 0.35%. The Dollar climbed 0.47% against the Japanese Yen. Stronger-than-expected Jobs growth propelled the Canadian Dollar 0.3% against its US counterpart (USD/CAD 1.3295 from 1.3335).
Wall Street stocks finished with gains while global bond yields extended their rally. The Dow was up 0.8% to 26,815. (26,505). The S&P 500 gained 0.7% to 2,972 (2,940).
Canada’s Payrolls created 53,700 jobs in September, beating median forecasts for a gain of 11,200.
Canada’s Unemployment Rate dipped to 5.5% from 5.7 % in August.

EUR/USD – The Euro closed at 1.1035, above the 1.1010 for the first time since September 29. Broad-based US Dollar weakness and higher Euro area bond yields have buoyed the shared currency.

Pound Dollar Chart – Daily FX – 14 October 2019

GBP/USD – Sterling rocketed a total of 3.7% in two sessions, from 1.2212 to 1.2645 (Friday close) on fierce short covering on growing prospects for a less disruptive Brexit. The Pound dipped to 1.2605 from 1.2645 in pre-Sydney trading after weekend headlines suggested a lot more work needs to be done in Brexit talks. GBP/USD currently sits at 1.2630.
USD/JPY – The Japanese Yen was one of two major currencies that weakened against the Dollar as risk appetite remained healthy. The partial trade deal between China and the US lifted USD/JPY to a 108.45 finish (107.95 Friday).
USD/DXY – The Dollar Index, a popular gauge of the Greenback’s value against a basket of 5 major currencies, retreated to 98.332 from 98.715 Friday.
AUD/USD – The Aussie extended its rally versus the Greenback to 0.6795, up 0.34% (0.6760). Overnight high traded for the Aussie was 0.6810. The Aussie Battler’s recovery remains tepid despite progress on China-US trade talks due to a weak domestic economy caused by the drought and housing slowdown.

On the Lookout: China returns after its week-long National Day celebrations with its Trade Balance report in Yuan and US Dollar terms. Meantime Japanese markets will be closed in observance of its national Health/Sports Day. US and Canadian markets are closed today in observance of Columbus Day and Thanksgiving Day respectively.
Data releases for today are few with Chinese trade numbers the highlight. Euro area reports see Germany’s Wholesale Price Index and Eurozone Industrial Production.
The week ahead sees the US Earnings Season begin. While this will affect stock trading more than FX, traders will keep an eye out for earnings from US companies affected by the strong US Dollar and trade war.
On the trade front, FX will keep an eye out for any official Chinese reaction to the trade deal initiated by President Trump. All eyes will also be on Trump’s trade tweets on Twitter.

Trading Perspective: FX will consolidate at current levels in Asia today. The Dollar is struggling with key levels against the currencies approaching. The week ahead will determine if this corrective downtrend can be sustained.

Global Bond Yield Rate Chart – Bloomberg – 14 OCT 2019

On Friday, US bond yields extended their gains. The US 10-year yield climbed 7 basis points to 1.73%. Rival treasury yields more than matched the gains in US rates, apart from Germany. Ten-year German Bund yields were up 2 basis points to -0.45%. The UK 10-year Gilt yield was up 12 basis points to 0.70%. Australia’s 10-Year bond rate closed at 1.01% from 0.89% on Friday. This will keep the Greenback on the defensive.

DXY CHART – Daily FX – 14 October 2019

USD/DXY – The Dollar Index traded to an overnight and September 20 low of 98.20 before settling at 98.332 in New York for a 0.37% loss. Overnight high traded was 98.742. Technically the Dollar Index is on a corrective downtrend. Immediate support can be found at 98.20 followed by 98.00. Immediate resistance lies at 98.70 and 99.00. Look for a likely trading ranged today of 98.10-98.50. Prefer to sell rallies.
EUR/USD – The Euro rallied 0.19% to a 1.1035 finish in New York. The overnight high traded was 1.10627 before the shared currency dipped. The Euro’s topside was constrained by the yield gap between US and German 10-year rates. Trade war optimism and an overall weaker Greenback will keep the Euro supported. Immediate resistance can be found at 1.1060 followed by 1.1090. Immediate support lies at 1.1010 followed by 1.0980. Look to trade a likely range today of 1.1010-1.1060. Prefer to buy dips.
GBP/USD – The British currency stole the limelight as best performing currency for 2 sessions following its 3.7% spike. Fierce short covering boosted the Pound to a 1.27068 overnight and late June high. GBP/USD settled to close at 1.2645, sliding to 1.2605 in pre-Sydney markets and settling currently at 1.2639. Sterling has immediate resistance at 1.2680 followed by 1.2710. Immediate support can be found at 1.2610 followed by 1.2560. Look to trade a likely range today of 1.2585-1.2715. Just trade the range shag on this one today.
AUD/USD – The Aussie lifted to an overnight and three-week high at 0.68104 before easing to 0.6795 at the New York close. Immediate resistance lies at 0.6810 followed by 0.6850. Immediate support can be found at 0.6750 (overnight low 0.67533) followed by 0.6730. Look to trade a likely range of 0.6770-0.6820. Prefer to buy dips/
USD/JPY – The Dollar rallied against the Yen to an overnight and near 2.1/2 month high at 108.628 before easing to 108.42 at the New York close. Japanese 10-year JGB yields were up 3 basis points to -0.19%, while the US 10-year rallied 7 basis points. The wider yield gap and risk-on stance lifted the USD/JPY pair. Immediate resistance lies at 108.70 followed by 109.00. Immediate support can be found at 108.30 followed by 108.10 and 107.80 (overnight low 107.849). Look for a likely trading range today of 108.10-60. Prefer to sell rallies.

Have a good week ahead. Happy trading all.

Investors Lookout for Interim Trade Deal, European Equities Positive on Brexit and Trade Talk Cues

October 12, 2019 by Karthik Subramanian Leave a Comment Filed Under: Market News - US Open Tagged: Barnier, FOMC, Sino-U.S. trade talks

The outcome of Sino-U.S. trade talks was awaited for a clue on short term directional bias of the global financial market.

Summary: Global equity markets are seeing positive progress today as the trading session comes to close for the week. On last trading session for the week, there are several positive factors driving positive price action in the global market.

In the Asian market, equities trade positive as trade talks headed for the last day with representatives of both nations hinting at better than expected progress in trade talks. This along with reports stating that US President Donald Trump is set to meet with top Chinese negotiator – Mr. Liu He helped improve investor morale. Traders now hope for a possible partial trade deal between both nations and a partial deal will provide the global markets with some level of calmness given the fact that the global financial market is going through a whirlwind of news and event-driven price volatility.

In European market hours, major indices and equities opened bullish on positive cues from Asian and US markets. Further, news of comments from Irish Prime Minister Leo Varadkar stating that Brexit deal is likely to be clinched by end of October after the recent last-minute crunch talks saw some favorable developments helped improve optimism surrounding Brexit. This along with gains in the European stock market influenced by a boost in SAP shares on the update of the firm’s decade long CEO stepping down helped equity markets and risk assets see healthy risk on trading activity. In the forex market, the latest developments in geo-political events have resulted in major global currencies and EM currencies see positive momentum against US Greenback.

Precious Metals: Rare metals continue to trade positive on the last trading session of the week despite positive progress in trade talks and Brexit as investors await official concrete evidence and updates on positive proceedings. This along with weaker USD helped safe-haven metals trade positive in the international market.

Crude Oil: Crude oil price is trading positive in the global market as reports of a missile strike on state-owned Iranian oil tanker and data hinting at crude oil shipping price hike helped improve demand to supply ratio in favor of crude oil bulls. US tariffs on oil tankers have crippled nearly 3% of global oil tanker fleet and this is causing a dent in global oil supply helping push price up.

AUD/USD: The pair challenged a key resistance level today and is trading with positive price bias as optimism surrounding Sino-U.S. trade talks helped improve the support for Chinese proxy Australian Dollar. Further, the weakness of US Greenback on improved risk appetite in the global market also helped improve investor sentiment in favor of AUD pushing the pair to fresh two week tops.

On The Lookout: Attention of global investors are divided equally on Sino-U.S. trade talks and Brexit as both events show considerably positive progress just as the trading session comes to close for the week. US President Trump commented that progress in ongoing trade talk has been very very good and this has influenced a hope for a partial trade deal in the global market. But traders are still cautious about the outcome as President Trump has mentioned earlier in his comments that he is not ready for a partial trade deal.

So far none of the key problems such as copyright infringement and national security issues have been addressed by the USA which makes traders highly nervous about the possible outcomes of trade talks. Later in the day, US President Donald Trump is set to meet with Chinese Vice Premier Liu He which is the main focus of traders today.

In the European market, Brexit proceedings took an unexpected turn and optimism for Brexit deal rose to new highs as Irish PM stated that a deal is highly likely following his recent talks with British PM Boris Johnson. Now traders and general public alike wait to know more details on their discussion and reaction from EU and opposing party members on the latest progress.

In the Middle East, tensions rise to new highs following the latest attack on Iranian state-owned oil tankers given the high level of sanctions the US has imposed on Iranian central bank and oil exports. In the release front, traders await US Michigan consumer sentiment, expectations, and Inflation expectations data, and Canadian Unemployment data and employment change for short term profit opportunities. There is also a speech from FOMC members Kashkari and Rosengren.

Trading Perspective: Improved investor sentiment on the latest progress in trade talks and Brexit along with weaker USD suggests that the forex market is likely to see major and EM currencies continue to trade positive on the last trading session of the week. US stock and index futures trading in the international market saw positive price action ahead of Wall Street opening on broad-based optimistic geopolitical event outlooks which hint at a positive opening on Wall Street later today.

EUR/USD: The pair is trading positive in the global market today given development in major geopolitical events and resulting risk on trading activity. The price of the pair has headed towards mid-1.10 handle near which price is seeing range bound activity. Traders now await US macro data and FOMC members’ speech for short term profit opportunity and trade talk updates for short term directional bias as the trading session comes to close for the week.

Barnier and Barclay

GBP/USD: The pair is seeing positive price action as back to back positive headlines on Brexit related proceedings underpin GBP bulls. Both Irish and UK PM talks and Barnier –Barclay meeting boosted traders’ morale and optimism surrounding Brexit deal pushing the price of pair to mid-1.26 handle. Traders now await US macro data and FOMC members’ speech for short term profit opportunity and trade talk updates for short term directional bias as the trading session comes to close for the week.

USD/CAD: The pair is trading well nearly weekly lows below 1.3300 handle as the price momentum is underpinned by USD’s broad market weakness and firmer CAD. The commodity-linked currency Canadian Loonie receives strong support from upbeat crude oil prices and reports of progress in Sino-U.S. trade talks. Traders now await the Canadian unemployment rate and employment change data updates for short term profit opportunities. Positive employment change data would help CAD push the price below mid-1.32 handle as the trading session comes to close for the week. Traders also await trade talk updates as an outcome of talks will help decide the short term directional bias.

Please feel free to share your thoughts with us in the comments below.

Federal Reserve issues FOMC statement

October 10, 2019 by Reg Hub Leave a Comment Filed Under: Central Bank Annoucements, Central Bank News Tagged: Federal Reserve Bank, FOMC

Information received since the Federal Open Market Committee (FOMC) met in July indicates that the labor market remains strong and that economic activity has been rising at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Although household spending has been rising at a strong pace, business fixed investment and exports have weakened. On a 12-month basis, overall inflation and inflation for items other than food and energy are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. In light of the implications of global developments for the economic outlook as well as muted inflation pressures, the Committee decided to lower the target range for the federal funds rate to 1-3/4 to 2 percent. This action supports the Committee’s view that sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective are the most likely outcomes, but uncertainties about this outlook remain. As the Committee contemplates the future path of the target range for the federal funds rate, it will continue to monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

Voting for the monetary policy action were Jerome H. Powell, Chair, John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Charles L. Evans; and Randal K. Quarles. Voting against the action were James Bullard, who preferred at this meeting to lower the target range for the federal funds rate to 1-1/2 to 1-3/4 percent; and Esther L. George and Eric S. Rosengren, who preferred to maintain the target range at 2 percent to 2-1/4 percent.

Implementation Note issued September 18, 2019

Trade, No Trade? China Cancels US Farm Tour, Shrugs It Off

September 23, 2019 by Michael Moran Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: AUD/USD, Bitcoin, Brexit, ECB, economy, EUR-USD, Fintech, FOMC, Forex, FX trading, GBP-USD, monetary policy, Retail Fx, trading platform, USD/JPY

Summary: The Dollar traded within well-worn ranges with differing FX outcomes. A risk-off stance pervaded at the close of US markets on Friday, pushing Wall Street stocks and US yields lower. A Chinese trade delegation cancelled scheduled visits to farms in the states of Montana and Nebraska, following 2 days of trade talks in Washington. Markets concluded that both protagonists in the trade war were no closer to a comprehensive agreement. A late breaking Bloomberg report said a Chinese official shrugged off the farm tour cancellation saw risk come back a touch. Geopolitics remained shaky after Saudi Arabia warned Iran that any strike would amount to war following last week’s oil field attacks. The US Dollar fell against the Yen (107.70 from 108.05) and Swiss Franc (0.9915 from 0.9932). Against the Offshore Chinese Yuan, the Dollar was initially higher (7.12 against 7.10). The latest news saw USD/CNH fall back to 1.10. The Australian Dollar fell 0.47% to 0.6762 from 6792. It’s smaller cousin, the Kiwi slumped 0.7% to 0.6260 (0.6300), fresh 4-year lows. New Zealand’s RBNZ meets on interest rates this week. The Euro dipped to 1.1015 from 1.1040 while Sterling fell back to 1.2472 (1.2522). Equities were sold at the New York close while futures rose in Sydney. US bond yields dropped. The benchmark US 10-year rate finished at 1.72% (1.78%).
Germany’s Producer Prices fell to -0.5% in August, missing forecasts at 0.0%.
Tokyo markets are closed today in observance of its Autumnal Equinox Day.

Forex Fact. – German PPI Chart – 23 SEPT 2019

USD/JPY – The Dollar slumped at the New York close at 107.52, from 108.05 as risk aversion crept into the markets on Friday. In early Sydney, USD/JPY steadied in early Sydney as Chinese officials shrugged off the US farm tour cancellation, saying it had “no effect” on trade talks.
EUR/USD – The shared currency drifted lower within well established ranges to 1.1015 from 1.1040. Worse than expected German Producer Prices and risk-off from lack of trade talk progress between China and the US weighed on the Euro.
NZD/USD – The Kiwi plunged to overnight and fresh 4-year lows at 0.62549, settling at 0.6265 in early Sydney, and 0.6300 Friday. The RBNZ holds its policy meeting this week (Wednesday) with 25% chance of a rate cut.

On the Lookout: Risk-off, risk-on, and the market’s initial reactions said it all this morning. Bloomberg reported that Chinese Business News reported that Vice Agricultural Minister Han Jun said that their withdrawal from a planned US farm tour visit “had nothing to do with trade talks”. Wall Street stock futures rose on the news, while the Dollar edged back to 107.72 Yen from 107.52. USD/CNH fell back to 7.10 after spiking to 7.12. On Friday the Dollar was changing hands at 7.1030 Offshore Chinese Yuan.

IG – Daily FX USD CNH Chart – 23 Sept 2019

Seems like many of us have experienced this scene from China before. Markets will stay alert, remaining on edge. At the end of the day, the Dollar traded within well-worn ranges with FX subdued.
Today sees Japanese Flash Manufacturing data (despite the Tokyo holiday). Euro area Flash Manufacturing and Service data follow with Germany, France and the Eurozone reports. ECB President Mario Draghi addresses the European Parliament’s Economic and Monetary Affairs Committee in Brussels. The UK releases its Conference Board Industrial Orders Expectations (August). US Flash Manufacturing and Services reports round up the day’s data release. FOMC officials Williams and Bullard have speaking engagements.

Trading Perspective: While the Dollar Index (USD/DXY) ended up 0.19% to 98.462 (98.369 Friday), its overall performance was mixed against FX rivals. The US 10-year bond yield dropped 6 basis points to 1.72% (1.78% Friday). Rival note yields were mostly unchanged. This will keep the Dollar’s topside limited despite the market’s general risk-off stance.
The Kiwi was Friday’s biggest mover amongst the majors. NZD/USD plunged to fresh 4-year lows at 0.62549 before recovering to 0.6265 in Sydney. This time it was the Kiwi that dragged the Aussie lower. The RBNZ meets this week with interest rate traders seeing a 25% likelihood of a rate cut. Last week’s Commitment of Traders/ CFTC report saw speculative Kiwi shorts total -NZD 29,790 contracts which is 84% of the year’s highest short contracts. It is in a similar position to where the Aussie was a few months ago. The risk therefore is north for the Kiwi. Particularly if US bond yields continue to slide.

IG – Daily FX NZD USD Chart – 23 Sept 2019

NZD/USD – Having slumped to fresh 4-year lows on the overall bearish sentiment ahead of this week’s RBNZ policy meeting and the market’s general risk aversion, the Kiwi settled at 0.6267, currently. NZD/USD traded to a low at 0.62549 in New York. Immediate support lies at 0.6250 followed by 0.6220. Immediate resistance can be found at 0.6290 and 0.6320. With the speculative market positioned short near yearly highs, prefer to buy dips in a likely 0.6250-0.6300 range.
EUR/USD – The Euro dipped to 1.1019 from1.1040, down 0.3%. The worse-than-forecast drop in German producer prices and overall risk aversion weigh on the shared currency. EUR/USD traded to an overnight low at 1.09962 before climbing to settle at 1.1019, where it currently sits. EUR/USD has immediate support at 1.1000 followed by 1.1080. Immediate resistance lies at 1.1040 and 1.1070 (overnight high at 1.1070). Today sees Euro area PMI’s. ECB outgoing President Mario Draghi address the European Parliament on Economic and Monetary Policy in a speech in Brussels. Look for a likely trading range today of 1.0995-1.1055. Prefer to buy dips.
USD/JPY – With Tokyo out today, expect subdued trading in the Dollar. However Japanese banks operating in Asia will have access to their head-office order books, which can be huge. USD/JPY has immediate resistance at 107.80 followed by 108.10 (overnight high 108.08). Immediate support can be found at 107.50 (overnight low 107.526) followed by 107.20. With US 10-year yields lower and the general risk aversion, look to sell USD/JPY rallies in a likely 107.30-107.80 range.
AUD/USD – The Aussie fell in tandem with the Kiwi, ending down 0.47% at 0.6765 (0.6795). The statement from China’s Agricultural Minister on the cancelled US farm visits saw stock futures and the USD/JPY rally. However, the Aussie didn’t move much, currently sitting at 0.6768 from 0.6765. AUD/USD traded to an overnight low at 0.6760, which is immediate support. The next support level comes in at 0.6730. Immediate resistance lies at 0.6790 followed by 0.6810 (overnight high 0.6809). Look to buy dips in a likely 0.6760-10 range.

Have a good week ahead all, happy trading.

Federal Reserve issues FOMC statement

September 19, 2019 by Reg Hub Leave a Comment Filed Under: Central Bank Annoucements, Central Bank News Tagged: FOMC, labor market

Information received since the Federal Open Market Committee met in July indicates that the labor market remains strong and that economic activity has been rising at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Although household spending has been rising at a strong pace, business fixed investment and exports have weakened. On a 12-month basis, overall inflation and inflation for items other than food and energy are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed.

Implementation Note issued September 18, 2019

Stocks & Currencies Divided on Geo-Political Cues & Caution Ahead of FOMC Update

September 19, 2019 by Karthik Subramanian Leave a Comment Filed Under: Market News - US Open Tagged: European politics, FED, FOMC

European politics

Depressing developments in European politics is a major cause for worry, all traders are now focused on FOMC updates.

Summary: Global equity and forex markets are seeing divided price action today as investor sentiment towards risk assets was divided on geopolitical cues stemming from the local market. In the Asian market, Hong Kong, China, and Indian markets saw positive price action while other major markets such as Japan, Australia, and Singapore saw major benchmark indices and key equities decline sharply on account of caution ahead of today’s FOMC meeting and interest rate decision.

As the trading session progressed further into European market hours, benchmark indices and key equities in Europe saw positive price action, but investor risk appetite took a nosedive on account of latest political and Brexit developments which weighed down Euro considerably. In the forex market, USD remained steady while the Australian Dollar and Japanese Yen saw dovish price action ahead of Fed meeting later today.

Precious Metals: Rare metal market is seeing divided price action today. As risk assets remained relatively positive albeit unfavourable developments in European political issues, demand for silver remained low. But caution ahead of Fed meeting and increased no-deal Brexit odds underpinned Gold.

Crude Oil: Crude oil, also known as Liquid gold saw further steep declines in both major international benchmarks today. Saudi Arabia’s comments reassuring plans to bring oil production back to full capacity came as serious blow to crude oil bulls acting as a trigger for today’s declines.

AUD/USD: The pair is trading in red as macro data suggested that the Aussie economy is moving at a pace below expected trend causing the pair to decline to fresh intra-day lows. But the pair has since recovered from intra-day lows while still remaining in red ahead of US FOMC update.

On The Lookout: The main focus of traders across the globe on today’s docket is updated from FOMC on their interest rate decision and stance on stimulus measures. However, events ahead of FOMC press conference and interest rate decision update had put forth plenty of stuff for investors to think about which are likely to keep them occupied for the rest of the week. Euro – the common currency of European nations took a serious blow as Italian Prime Minister Giuseppe Conte resigned ahead of no-confidence vote putting the future of nation in jeopardy.

Conte’s move to resign before vote makes the market second guess their opinion on the total number of MPs in favor of and against his views making the upcoming political developments an interesting event to wait for. Further, comments from France on the expectation of no-deal Brexit also increased uncertainties and market worries while comments from German Chancellor Angela Merkel stating that EU will think about practical solutions regarding backstop provided some level of reassurance. Trade talks between Sino-U.S. representatives on deputy levels are set to begin tomorrow which is another event to look out for in immediate future.

Trading perspective: Forex market is likely to continue divided action in early North American market hours while macro data updates provide short term profit opportunities. However, FOMC interest rate decision update set to release in Mid-North American market hours is major event today and likely to provide directional bias for forex market which will remain steady for the rest of the week. Aside from FOMC event, traders await release of FOMC economic projection, EIA crude oil inventories, Housing starts and building permits data from US macro calendar and release of Core CPI data and Common, Median and Trimmed CPI data from Canadian macro calendar. US stock and index futures which are trading in the international market saw dovish price action ahead of Wall Street opening on caution ahead of today’s fed meeting which suggests US Wall Street is likely to see subdued opening today.

EUR/USD: The pair is trading in red across Asian and European market hours today. EURO bulls are under pressure from multiple fronts such as dovish CPI data, uncertainties stemming from Italian politics and latest developments in Brexit proceedings. Traders now await US macro data for short term profit opportunities.

GBP/USD: The pair is trading in red despite the prevalent risk on the trading environment in the European market as GBP came under pressure from increasing no-deal Brexit odds from France and worse than expected outcome in UK macro calendar data. Traders now await US macro data for short term profit opportunities.

USD/CAD: The pair is trading mostly flat with overall price momentum and bias slightly in favor of US greenback. The upside move is influenced by commodity-linked currency Canadian Loonie’s weakness over consecutive sessions of decline in Crude oil price in the international market. Traders now await the US and Canadian macro data updates for short term profit opportunities and directional bias.

Please feel free to share your thoughts with us in the comments below.

US Dollar, Yields Dip, Aussie Climbs as RBA Holds Steady

August 21, 2019 by Michael Moran Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: AUD/USD, Capital Markets, CFTC, EUR-USD, FOMC, FX, FX trading, GBP-USD, SEC, USD/JPY

Summary: The US Dollar and bond yields dipped as optimism on new stimulus measures from global central banks faded just days ahead of the Jackson Hole, Wyoming gathering. Fed Chair Jerome Powell will open annual symposium with a speech where several other central bank heads are expected to speak. Markets were cautious but remained calm. US President Trump stepped up his attacks on the Federal Reserve, saying Jerome Powell should cut rates 100 basis points and add QE as well. The Dollar Index (USD/DXY) a popular gauge of the currency’s value against 6 majors, dipped 0.18% to 98.171. US bond yields retreated. Benchmark US 10-year rate finished at 1.56% from 1.61% yesterday, trading more like a currency. In Italy PM Giuseppe Conte resigned, opening prospects for new elections and adding to global uncertainties. The Euro recovered to 1.1100 after hitting near two-year lows. Earlier, Australia’s central bank, the RBA revealed a “steady as she goes” policy from its latest meeting minutes. The Australian Dollar bounced off its lows to close at 0.6777, up 0.3% (0.6752). Risk aversion led to a lower Dollar versus the haven sought Yen to 106.20 from 106.62 and Swiss Franc, 0.9778 from 0.9817.

BloombergMarkets US 10-Year Bond Yield Hourly Chart – 21 AUG 2019

Wall Street stocks gave back most of their gains. The DOW dipped 0.83% to 25,897, from 26,115. The S&P 500 lost 0.9% to 2,895. (2,922.)

EUR/USD – managed to rally on the back of weaker US Dollar to 1.110 (1.1080 yesterday) despite Italy’s growing political turmoil. In his resignation Conte accused Deputy Minister Mateo Salvini of breaking up the government and putting the country at risk. Earlier the Euro dropped to near 2-year lows at 1.10656.
AUD/USD – The Australian Dollar rallied against the Greenback to 0.6777 from 0.6752 after the RBA latest meeting minutes revealed a “steady as she goes” policy. Market sentiment though remains bearish on the Battler. AUD/USD kept within a two-week trading range.
USD/JPY – the Dollar dipped against the Yen weighed by lower 10-year bond yields and a more risk-averse market stance. USD/JPY closed at 106.20 from 106.62 yesterday.
GBP/USD – The British Pound rallied against the generally weaker Greenback to 1.2170 (1.2130 yesterday). Sterling was aided by comments from German Chancellor Angela Merkel who said that the EU would think about practical solutions to the backstop, which is the agreed insurance policy for the Irish border. Boris Johnson’s UK government wants it scrapped.

On the Lookout: Yesterday saw a light economic calendar while in Italy, politics heated up. The trade front produced little headway which traders will keep a lookout for in Asia today. China has yet to respond to the recent US moves.
Today data releases pick up. Australia opens with its M1 Leading Index followed by New Zealand’s annual Credit Card Spending (August). The UK reports on its Public Sector Net Borrowing, the difference between government spending and income. Canada reports on its inflation numbers with Headline August CPI, Annual Trimmed CPI, August Core CPI data. The US Existing Home Sales report rounds up the day’s data. The FOMC’s latest meeting minutes are released in the North American evening (early Sydney Thursday 4 am). Which will give traders a clearer guide of future Fed interest rate policy.

Trading Perspective: Ahead of the FOMC’s release of its meeting minutes and Jackson Hole, Wyoming global central bank symposium, expect the recent trading ranges to hold. We highlighted that net speculative US Dollar longs were very much unchanged. However speculative shorts in Sterling and the Australian Dollar continued to build, which may see further short-covering support. Against the Yen, it is a totally different ball game. Among the majors, the Yen is the only currency where speculators are net long the currency (ie short US Dollars).

Saxo Bank Bloomberg – Non-Commercial USD vs 9 IMM Currencies – 21 AUG 2019

President Trump’s attacks on the Fed and some of his solutions, ie cutting taxes on payrolls will erode support for the US Dollar. It is no secret now that he prefers a weaker Dollar. Watch the bond yields, they are trading like currencies and will give us a guide.

EUR/USD – The Euro rallied on the back of the generally weaker US Dollar. The latest drama in the Italian political scene leaves the shared currency vulnerable. EUR/USD closed at 1.1100 after trading to an overnight and near 2-year low at 1.10656. The overnight high traded was 1.11066 which leaves the immediate resistance at 1.1110. The next resistance level lies at 1.1130. Immediate support can be found at 1.1080 and 1.1060. A clean break of 1.1060 could see 1.1027, early August and two-year lows. The latest COT report saw a small increase in net speculative Euro shorts to -EUR46,649 contracts. Which is about 45% off the biggest shorts recorded in a year. Expect a likely trading range today of 1.1060-1.1110.
USD/JPY – The Dollar retreated against the Yen weighed by lower US bond yields and a rise in risk aversion. USD/JPY closed at 106.22 from 106.62 yesterday. Immediate support for today can be found at 106.10 followed by 105.80. Immediate resistance can be found at 106.70 and 107.00. The latest COT report saw net speculative long JPY bets increase by +JPY 14,181 bets to total +JPY 24,742 the biggest total since November 2016. This is a danger sign to getting too short of US Dollars near the 105.00 area. We also know that the Japanese authorities will be vigilant at those levels as well. Meantime we have not broken out of the 105-107 range. Look to trade a likely range today of 106.00-106.70. Prefer to buy dips.
AUD/USD – The Australian Dollar dipped to an overnight low at 0.67546 ahead of the RBA meeting minutes release yesterday. Following the result where the Australian central bank signalled a steady as she goes policy, the Battler slowly grinded higher against the generally weaker Greenback. AUD/USD traded to an overnight high at 0.6495. Immediate resistance remains at 0.6800 followed by 0.6830. Immediate support can be found at 0.6755 followed by 0.6730. The latest COT report saw speculative Aussie shorts increase to -AUD 62,912 bets from the previous week’s -AUD 55,511. Look to trade a likely 0.6760-0.6810 range today, prefer to buy dips.

21 AUG 2019 – DAILY FX GBP USD 1D Chart –

GBP/USD – Sterling had a brief rally to 1.2180 after Merkel’s positive comments on the EU’s preparedness to think about practical solutions to the Irish backstop which is key to a Brexit agreement. This was short-lived and the Pound slipped back to 1.2160 in early Asia. GBP/USD has immediate resistance at 1.2180 followed by 1.2210. Immediate support can be found at 1.2130 followed by 1.2100. The latest COT report saw speculative short GBP bets trimmed to -GBP 95,820 contracts from the previous week’s -GBP 102,702. This is still a large number of shorts, and the risk is for a further short squeeze. Look to trade a likely range today of 1.2110-1.2180. Prefer to buy dips.

Happy trading all.

Trade Fears Pause, Dollar Ends Flat, Markets Remain Fragile

August 9, 2019 by Michael Moran Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: AUD/USD, EUR-USD, Fintech, FOMC, Forex, GBP-USD, Sino-U.S. trade talks, trading, trading platform, USD/JPY

Summary: Trade fears took a breather overnight after the PBOC (Chinese central bank) set the midpoint rate (Fix) for the CNY at 7.0039, stronger than expected. A surprise rise in Chinese exports for July added calm and lifted risk sentiment. For now. Early breaking news in Asia from Bloomberg featured a news report that the US has delayed licenses to do business with Huawei after China halted buying of US crops. The Dollar Index (USD/DXY), a popular gauge of the US currency’s value against a basket of foreign currencies slipped to flat at 97.543 following a higher close at 97.63. The safe-haven Yen rallied against the Dollar to 105.87 from a much unchanged close in New York at 106.05. After outperforming overnight on the return in risk, the Aussie and Kiwi eased to 0.6794 (from 0.6804), and 0.6477 (from 0.6482) respectively. The Euro rose modestly to 1.1187 after falling from 1.1225 to 1.1182. Overnight, Italy’s Deputy Prime Minister Matteo Salvini said that there was no way to patch up differences with the ruling coalition and the only was forward was to hold fresh elections. Bond yields steadied for the second day running. The US 10-year rate closed at 1.72% (1.72% yesterday). The Philippine central bank eased interest rates, following the RBNZ, Bank of India and Bank of Thailand. Wall Street stocks erased about half of their overnight gains. The DOW slipped to 26,209 from 26,399 while the S&P 500 was down to 2,918 from 2,941.

Forex Factory – China US Denominated Trade Balance – 09 AUG 2019

China’s Trade Surplus fell in US Dollar terms to USD 45.6 billion from June’s USD 51 billion. Exports climbed to 3.3% from -1.3%, beating forecasts. Imports also outperformed to -5.6% from -7.3%.
US Weekly Unemployment Claims improved to 209,000 from 217,000 the previous week.

– USD/JPY – The Dollar Yen had a less volatile session trading to an overnight high at 106.30 before slipping to close at 106.05. Early breaking news on the US delay on licenses from companies to do business with Huawei pressured the Dollar to 105.80, where it now sits.

EUR/USD – The Euro slipped off its highs on the overall stronger Dollar and uncertain Italian politics, closing at 1.1182 from 1.1202 yesterday. The Single currency climbed in early Asia to its current level of 1.1187.
AUD/USD – The Aussie outperformed on the back of the better than expected Chinese trade report as well as the stronger PBOC onshore Yuan fix. AUD/USD closed at 0.6805 (0.6760 yesterday). In early Asia, the Aussie Battler eased to 06797.

On the Lookout: Markets remain fragile with the trade dispute between China and the US far from being resolved. Another news agency (One American News Networks – OANN) reported that the White House is considering ending talks with China and imposing other sanctions like halting Chinese student visas and removing Chinese authorities from international agencies if Beijing uses its military to crack down on protests in Hongkong.
RBA Governor Philip Lowe speaks to the House of Representatives Standing Committee on the Economy in Canberra this morning (9.30. am Sydney time).
The RBA releases its Quarterly Monetary Policy Statement at 11.30 am Sydney time today.
Today’s data report sees Chinese CPI and PPI for July. Before that New Zealand’s Visitor Arrivals for July are released. Japan releases its Preliminary Q2 GDP report. European data sees German and Italian Trade Balances and French Industrial Production. The UK releases its GDP (July), Q2 Preliminary GDP, Manufacturing Production, Construction Output and Goods Trade Balance.
Canada’s Employment Report (Employment Change, Jobless Rate) and Housing Starts follow.
The US releases its Headline and Core PPI report (July).

Trading Perspective: Expect further choppy trading given the latest news reports. Traders will keep their eyes on any fresh developments/statements from trade officials (China and the US). Overnight President Trump tweeted that he “is not thrilled with our very strong dollar”.
We could see further short-term US Dollar selling against the Euro and the Yen mainly. The Australian Dollar will be sensitive to the RBA monetary policy statement and Chinese data.

EUR/USD – The overnight range of 1.1180 to 1.1232 should stay intact, albeit in a choppy fashion. EUR/USD had a bid to it after Reuters reported that Germany is considering ditching its balanced budget goal by issuing new debt to finance a costly climate protection package. This u-turn in fiscal policy would arrest falling German interest rates, if implemented. EUR/USD has immediate resistance at 1.1230 followed by 1.1260. Immediate support can be found at 1.1180 and 1.1150. Look to trade a likely range today of 1.1180-1.1230. Prefer to buy dips.

USD/JPY – The Dollar closed little changed versus the Yen in New York at 106.05 before easing this morning on the reports of another build in US-China trade tensions. USD/JPY fell to 105.72 lows in Asia before recovering to settle at 105.84 currently. Immediate support for the Dollar lies at 105.80 followed by 105.50. Immediate resistance lies at 106.00 and 106.30 (overnight high 106.304). Expect Japanese corporates and importers to be on the bid near this morning’s lows. Likely trading range today is 105.70 to 106.70. Prefer to buy dips.

Daily FX AUD USD Hourly Chart – 09 AUG 2019

AUD/USD – The Aussie was best performing currency against the US Dollar overnight. The strong climb in Chinese exports and the lower USD/CNH lifted the Australian Dollar to an overnight high at 0.68219 before easing at the close to 0.6805. Asian trading saw the Aussie push down to 0.6778 before rallying to its current 0.6810. Immediate resistance can be found at 0.6820 and 0.6850. Immediate support lies at 0.6780 and 0.6750. Look to buy dips in a likely trading range of 0.6785-0.6815 today.

Happy Friday and trading all.

RBNZ Chops Rates 0.5%, Bond Yields Dive Then Climb

August 8, 2019 by Michael Moran Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: AUD/USD, CFTC, EUR-USD, FOMC, FX, FX trading, GBP-USD, Sino-U.S. trade talks, trading, trading platform, USD/JPY

Summary: The RBNZ started the ball rolling and cut its Official Cash Rate by 0.5%, more than expected, to an all-time low of 1.0%. The Bank of Thailand and Bank of India cut rates, raising concerns about the weak global economy. US President Trump called on the Federal Reserve to cut interest rates more in a tweet. Global bond yields plunged then pulled back at the last hour in New York, reversing sharp falls as dealers squared up. Market volumes were lower amidst choppy trade due to the northern hemisphere summer holidays. The benchmark US 10-year bond yield made an impressive comeback to 1.73% (1.72% yesterday) after plummeting to 1.595%, late 2016 lows.

CNBC US 10-Year Bond Yield Chart – 08 AUG 19

New Zealand’s Dollar, known by traders as the Kiwi, nosedived to 0.6377 from 0.6525, 3.1/2-year lows before settling at 0.6445. While the Dollar Index (USD/DXY) was little changed at 97.630, it was mixed versus it’s Rivals. The Greenback was lower against the safe-haven Yen (106.22 vs 106.45) and Swiss Franc (0.9755 vs 0.9765). The Euro ended flat at 1.1204 despite weaker German Industrial Production data. The Australian Dollar rebounded to close at 0.6760 (0.6758) after slumping to 0.6677 on the back of the Kiwi’s fall. Yesterday the Dollar gained against the Offshore Chinese Yuan (CNH) to 7.0800 (7.0555).
Wall Street stocks reversed losses to close with modest gains after an initial tumble. The S&P 500 finished at 2,882 (2,878 yesterday) after slumping to 2,824.
The RBNZ cut its Official Cash Rate by 0.5% to 1.00% from 1.50%. Most analysts forecast a 0.25% trim. RBNZ Governor Graeme Orr kept a bearish stance, stating to Parliament that “negative rates are a possibility”. Australian Home Loans slipped -0.9% in July, lower than expected. Germany’s Industrial Production fell to -1.5% in June, much worse than the -0.5% forecast. Germany’s 10-year Bund yield plunged to an all-time low at -0.6% before settling at -0.59%.

EUR/USD – The Euro ended little changed at 1.1204 after a choppy session. The Single currency fell to an overnight low at 1.11793 on the dismal German Industrial Production report. EUR/USD jumped to a high at 1.1242 after the initial drop in US bond rates.
USD/JPY – The Dollar plunged to 105.494, fresh 2019 lows before settling at 106.24 on the bounce back in the US 10-year yield.
AUD/USD – The Australian Dollar had another volatile session, slumping to 0.66768, its lowest since early 2009 after the RBNZ’s move to chop rates. The Aussie then jumped in true Battler fashion on the rebound in risk assets. AUD/USD closed at 0.6760, touching an overnight high at 0.6783.

Daily FX – NZD USD Chart – 08 AUG 2019

NZD/USD – The RBNZ shot the already flightless Bird down after the interest rate chop to 0.63774, near-November 2015 lows. NZD/USD had been sitting at 0.6525 before the move. The Kiwi then rallied with risk to finish at 0.6445, down 1.3%.

On the Lookout: Traders and investors alike will keep their focus on today’s release of China’s Trade data (no scheduled time, normally in early Asian afternoon). Analysts expect China’s July Trade Surplus to narrow to a median CNY 300 billion from June’s CNY 345 billion. In US terms, a surplus of USD 41 billion from USD 50.98 billion. China’s Annual Imports are forecast to have dropped -8.3% from -7.3% in June. Exports are expected at -2.0% from -1.8%.
Japanese Bank Lending, Current Account and Trade Balance as well as Foreign Investment in Japanese stocks and Japanese investment in Foreign Bonds are release prior to the Chinese reports (9.50 am Sydney time).
Euro area sees the release of the ECB’s Economic Bulletin. US Weekly Unemployment Claims and Final Wholesale Inventories round up today’s economic reports.

Trading Perspective: The rebound in stocks and bond yields occurred in thin trading. Easing moves from the RBNZ, Bank of Thailand and Bank of India fed market concerns about the weak global economy. This saw equities and bond yields plummet before mounting a strong comeback. Currencies followed suit and the Dollar Index (USD/DXY) closed much unchanged at 97.63. Expect more volatility as the trade war between China and the US continues to escalate. Traders will also watch the PBOC and their actions today particularly at the CNY Fix. Ranges are being established, albeit wider due to the choppy trade. Which is ideal for FX traders.

EUR/USD – The Euro ended flat at 1.1204 after trading an overnight range between 1.11793 and 1.12419. Immediate resistance lies at 1.1220 followed by 1.1250. Immediate support can be found at 1.1180 and 1.1150. Euro traders await the release of the ECB’s Economic Bulletin, which will provide insight into the ECB Board’s latest thinking on the economy and interest rates. The Economic Bulletin (previously known as the ECB Monthly Bulletin) is published two weeks after the latest Governing Council meeting. Look to trade a likely range today of 1.1190-1.1260.
USD/JPY – The Dollar slumped to 105.494, lows not seen since the flash crash in January this year. The fall in the US 10-year yield to 1.595% weighed heavily on this currency pair. The subsequent bounce saw USD/JPY back up above 106, closing at 106.24. The Yen will continue to attract due to its haven status in the current environment. On the bid side of the Dollar, Japanese corporate (importers) buying on dips and a vigilant BOJ will provide support. Immediate support lies at 106.00 followed by 105.70. Immediate resistance can be found at 106.50 and 106.80. Look to trade in a 105.85-106.85 range. Prefer to buy dips

RBA AUD TWI CHART – 08 AUG 2019

AUD/USD – the Australian Dollar had a good bounce after plunging on the back of the Kiwi. The Australian Dollar remains oversold despite the heavy feel about it. In typical Aussie Battler fashion, the currency always feels heaviest when its at or near lows. The opposite applies when it’s bid. We highlighted two factors yesterday. That on a Trade Weighted Index, the Aussie is near decade lows as well. While the RBA has advocated a low currency, the Aussie has reached its lower limits. Speculative short Aussie bets are still at near 12-month highs (-AUD 53,442 contracts as at 30 July). Immediate support for the Aussie lies at 0.6730 and .6700. Strong support can be found at 0.6680. Immediate resistance can be found at 0.6780 followed by 0.6800. Look to buy dips in a 0.6740-0.6790 range.

Happy trading all.

Federal Reserve issues FOMC statement

August 1, 2019 by Reg Hub Leave a Comment Filed Under: Central Bank Annoucements, Central Bank News Tagged: Federal Reserve Board, FOMC, Jerome H. Powell

Information received since the Federal Open Market Committee met in June indicates that the labor market remains strong and that economic activity has been rising at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Although growth of household spending has picked up from earlier in the year, growth of business fixed investment has been soft. On a 12-month basis, overall inflation and inflation for items other than food and energy are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. In light of the implications of global developments for the economic outlook as well as muted inflation pressures, the Committee decided to lower the target range for the federal funds rate to 2 to 2-1/4 percent. This action supports the Committee’s view that sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective are the most likely outcomes, but uncertainties about this outlook remain. As the Committee contemplates the future path of the target range for the federal funds rate, it will continue to monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective.

The Committee will conclude the reduction of its aggregate securities holdings in the System Open Market Account in August, two months earlier than previously indicated.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; James Bullard; Richard H. Clarida; Charles L. Evans; and Randal K. Quarles. Voting against the action were Esther L. George and Eric S. Rosengren, who preferred at this meeting to maintain the target range for the federal funds rate at 2-1/4 to 2-1/2 percent.

Implementation Note issued July 31, 2019

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