Currency Updates:
U.S. Dollar Trading (USD) the market was full of positive expectations going into the ECB press conference and the USD was on the back foot as the EUR/USD shorts were squeezed to day highs scared they would be caught on the wrong side of the market. ECB President Draghi was very disappointing though and the early rally was reversed sharply to new week lows and could potentially test 1.2000 in coming days. Looking ahead, July NonFarm Payrolls forecast 100k vs. 80k. July Unemployment Rate forecast unchanged at 8.2%. July Services ISM forecast at 52 vs. 52.1 previously.
The Euro (EUR) the pre ECB move saw a move above 1.2400 before Draghi failed to deliver a clear plan for the Eurozone. The market was expecting immediate measures to be announced so we saw the pair fall to back below 1.2200 in a violent move lower. The market will be looking to the downside on crosses and the majors with more pressure to be applied to the EU politician’s to quickly agree to new measures.
The Japanese Yen (JPY) the USD/JPY was sidelined as the major reacted to Draghi press conference but the EUR/JPY was up and down following the EUR/USD moves. The main event for the USD/JPY is tonight from the US NonFarm Payrolls data. Good data will further delay more FED stimulus while bad data will prompt selling both on Yen crosses and on USD/JPY as QE3 will be fully priced in for the next meeting.
The Sterling (GBP) the GBP/USD rallied with the Euro pre Draghi and the BOE did as expected leaving interest rates at 0.5% and Asset purchase program at 375bn. EUR/GBP spiked to 0.7900 but finished back below 0.7850 as the Euro was sold heavily in the US session. Looking ahead, July EU PMI Services forecast at 47.6 vs. 47.6 previously. Also ahead, UK PMI services forecast a t51.5 vs. 51.3 previously.
Australian Dollar (AUD) the AUD/USD hit multimonth highs briefly overnight above 1.0550 from the short squeeze on the EUR/USD before Draghi lifted all majors. The sharp selling afterwards on the EUR/USD and US stocks hurt the Aussie but it held up better than most with the EUR/AUD hitting fresh all-time lows under 1.1650. Looking ahead, no data till next week.
Oil & Gold (XAU) Gold fell below $1600 with the USD strength but found support at $1585. OIL/USD fell with US stocks to $87 a barrel.
