Daily Trader Talk – Monday 3rd July.
What Happened on Friday > Top 3?
>US Dollar ends lower for the fourth month in a row.
>Oil price recovery fires up the risk on trades.
>EUR, AUD & GBP all close solidly against the Greenback.
Outlook
+ US Jobs & Payroll data at the end of this week crucial
+ Bullish Bias to continue for EURO as Euro area inflation a touch stronger
+ USD Index at a pivotal point near 95.40
Data & Event Risk Today?:
- (AUD) China Manufacturing PMI – 11.45am Sydney.
- (GBP) Manufacturing PMI – 6.30pm Sydney.
- (GBP) BOE Carney Speaks – 10pm Sydney.
- (USD) ISM Manufacturing – 12am Sydney.
USDX: 95.40
The Dollar Index had a very heavy trading week last week, collapsing from a steady 97 level to find lows around 95.20 before a small bounce.
The ECB, BOE & BOC seem to be much closer to tightening their policy which hits the USD demand where it hurts.
USDJPY: 112.35
Dollar Yen took off to a whisker below 113 last week but has traded in swings since then, closing the week around 112.25.
The news of the Tokyo metropolitan election result just hit the news wires, and has seen 112.35 resume on the back of PM Abe’s defeat – undermining his prospects to win the nationwide election.
The softness in USD broadly, battling against Yen softness is a very interesting trade right now in this key US jobs data week. The FOMC meeting minutes hit on Wednesday and will be crucial for the USD positioning before the Non-farm data hits.
EURUSD: 1.1420
The Euro surged to a fresh yearly high and has held that level with a solid weekly close around 1.1420.
Friday’s Euro zone inflation data should help the Euro higher still this week, particularly when we see the FOMC meeting minutes, as we have a light data week on the Euro side, but a very active event risk & Data week for the USD side.
There are a lot of reasons to be buying Euro against the Greenback currently.
GBPUSD: 1.3015
Sterling finished off the week strongly, closing above 1.300 convincingly.
When the US FOMC speakers reaffirmed that the feds current policy is appropriate in light of the soft recent inflation readings, the markets took the cue to sell USD.
The Sterling is still vulnerable for a pullback if the US data surprises to the upside this week, so be nimble around the key data risk on the calendar.
AUDUSD: 0.7685
AUD had a stellar continuation trading session to close off the week at 7685 after spending most part of Friday’s session above the 7700 handle.
The iron ore recovery story as well as solid China data on Friday helped the Aussie to highs around 7715 before settling back.
The debate remains around the RBA considering rate hikes so this week will be extremely interesting for the Aussie in the wake RBA tomorrow as well as Retail sales, Aussie Trade balance and the always critical US jobs data.
NZDUSD: 0.7340
NZDUSD has struggled to get past the 7340 level but is holding up firmly after last week very soft week of trading in the USD.
The Aussie rally and risk-on theme also played their part to help the Kiwi hold gains above 7300.
A move to 7350 looks very likely this week for NZDUSD in a busy data week on the greenback side.
USDCAD: 1.2975
USDCAD has been a big reflection of the divergence trade last week, as softer outlook for USD coupled with BOC tightening speculation fuelled a fierce move from around 1.1360 to sub 1.3000.
The Oil price recovery story helped the CAD greatly too, as WTI bounced from dangerous lows approaching $40 to a solid recovery to $46.30.
On a percentage basis that is a huge swing higher for Oil making USDCAD vulnerable for lower lows even from this level. This pair will be very sensitive to the USD data this week so look stay nimble.
VIX: 11.18
Volatility Index slid slightly lower to finish off a wild week for Stocks, dragged by tech stocks and a host of central bank speakers.
This week will prove to see more of the same as the market is still pricing in a 3rd rate hike for the US at 60%.
GOLD: $1,242.20
Gold had a soft end to the week coming back from $1,245 to just above the $1241 level as a risk on theme dominated most of last week with renewed optimism for the ECB, BOE & BOC rate expectations.
Gold will move above $1,250 if the US jobs data disappoints at all, but can fall well below the recent lows if we see a rebound in the Average hourly earnings or headline Unemployment rate for the US.
Oil (WTI) : $46.30
Oil price continued the rebound after the headlines around conditions placed on Qatar keep rolling through.
The US production story has the ability to turn Oil lower again, but last week was a sustained solid rally in the WTI price with momentum growing on the upside.
Macro Themes in Play
- DXY bounces as US yields outperform, yield curves rising
Odds for third 2017 rate hike improve to 60%
• EURUSD pulls back but still ends up 2% on week;
USDJPY recovers with stocks to close at new highs for move, bullish;
Cable sideways, UK rates lend support for run at 1.3050
• CAD higher with oil, market betting on BOC rate move next; AUD better behind metals, banging up against trend resistance (.7730)
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Russell Sandiford / Dealer |
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Australia (toll free) T 1800 176 935
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