Market Action – Update

Daily Trader Talk – Wednesday 5^th July.

What Happened on Tuesday > Top 3?

>North Korea grabs the headlines

>RBA fails to boost the Aussie dollar outlook

>Asian & European Equities moved lower, as did most Bond yields on a quiet trading day

Outlook

+ US FOMC Meeting Minutes

+ Oil recovery continues slowly as interest in North Korean response grows for safe-haven assets.

+ AUD & NZD looking vulnerable

Data & Event Risk Today?:

• (GBP) Services PMI – 6.30pm Sydney.
• (USD+) FOMC Meeting Minutes – 4am Sydney.

USDX: 95.90

US Dollar Index holds onto recent recovery from last week’s selloff.

The FOMC meeting minutes, Interim payroll data and headline Jobs data crucial for USD positioning.

I feel that the US data may disappoint sending USD Index under recent lows of 95.

USDJPY: 113.05

Dollar-Yen sold off by about 30 pips on the North Korean headlines yesterday regarding their longer-range missile test completion, giving safe haven assets such as Gold & the Yen a Bid higher.

The USDJPY pair is fighting a battle between Yen buying for safe haven as well as Yen selling from the weak underlying data.

Unless something new comes from Trump’s response to North Korean ongoing aggression, the USDJPY pair will be driven by the USD data.

Wait & see approach is best on dollar-yen. Best to follow the trend not try to be clever.

EURUSD: 1.1375

The Euro saw a mild pullback as expected in lighter trade for US bank holiday trade.

The moves yesterday lower for Euro, drifting back to 1.1338 were unconvincing.

Buyers will step in again if the FOMC minutes or US Jobs report is underwhelming.

GBPUSD: 1.2938

Sterling saw a very similar trading pattern as the EURUSD did on Tuesday.

BOE voting member reaffirms his view to push for a rate hike at the next meeting but the Sterling still holding around the 1.2930 / 1.2950 range.

Services PMI data hits after the London open tonight so further weakness in GBPUSD is possible is we get another below expectations result.

AUDUSD: 0.7612

AUD got whacked 1 big figure lower on the back of a neutral RBA stance on holding Australia’s cash rate at 1.5%.

No doubt, markets were expecting the RBA to follow the theme from last week from other central bankers hinting at rate hikes, with hawkish sentiment, but they didn’t.

AUDUSD reset from the 7700 handle back to lows of 7595 before a quiet bounce.

The Retail Sales data was good and the China data was good but the RBA failing to be hawkish was taken as a dovish stance on rate outlook, thus the selling was sustained through the Asian session yesterday.

NZDUSD: 0.7280

NZDUSD pulled back and seems to have taken a turn to the downside.

Dairy number overnight was a little bit soft which doesn’t help but the risk sentiment shifting on North Korean concerns was the main cause for a slide lower in the Kiwi.

It should hold the 7250 level as support forms a base awaiting the FOMC meeting minutes.

USDCAD: 1.2995

I have been calling the USDCAD lower for two weeks now, mas momentum builds in the CAD rally, USDCAD slide.

We are now priced at approx. 54% chance of a rate hike next week for Canada, but as always watch the data tomorrow night (Canadian Trade Balance) with caution.

The USDCAD Short trade is a great way to play a soft NFP data release on Friday out of the US.

VIX: 11.22

Volatility index traded slightly higher yesterday, but still quite low under 11.50.

USD Was mixed yesterday as we await the FOMC meeting minutes and key Unemployment & payroll data to close off the week for the US.

GOLD: $1,227.15

Gold recovered about $5 yesterday to 1227 after the sustained selloff on Tuesday.

I feel a bounce much higher is possible over Fridays crucial USD related data, particularly with a serious escalation from North Koreas latest political moves.

Oil (WTI) : $47.00

Oil price continued the grind higher, trading up to highs of around 47.15.

No significant change from Tuesday.

Macro Themes in Play

+ Safe have assets such as Yen & Gold are on standby for North Korean tensions.

+ AUD turning bearish on RBA lack of optimism, also NZD looking vulnerable

+ OIL Price recovery is maintaining and CAD looking increasingly like the next to Hike rates.