Daily Trader Talk – Tuesday 4th July.
What Happened on Monday > Top 3?
>Strong US Manufacturing data & US Treasuries spur a USD Rally
>Stocks Up, Oil Up, USD Up, Gold Down to November low.
>GBP, EUR & AUD come back of highs against the USD, but USDJPY Strong.
Outlook
+ Markets still curious about another US Fed rate hike and USD trades accordingly
+ USDJPY Will be in focus in Asia today as US Holiday for 4th of July.
+ RBA Tuesday is here – Will the RBA be hawkish too?
Data & Event Risk Today?:
- (AUD) Retail Sales data – 11.30am Sydney
- (AUD) RBA Rate Statement– 2.30pm Sydney.
- (GBP) Construction PMI data – 6.30pm Sydney.
- (NZD) Dairy Traders Numbers– Tentative.
USDX: 95.98
US Dollar Index had a great Monday across all sessions, trading higher along with US Treasury yields.
ISM US Manufacturing data was solid and markets took that as an open door for a fed rate hike possibility in line with the upcoming jobs report for the US on Friday. Still pricing Fed Funds Futures probability around 55% means this week’s FOMC minutes and Jobs report is extremely important to USD sentiment.
USDJPY: 113.35
Dollar Yen saw a continued grind higher across the Asian & London session from levels around 112.25 to 113.3.
PM Abe’s defeat in the Tokyo Metropolitan election added to a firm stance by BOJ for softer yen rates means that the divergence trade is in full swing – meaning soft Yen, slowly strengthening USD can propel USDJPY back to 115.00.
EURUSD: 1.1375
The Euro had a pull back to start the week as the USD found strong support.
The moves yesterday lower for Euro, drifting back to 1.1370 from highs around 1.1450 were purely a USD move.
Buyers will step in again if the FOMC minutes or US Jobs report is underwhelming.
GBPUSD: 1.2950
Sterling saw a pullback led by US dollar strength yesterday, but was also offered in the London session after weaker than expected manufacturing data for the UK hit the newswires.
Construction PMI data is released on the London open of trade today, but with a US holiday I expect the Cable to consolidate towards 1.2985/1.3000 again.
Traders bought USD yesterday but won’t yet be convinced in the Feds open door to another rate hike in the US.
AUDUSD: 0.7667
AUD saw a continued slide back from 7700 handle to 7650 as the USD reset higher yesterday.
The Retail sales data and RBA rate statement should make the Aussie a very interesting trade today.
Any hawkish bias for the RBA will see a swift run towards 7750 and a disappointing release will go the other way settling at 7600.
I still favour the upside for the AUD and cross pairs on the Aussie.
NZDUSD: 0.7290
NZDUSD suffered from USD bulls roaring into the long USD trade as US manufacturing data threw optimism back into the US dollar data points.
The Kiwi is holding most of the recent gains but starting to look vulnerable. A break below 7250 will trigger further selling off in my view.
USDCAD: 1.2995
USDCAD recovered to start the week after a savage selloff last week. That was always likely after the lower lows but the downside should still prevail as the Oil price is now firmly pointing higher again.
Oil went through the $47 price level and USDCAD seems to be finding its way lower again.
I am keenly watching if the recent lows break down, certainly possibly if this week’s US jobs report disappoints.
VIX: 11.06
Volatility had a quiet trading range to start the new week.
Tech stocks suffered selling pressure, but the Dow & SP500 were solid once again.
GOLD: $1,224
Gold was crushed lower as the strong US data & US Treasury yields saw strong Buying of USD.
Gold slammed down from around 1237 to lows of 1218 before a small bounce back to 1224.
Wild moves and more to come with this week’s key US jobs report set for release to finish the trading week.
Oil (WTI) : $47.00
Oil price continued the rebound yesterday all the way back to the $47 level now.
A swift recovery towards $50 seems likely from here, as the upside momentum seems very deep.
Macro Themes in Play
+USD Back in favour fuelled by Manufacturing data & Treasury Yields.
+GBP turns lower as UK Manufacturing data disappoints.
+OIL Price recovery is strong, Gold slammed lower on renewed USD optimism.
| Russell Sandiford / Dealer | ||
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Australia (toll free) T 1800 176 935
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