Securities Identifier YHOO NYSE
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United States Dollar
The United States Dollar strengthened over the last 24 hours, reversing its declines over the previous day. The catalyst was again President Trump who, along with EU President Juncker, agreed to hold off on tariff implementation so that both sides could negotiate a deal. Closer to home, US economic data was mixed with monthly trade balance and headline durable goods orders weaker than expected. This morning, the Greenback opens 0.59% higher at 94.79, against a basket of currencies.
The major headline over the last 24 hours was the ceasefire in on-going trade tensions between the US and EU. While the comments by both presidents after the meeting were vague and unhelpful, a halt on tariff implementation is nevertheless more than the market expected. The positive market sentiment saw equity markets and the EUR appreciate significantly initially, although these were both later reversed due to unrelated announcements. Nevertheless, positivity returned to the market which led to a small recovery for the Greenback.
Markets now turn their attention to the US Q2 GDP which came in just above consensus of 4% posting a 4.1%. The growth number double the previous quarter reading on the back of consumer spending and a narrowing trade deficit. Later this morning we have US consumer sentiment as the next risk event for market participants.
USD / CAD Expected Range: 1.3029 – 1.3114
The USDCAD ended the session 0.20% higher, in line with broad USD strength against all major currencies, at 1.3072.
The loonie was trading at the highest level in a month versus the USD, around 1.3030, but couldn’t hold onto gains despite comments by US Trade Representative Robert Lighthizer around NAFTA and the possibility of reaching a tentative accord next month.
Support for the USDCAD sits now on yesterday’s lows around the 1.3030s while 1.3114 should act as short-term resistance.
EUR / USD Expected Range: 1.1621 – 1.1658
EUR/USD dropped to a weekly low, down 0.8% to 1.1640 after the ECB kept rates unchanged, as expected, and reiterated a pledge to keep them flat until mid-2019. EUR/USD also fell despite Draghi sounded upbeat in his accompanying presser. Despite the risk of a trade war, the ECB president said that the latest data indicated the region was “proceeding along a solid and broad-based growth path”.
EURUSD dropped to a weekly low, down 0.8% to 1.1640 after the ECB kept rates unchanged, as expected, and reiterated a pledge to keep them flat until mid-2019.
From a technical perspective, support is expected at 1.1575 (July 19th low) and resistance at 1.1791 (July 9 high).
GBP / USD Expected Range: 1.3083 – 1.3123
GBP/USD fell throughout the day yesterday, mostly a result of a strengthening dollar. It broke down below the 100 and 200-hour moving average but has at least been steady through the overnight session. There wasn’t much by way of UK economic data on Thursday to make mention of and political and Brexit headlines – mostly negative – continue to dominate, albeit there was no fresh news in this regard yesterday.
Theresa May flies off to Austria today for further Brexit talks, this after EU chief negotiator Michel Barnier said on Thursday that the EU “will not delegate the application of its customs policy and rules and VAT and excises duty collection to a non-member who would not be subject to the EU’s governance structures”. After talks with the Austrian chancellor and Czech PM the UK PM then goes off on her summer hols.
Today shouldn’t be too much different from yesterday, as far as trading of the cable is concerned. There’s no UK data due out and the Brexit headlines, as well as US data, will likely take center stage.
AUD / USD Expected Range: 0.7370 – 0.7399
The Australian Dollar once again is back under the 74c handle against the Greenback relinquishing all gains from the session prior. The AUD/USD suffered at the hands of a stronger U.S Dollar falling from 0.7463 down to 0.7372. The move was sparked by a sharp drop in copper prices and markets squaring up positions ahead of top-tier US data out later today US time.
Speaking of which, locally yesterday Australian Import Prices increased at a faster-than-expected pace in the three months ended June, figures from the Australian Bureau of Statistics revealed. The import price index climbed 3.2 percent sequentially in the second quarter, faster than the 2.0 percent rise in the first quarter. It was the third consecutive quarterly increase and above the 1.9 percent rise, economists had forecast. The increase was driven by higher prices paid for petroleum, petroleum products and related materials, general industrial machinery, electrical machinery, apparatus, and appliances. On a yearly basis, imports prices grew at a faster rate of 6.0 percent in the June quarter, after a 2.6 percent gain in the March quarter. Data also revealed that export prices grew 1.9 percent quarterly and by 6.6 percent yearly in the June quarter.
The domestic docket sees PPI figures due at 11.30am AEST, figures are expected to remain flat at 0.5%. Markets will be closely watching tonight’s US Q2 GDP figures with consensus for growth of 4.2%.
New Zealand Dollar
NZD / USD Expected Range: 0.6763 – 0.6789
The New Zealand dollar opens lower this morning having fallen sharply through trade yesterday as the uptick in risk appetite enjoyed following reduced trade tensions faltered. The NZD touched intraday highs at 0.6851 following an upbeat press conference between President Trump and EU Commission President Jean Claude Juncker where both leaders promised to work toward zero tariffs. The impromptu press conference helped ease concerns linked to an escalating trade war and fostered a short-term upward run on commodity currencies. The Kiwi however then gave up gains as investors expect Trump attentions to return to US-Sino trade hostilities. As the tariff battle between the US and China continues and the CNY remains under pressure the upside demand for the NZD will likely be short.
Opening this morning 8 tenths of a cent lower the Kiwi currently buys just 0.6779 U.S cents as attentions turn to an all importing US GDP indicator. With expectations for an exceptionally strong Q2, a print at or around 4.8%-5% could prompt a USD extension into the weekend and see the Kiwi test lows nearing 0.6720.
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