Welcome to my Forex Today column where I'll give a brief wrap on the key drivers of Forex markets and throw in a chart of the day.
As ever, feedback welcome....oh and for AUDUSD specifically you can find that in My Australia Today piece each morning on the blog.
And, for a deeper dive into more currencies and the charts please see my daily markets video.
The pressure has been relieved, but not released on the Turkish lira as traders tire of selling after the currency seems to have found a base around 7.2 against the USD. At 6.34 USDTRY is below last week's close and that in turn has relieved some of the pressure on emerging markets.
Hopefully, contagion has been averted - though the RBI might have been getting a little titchy with USDINR above 71 yesterday afternoon and the BI watching USDIDR approaching 2015 highs has been a little busy before today's monetary policy meeting.
In the end though besides the Turkish trouble the reality is the march of the USD continues.
At one point last night the Euro was solidly above 1.14, the Pound was trading with a 1.28 handle, and even the Aussie dollar looked like it was climbing off the mat. All that’s faded though with EURUSD at 1.1349, down 0.5%. GBPUSD has done a little better with a 0.35% loss – it’s trading at 1.2721 while the Yen at USDJPY 111.21 has lost a similar amount. The Aussie is down 0.40% at 0.7240 and at the lowest levels since January 2017. The Kiwi gave up its gains too and is back at 0.6574 while the CAD was a rare winner with USDCAD down – not a typo – 0.5% at 1.3055.
The USD is stronger again this morning.
That’s against the majors at least while emerging markets have largely got a reprieve from the easing of selling in the Turkish Lira. But two things are at play here. The first, this genuine crisis building in Turkey and the mini-funk it’s caused in emerging markets – the USDINR hit a new record high last night, and the IDR is back near 2015 lows (USDIDR highs). The second thing is that against the majors the USD has just kept keeping on.
Last night both the Pound and Euro got a bit of a lift from ostensibly better than expected data – employment in the UK and Q2 GDP for Germany and the EU. But the gains both these currencies made proved ephemeral. That’s important information in that price action folks. As I left my desk yesterday afternoon it looked like a decent rally may ensue, but after a false start the USD surged again such that the DXY is up 0.3% to 96.68.
That’s about 1 big figure away from the 61.8% retracement level of the big 2017/2018 fall which comes in at 97.70. That’s the current target and then we’ll see how things look after that.
Tonight’s retail sales data in the US is going to be important in the context of this current move. But as you can see in this DXY candle from the last 24 hours, one that has a corollary in the move in the EURUSD, is a pretty bullish one engulfing the previous days move.
The buyers of USD’s are sending a very strong signal right now. I’m still targeting a move in EURUSD to 1.1160/1.1200. That will impact many other pairs.
I want to highlight the USDCAD chart for you to show that for all the fundamentals and rhetoric I run through each day if that's not your bag technicals are a pretty good indicator themselves - and on their own. USDCAD bucked the trend last night and fell - USD loses - while the USD was stronger across the board. Now we know the CAD is not an EM currency so what gives?
Maybe it's as simple as a trendline and the downtrend USDCAD has been in for a couple of months now?
On the day the Bank of Indonesia’s meeting and policy decision will take on a little more interest for developed markets than usual. Not many forecasters expect a move. But if it was me with IDR near the 2015 highs I’d nudge rates a little higher in the current circumstance to make the point “ I’ve got this”.
Before that though we get the Westpac consumer sentiment data in Australia as well as what’s likely to be another disquieting wage price index for the second quarter. Chinese house prices and FDI are out and then tonight Sterling traders will be on tenterhooks for July inflation data in the UK. All forex traders will be doing likewise when the US releases retail sales and industrial production data for July along with business inventories and the NY Fed Empire manufacturing survey.
Have a great day's trading.
Chief Market Strategist
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