Forexlive Americas FX news wrap: USD ends the week... weak

Forex news for traders on July 28, 2017.

In other markets today:

Spot gold is ending the day up $10.52 or +0.84% at 1269.65
WTI crude oil is up +$0.75 or 1.53% at $49.79
US stock indices have were mixed but off the lows. S&P was down -0.13%. Nasdaq is down -0.12%. Dow is up 0.15%
US yields area lower. 2 year 1.347%, -1.5 bp. 5 year 1.8339%, 1.8 bp. 10 year 2.288%, -2.1 bp. 30 year 2.895%, -2.4 bp

US GDP came out a bit weaker than expectations at 2.6% vs 2.7%, but the Q1 was also revised lower to 1.2% from 1.4%. Consumption was 2.8% (as expected). The price index rose by 1.0% annualized vs 1.3%. Business investment was strong. If you take Q1 and Q2 you average you get 1.9% - that is not even 2.0% and certainly not the 3% expected from a Trump economy.

Later the day the NY Fed estimate for Q3 growth showed expectations at 1.92%, down from 1.95%. Goldman Sachs also guesstimated a 2.4% 3Q (down from 2.5%) after taking into consideration the Q2 numbers.

PS. The NY Fed are in with the first revisions to Q2 (and what will be their last guess for that quarter). Their model says Q2 should have been 2.1% (not the 2.6% reported).

PSS. There will be 4 revisions to the GDP before it is put in the books. So this 2Q story is just getting started (and we are nearly 1 month into Q3 - but 3 months away from its first cut).

The USD moved lower on the GDP data.

In other fundamental news, the Michigan consumer confidence sentiment index came in at 93.4 vs 93.1 from the preliminary release. The expectation index came in at 80.5 vs 80.2 and current conditions was also a touch higher at 113.4 vs 113.2. The worry about this is the 80.5 reading for expectations is the lowest since the November election. Is the Trump honeymoon over in the eyes of the consumer? Of course stocks are higher and that makes current conditions feeling good, but are consumers starting to smell trouble? The numbers - although better vs expectations - did not really help the USD.

And then there was Washington. The Senate tried to pass a skinny repeal bill in the early hours of the day (like 1:30 AM ET). That failed when John McCain who saved the Senate vote earlier in the week to start the next process of repeal and replace, ruined the Republicans effort to run through a skinny repeal bill. McCain - a known maverick - also has a recently diagnosed brain tumor. He, after his vote earlier this week, said he wants to have a bi-partisan solution to repeal and replace. However, he did not trust that was going to happen with the skinny bill. Hence his "no' vote.

Perhaps, there comes a time in ones life when politics really does not matter. In a Senate that has a couple liberal Republicans in a 52-48 party split, the vote of McCain becomes very important swing vote, not just today, but in the future.

There was also more fall out from an Anthony Scaramucci interview with a New Yorker reporter. In that interview - he not only was used "non presidential language", but the new communications director basically called for the firing of the WH Chief of Staff Priebus.
Scaramucci and Priebus are not exactly best friends with Scaramucci characterizing them like Biblical brothers Cain and Abel.

Of course Cain killed Abel.

After the close - around 5 PM ET - the President tweeted that Priebus will be replaced as WH Chief of Staff by Homeland Security secretary Gen. John H. Kelly. Cain killed Abel.
Is it only a matter of time before Attorney General Sessions and possibly Stephen Bannon are shown the door?

Scaramucci did not have kind words for Bannon in his interview, and Sessions.....well that story has been going on for a while now. The draining of the swamp is now occurring within the President's chosen circle.

The impact of Washington on the market?

Well perhaps it does depress the dollar. That may be a policy objective of course.
However, over in the stock market, a fall - as a result of the next juicy scandal - simply causes a reactionary sell off on the fears that "The Big One" (i.e. stock decline) is coming. When it does not happen, the sellers are forced to cover.

Also with the Dow and S&P up 10% and the Nasdaq up 18+%, money managers who are not near those numbers, are probably feeling a bit pressured to make up for lost chances.

Finally, as mentioned a lower dollar is good for sales overseas. So multi-nationals can do just fine (and we saw a lot of that in the earnings this week . Apple earnings next week).

At some point, there will be a big "Ole" but it is fun riding the bullish wave (and squeezing the under invested) in the meantime.

Finally, N. Korea launched another test missile. Ho hum. Nothing tends to happen when that happens anymore.

In the currency markets, the dollar declined against all currencies with the exception of the CHF.

The CHF continued its move lower against all the major currency pairs with over 1% moves against the EUR, GBP, JPY and CAD. Earlier this week, the SNB's Jordan said the currency was largely overvalued, and for once the market believed it. This was despite the temptation for a flight into the relative safety of the CHF from politics, falling stocks, N.Korea,etc.

Technically, the USDCHF moved above the July high at 0.9700 before correcting below that level into the close. Next week the bulls will know there is more upside if that 0.9700 level can be breached. If not, the USDCHF might look to join the USD selling party.

The EURUSD fell short of making it to the 1.1776 high for the week on Friday, but did move above resistance at 1.1735 (38.2% of the move down from the 2014 high) and 1.1711 (the swing high from August 2015. Those level will remain important barometers for bullish above and bearish below in the new week. Staying above will start to target the 200 week MA at 1.1794 (will be lower next week). The EURUSD has not been above the 200 week MA since July 2014

The GBPUSD - like the EURUSD - fell short of reaching the week's high at 1.3158 (high reached 1.3152). A move above that level, and a topside trend line on the daily chart at 1.3167 will be eyed on Monday. Get above and it is more bullish. If it can not be broken, the 1.3047 May high will be a key level on the downside. Those are the guardrails to start the week.

The USDJPY closed below its 200 week MA and 38.2% retracement of the move up from the 2016 low at 111.20 (both are at that level). Stay below that MA(and retracement level) is more bearish. The commitment of traders report shows that JPY shorts remain very high in the current week. The USDJPY's fall runs counter to that position (the JPY is getting stronger). As a result, there is a risk of a squeeze lower in the USDJPY. Relief can be had with a move back above the 200 week MA, but absent that.....the price action could start to hurt the JPY shorts.

The USDCAD closed the week below the 2016 low at 1.2460. The 200 week MA is ahead at 1.2372 (will be a bit higher next week). Those are the two levels to watch in early trading next week. The USDCAD has been down the last 5 weeks in a row. The BOC raised rates in July. The GDP data today (+0.6% MoM and YoY 4.1%) shows the hike was justified.

Goldman is suggesting to sell the AUDUSD (please see post here). I will only go with that if the technical's support the move. For your weekend homework, check out my post HERE. If you like it share it too.

Below are the % changes of the major currency pairs vs each other today.

Have a great weekend. Thank you for your continued support. PS feel free to share what we do when you think it is worthy.

Good fortune with your trading.