Forex news for NY trading on August 29, 2019
- Stocks closed higher for the 3rd time in 4 sessions
- WTI crude oil futures settle at $56.71
- Nikkei Asian Review: China clamps down on capital flight risk as yuan weakens
- With "risk on" trades on, that is not good for gold.
- US treasury sells $32 billion of 7-year notes at a high yield of 1.489%
- A snapshot of the forex market shows CAD the strongest and CHF the weakest
- European equity close: Italy leads the way higher
- NHC says Hurricane Dorian to become Category 4 storm in next 72 hours
- ECB's Knot says there is no need to resume QE program
- Corbyn says he will try Tuesday to stop Johnson from shutting down parliament
- US July pending home sales -2.5% vs 0.0% m/m expected
- Trump says lower level US-China trade talks scheduled for Thursday
- IMF gives China cover to weaken the yuan further
- Canada Q2 current account balance -$6.38B vs -$9.75B expected
- US July advance goods trade balance -$72.3B vs -$74.4B expected
- US wholesale inventories for July 0.2% vs 0.2% estimate
- US initial jobless claims 215K vs 214K estimate
- US Q2 GDP second reading +2.0% vs +2.0% expected
- ForexLive European morning FX news wrap: Risk recovers on China trade remarks
In other markets today:
- Spot gold is down $11.69 or -0.75% at $1527.39
- WTI crude oil is up $0.82 or 1.47% at $56.60
The markets were in a good mood at the start of the NY session from positive overtures from China on a trade truce. That got stocks moving to the upside, yields rebounding, gold started to fall as "risk off" flows reversed.
Data in the US today showed GDP coming in as expected at 2.0% with consumption revised higher to 4.7% from 4.3% in the preliminary report. Although businesses are reluctant to spend from the uncertainty, the consumer remains strong.
The chief catalysts for the consumer is employment remains strong. The weekly initial jobless claims remained near lows levels today (215K vs 211K last week) It is hard to see a recession with the job market so strong.
Other data showed Wholesale and retail inventories higher in July. You can say that the threat of tariffs is leading to willing inventory accumulation.
The goods trade deficit remains high at $-72.3B, but was lower than expectations at -$74.4B. That too is likely impacted by threats of future tariffs.
A more negative was pending homes sales for July which fell -2.5% vs 0.0% estimate. Although treasury yields have moved lower, comparable mortgage rates have not followed at the same pace lower. That might help banks, if the Fed cuts rates as they are supposed to do, but does not help the housing market (the new home buyer).
Overall, the dollar was given a boost.
Helping the EURUSD to the downside was comments from incoming ECB President Lagarde who said in a letter to a European Parliament questionnaire:
- That the ECB has not hit the lower bound on interest rates
- impressive the need to keep monetary policy highly accommodative for the foreseeable future
- stated that the central bank has the tools to tackle a downturn, and must be ready to use them.
She did balance her those comments by saying lower rates have applications for banks, but the market interpreted her remarks is being more dovish and as a result, the market marked down the EURUSD.
Later, admittedly, ECBs Knot said that there is no need to resume QE program, and that ECB should keep powder dry in case of a new shock. That sent the EURUSD up from 1.1058 to a a high of 1.1091. However, the market discounted the remarks as being more of an outlier vs the concensus, and the price started to move back lower (plus the 200 hour MA at 1.1093 stalled the rally too). The EURUSD ended up falling below the August 23 low price at 1.10478, but could not quite get to the August 1 low at 1.10265. The low for the day reached 1.10414 before rebounding modestly into the close up to 1.1055.
In other pairs today:
- The USDJPY moved above its 100 hour moving average in the London morning session and stayed above it in the early NY session (at 106.153. The NY session low bottomed at 106.18 before moving higher). That gave the buyers the go ahead to explore the upside more. That move higher took the price to upside resistance (ceiling) at the 106.63-77 area. The high for the day reached 106.676 before coming off to 106.50 into the close.
- The GBPUSD chopped up and down and in the process, stayed below the 100 hour MA at 1.22366 but waffled above and below a lower 200 hour MA at 1.2200 level. Finally, in the last few hours of trading, the pair moved to a new session low at 1.21718 (closing at 1.2181).
- The NZDUSD and AUDUSD tried to rally on "risk on" flows but gave up most/all of those gains by the end of the day as "risk on" turned more into, "buy the dollar". For the NZDUSD, the high corrective price today at 0.6346 stalled right at the swing low from 2016. The inability to get above that level kept the pair at the lowest level since September 2015 instead. For the AUDUSD, its corrective high stalled right near its 100 hour MA (currently at 0.67475). For the NZDUSD it will take a move above the 0.6346 to tilt the bias a little more to the upside. For the AUDUSD it will take a move above the 100 hour MA at 0.67475 to tilt its bias higher now.
Below is a snapshot of the winners and losers in the forex market today. The CAD and the USD was the strongest. The CHF and the NZD were the weakest.
