Forex trading news for July 6, 2017.
- US stock indices slide to the downside. Close nearer the lows.
- US employment to be released on Friday. What to expect?
- Institutional analysts like the EURUSD
- Crude oil futures settle at $45.52 up $.39 or 0.86%
- More BOE McCafferty: Suspects UK has not taken on board positions of other 27 EU countries
- Nowotny: QE not a permanent policy tool
- BOE McCafferty: Pound helping exporters, firms investing
- ECB Weidmann: Domestic price pressure will increase over time
- Atlanta Fed GDPNow forecasts 2Q GDP at 2.7% vs 3.0% last
- European stocks down but rebound off lows
- US crude oil inventories -6299K vs -2000K est
- Germany's Merkel: I will represent Germany and European interests at G20 summit
- Fed's Powell: Housing market in some ways safer than before crisis
- US ISM non-manufacturing composite index for June 57.4 vs 56.5 est
- Toronto house prices fell 7.8% in June and are down 12.1% since April
- US Markit Services PMI for June (final) 54.2 vs 53.0 preliminary
- Canada May building permits +8.9% vs +1.0% expected
- Canada May merchandise trade balance -1.09B vs -0.5B expected
- US initial jobless claims 248K vs 243K estimate
- US May trade deficit $46.5B vs $46.3B expected
- ADP June employment 158K vs 185K expected
- The strongest and weakest currencies as NA traders enter for the day
In other markets today:
- US stocks tumbled with the S&P down -0.94%. The Nasdaq shedding -1.0% and the Dow down -0.65%
- US bond yields were mostly higher. 30 year 2.900%, up 5.4 bp. 10 year 2.366%, +4.3 bp. 5 year 1.935%, up 2.1 bp. The 2 year is ending the day unchanged at 1.3984%.
- Spot gold is ending down -$2.04 or -0.17% to 1224.90
- WTI crude oil is ending at $45.30 just above the 200 hour MA at $45.21. The high extended up to $46.53 after a larger than expected draw down of inventories
If you look at the big mover in trading today the EUR is at the top of the table. Against the major currency pairs, the EUR was stronger against all of them. Versus the USD it was stronger by 0.63%. It was stronger against the commodity currencies.
What was the catalyst?
The minutes from the ECB were a bit more supportive of n unwind of QE. Later in the NY session, comments from ECB Weidman (i.e. "The ongoing economic recovery opens up the prospect of monetary policy normalization") and Nowotny (i.e., "QE is not a permanent policy tool.") also helped the QE unwind argument and the EUR bullish bias today.
Did the US data help contribute?
ADP employment came in weaker at 158K vs 185K estimate but let's be honest, 158K with employment at 4.3% is not a disaster (see employment preview here). Of course the reliability of the ADP predicting private payroll tomorrow is a bit dubious. Last month the ADP was revised to 230K from 252K but that is still well off the May number of 138K. So although ADP was "weaker", we really don't know how that will translate for NFP tomorrow.
In other news, trade was as expected. PMI/ISM service indices were generally better.
I honestly look at the market as a EUR thing today. It was the king. It led the way.
Of course technicals play a role (and will again tomorrow). Here is my take.
The EURUSD rallied during the London and NY sessions and is ending near the high for the day at 1.1424. In the process, the price extended above the 100 hour MA at 1.1367 without much problem (and stayed above it). The pair did stall right near the Monday/week highs at 1.1426 but the correction off the high, has only seen the price come down to 1.1417. The high price last week peaked at 1.1445. We are not far off that level. Typically, the price of a major currency pair does not like to be too close to an extreme ahead of a key economic release like the US employment. The exception would be if traders don't have much fear. Traders seem to not have much fear. The pair is 25 pips from trading at the highest level since May 2016. There is not a lot of fear. What would give them more fear? That 100 hour MA I spoke of at 1.1367? A move below it and the rising 200 hour MA at 1.1356 (it might be close to the 100 hour MA by the time the employment report is released), would change the bulls to bears. If you want a closer level ... a move below the 1.13938-1.1400 will be eyed.
The USDJPY has been trading mostly sideways since peaking on Monday. Actually on Wednesday a new high was made but was rejected (see chart below). I see more up and down consolidation in the chart below. The lows today based against the 100 hour MA and an upward trend line (currently at 113.097). A move below it, and the 113.00 level would be steps in the bearish direction but understand there are other support targets that could stall a fall like at 112.70 (50% in the chart below) and 112.598 (the rising 200 hour MA). Nevertheless, a move below that area at 113.00-09 would be something new technically (and more bearish).
The USDCHF moved to the south side of the 100 and 200 hour MA at 0.9633 and 0.9634 respectively. Those MAs stalled falls over the last few days. The break also was also pushed the price below the neckline of a head and shoulders formation. That is more bearish too. I would expect corrections to stall in the 0.9620-24 area where the 50% and the 200 hour MA are found. Use that as a lid for the pair on corrections. Overall, the bears took back control today.
BOEs McCafferty spoke more hawkishly as well during a radio interview today, and it seemed to give some support to the GBP, but then said:
- Sees modest rate rises if economy as forecast
- Couple of rate rises may come over years
"A couple of rates raise may come over years?" Years? HMMMM, kinda weak. Technically, the GBPUSD is above the 100 hour MA at 1.2947. If that holds, the buyers are more in control. I give the benefit of the doubt to the bulls.
The USDCAD is ending the day back above its 100 hour MA. Earlier in the Asian session the price traded above that MA line. Yesterday, the price traded above it as well. In the last hour, with the help of falling stocks, the price moved back above the MA line at 1.2967. I would not be surprised if traders took the bullish bait, put will spit it back out if the price moves back below the 100 hour MA in the new trading day. The buyers have to prove they can hold above the 100 hour MA. Key targets ahead are at 1.3013 and then the declining 200 hour MA at 1.3033 (green line in the chart below). Canada employment is out with the US employment data at 8:30 AM ET/1230 GMT.
