Session Wraps - Major Forex Headlines wrapped up by trading session

Forex news for North American trade on July 19, 2019:

Markets:

  • Gold down $20 to $1425
  • WTI crude up 65-cents to $55.95
  • US 10-year yields up 3 bps to 2.05%
  • S&P 500 down 18.5 points to 2976
  • USD leads, EUR lags on day
  • NZD leads, GBP lags on week
North American trade started out with a miss on Canadian retail sales. That quickly sent USD/CAD up to 1.3110 on the headline but the gain didn't last, in part due to details of the report that showed an odd drop in grocery store sales as a main culprit. USD/CAD retreated to 1.3070 shortly after then fell further late as Iran worries prompted a rebound in crude.

The market looked to be grinding towards the finish line but was hit by a series of headlines late. The first was that Iran had seized a UK-flagged ship in the Strait of Hormuz. That sent oil higher and worried stock markets. A WSJ report talking about only 25 bps compounded the move and that sent stocks from flat to solidly negative in the final two hours.

USD/JPY initially jumped on the Fed talk and hit 107.98 but gave back the 20 pip move in the following hour. It was a similar story across the board with the FX market less worried about the timing of cuts.

Cable started the day near 1.2550 and a session high but bled lower into the London fix and fell as low as 1.2476 on the WSJ report before finishing nearly right on the 1.2500 figure.

EUR/USD slipped a bit on a Speigel report about Draghi planning to ease in November but the damage was barely noticeable. Still, it was a rough finish for the euro at 1.1216 from 1.1282 late yesterday on the Williams talk.

Have a great weekend.
FX news wrap ticker

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Author: Justin Low

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Forex news from the European morning session - 19 July 2019

Headlines:

Markets:

  • USD leads, EUR lags on the day
  • European equities lower; E-minis up 0.1%
  • US 10-year yields up 2.2 bps to 2.047%
  • Gold down 0.6% to $1,437.40
  • WTI up 1.4% to $56.10
  • Bitcoin down 3.0% to $10,299

EOD 19-07
It is all about the dollar as we look to wrap up the week following the flip flop fiasco involving New York Fed president John Williams' comments overnight.

The dollar gained ground in Asia Pacific trading before gains eased up and then continued its track higher in the European morning - backed by a report from WSJ citing less dovish remarks from perennial Fed dove James Bullard from an older interview.

EUR/USD traded around 1.1240-60 for the most part in early trades before making new lows on the session towards 1.1230 as the dollar gained fresh ground during the session. Cable also moved from 1.2540 to a low of 1.2510 before recovering some ground.

As Treasury yields held higher, it kept USD/JPY bid on the session with the pair hovering around 107.60-70 despite a bit of a setback in European equities after a brighter start. The sentiment in Europe was dragged by risks of a potential Italian election shaping up.

Oil held firmer on the session after the US shot down a drone in the Strait of Hormuz overnight, which Iran still vehemently denies that it was one of theirs. WTI is up by 1.4% currently to $56.10 although gains have eased up a little during the morning.

Looking ahead, the main focus will still be on the dollar and the Fed as markets grapple with what to expect ahead of the 31 July FOMC meeting. Hence, pay attention to the final few Fed speakers left today before the blackout period commences tomorrow.

I wish you all a great weekend and have a wonderful rest of the day!

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Forex news for Asia trading Friday 19 July 2019 

If you missed the US session you missed the speeches from Fed officials Clarida and Williams - the two of note. Clarida got the ball rolling with dovish comments and Williams followed up later with more. Markets were quick to latch onto Williams' remarks, taking what he said as signalling a 50bp rate cut at the upcoming July meeting. The response was swift, equities caught a bid and the USD dropped. This was during the US session but its the background for what came next …


Forex news for Asia trading Friday 19 July 2019 

We entered early Asia (well prior to Tokyo markets, i.e. only NZ and Australia getting active) with a bit of consolidation, but this didn't last. Officials at the New York Fed issued a correction to Williams' comments, saying they were academic and 'not about potential policy actions at the upcoming FOMC meeting'.

Market response to this was even more swift, with a sharp upmove for the USD and equities dropping. As the dust settles the market has pulled in its expectations for 50bp, although not removing it completely from the table, and moving back towards it'll be a 25bp cut. 

Movements for currencies were, in summary, that sharp move up for the USD and then  retracement moves to varying extents across currencies.

  • EUR/USD dropped from touching just over 1.1280 to circa 1.1240 and a retrace towards 1.1270. 
  • USD/JPY lows were just above 107.20, the clarification from the Fed took it back to 107.60 and its just over 107.50 as I update.
  • AUD/USD high just over 0.7080 (NZD/USD just over 0.6790) then the drop to under 0.7060 (NZ under 0.6770) before stabilising above 0.7070 (NZ circa 0.6765). 
  • CAD, CHF, GBP played out accordingly.

Gold had a great US session and managed a high above $1,452 before given 15 or so dollars back. 

News and data flow apart from this was limited. Japanese CPI data indicated well under the BOJ target, nothing new here.


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Forex news wrap for NY trading on July 18, 2019

The USD moved lower in the NY session and got an initial kick lower after some comments from Pres. Trump that tensions in Iran were easing a bit  The Iranian regime had made an overture for a truce on nuclear proliferation (still too early) if the US would will stop sanctions.  Of course, like most negotiations the overtures are one thing, getting to an agreement is another.  In any case, there was a tilt to the downside in the USD on the news (flight out of the safety of the dollar).  

The big moving event was the comments from the NY Fed's Williams who upped his dovish slant by saying:

  • It is better to take preventative measures on rates than to wait for disaster to unfold
  • Research shows that when a neutral rates are low you should not keep your powder dry
  • Policymakers must move more quickly to vaccinate the economy and add monetary stimulus when rates are close to zero
  • When rates are near 0 policymakers cannot afford to take a wait and see approach
  • Lower for longer rates foster good financial conditions, allows stimulus to pick up steam, allows inflation to rise
  • Promising temporarily higher inflation after rates touch zero can offset nearly all negative effects of low rates
  • If inflation gets stuck below the goal, people's expectations may push inflation lower, reducing Fed's ability to be effective
  • Long-term forces lowering neutral rates set to linger
  • Investors see low-inflation readings as a new normal
  • Williams currently estimates neutral rates in US around 0.5%
It is hard not to exclude any of those comments as each adds to the dovish argument in a different way.  

The headlines sent the dollar tumbling lower (the Dollar index - DXY - moved below it's 200 day MA).  The greenback fell against all the major currencies with the declines vs the GBP (-0.92%) and the AUD (-0.91%) as being the greatest.  The dollar also took a big step lower vs the NZD (-0.74%) and the JPY (-0.64%).  Below is a summary of the % changes of the major currencies vs each other. The USD was the runaway weakest.
 
Forex news wrap for NY trading on July 18, 2019

The reaction in other markets was equally as impressive.

  • Gold, which tends to go opposite the USDs move, continued it's reversal of earlier declines by rising by over $20 at the highs after William's comments. We currently trade up +$18.89 or 1.30% at $1445.58. The high reached $1448.29. The low was at $1414.65, down nearly -$12 on the day at the time. That was a big reversal for the precious metal
  • US stocks reversed earlier declines and ended higher on the day. For the the Nasdaq index it closed up 22.036 points at 8207.24, after being down -50 points at the lows. The S&P index closed up 10.69 points at 2995.11, after being down -11.33 points at the lows. The Dow closed near unchanged but recovered a -0.50% decline at the lows.  Below is a graphical look at the % low, high and close levels in the North American and European indices today
US stocks close higher after a down and up ride today
  • Bond yields reversed course as well after being up in the NY morning, they reversed on the comments and are trading lower by up to -6.1 basis points in the short end (the shorter end fell over -5 bps yesterday).  The longer end saw the yields of the 30 year rise by 0.7 bps as the yield curve steepened on hope for multiple cuts by the Fed.  In fact the expectations for a 50 bp cut in July surged from about 34% at the close yesterday to close to 65% currently.  That'lll help to steepen the yield curve. Below are the changes and high to low ranges for the varies maturities (from 2 to 30 years). 
US yields move lower.
Some technical levels for some pair in the new day:
  • EURUSD: The EURUSD moved up to the 100 and 200 bar MAs and 38.2% of the move down from the June 25 high at the 1.1272-79 area. The high today reache 1.1279 and trade at 1.1275 currently. A move above that area and the highs from last week and this week at 1.1285 will open the door to 1.1302 (50% of the move down from the June 25 high).
  • GBPUSD:   The GBPUSD also moved higher but is stalling at the 100 bar MA on the 4 hour at the 1.25549. A move above would look toward the 50% at 1.2582 and then the 200 bar MA on the 4-hour at 1.2614.  On the downside, the pair should not travel below the 1.2500 level if the move higher is to continue.
  • USDJPY: The USDJPY fell below support at 107.53-56 (lows from June 27 and July 3rd) on its way to a low of 107.22. That break level (at 107.53-56) is risk level for shorts now.  A move lower looks toward 107.039 (low from June 21) and then the June low at 106.773. 

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