Forex news for NY trading on July 17, 2018

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In other markets:

In the European and US stock markets, all the major indices closed higher, with the German Dax leading the way. In the US, the Nasdaq was the biggest gainer despite earlier declines on the back of disappointing Netflix earnings after the close yesterday.

In the debt markets in the US, the yield curve flattened today, with the 2 year up 1.5 bps, while the 10 year was unchanged. The 2-10 spread is around 24 bps now.

Economic data in Canada showed manufacturing sales up 1.4% vs0.4% expected. It did not help the loonie which was lower in trading today.

In the US, industrial production was modestly higher than expectation for the month (0.6% vs 0.5% expected), but revisions to the prior month more than offset the modest beat.

The global dairy trade prices at the auction today fell -1.7%. That was the 4th consecutive decline.

In the forex market, the NZD shrugged off the weaker dairy prices and was the strongest currency of the day. The USD was not far behind.

The weakest currency was the GBP as PM May and the puzzle called Brexit continues to be the focus. Today PM May won a trade bill amendment vote by a narrow 6 vote margin. A defeat would have tied the PMs hand on Brexit and could have led to the ousting of the PM. BOE Carney today warned that a no-deal on Brexit would be bad for the UK, but more damaging to the EU. The EU was reported to have warned member states to prepare for a no-vote.

The big event was the testimony of Fed Chair Powell in front of the Senate. Congruent with the FOMC press conference and other speeches since then, he spoke highly of the economy and although he felt, the fight on inflation was yet to be won, he felt confident that inflation would settle symmetrically around the 2% target. He expects tax, spending to help growth over the next 2-3 years, and stressed that gradually raising rates was the way to extend the expansion. He commented that he was glad the Fed allowed the labor market to strengthen as inflation has not really kicked in despite the low employment rate. Although he said that Congress and the President was responsible for what goes on with regard to trade, he did warn that generally speaking countries that are open to trade have grown faster. If the actions lead to lower tariffs, that all will win in the long run.

His comments helped to reverse earlier declines in the stock market (especially the Nasdaq), and led to a run higher in the USD.

The USDJPY today tested the 100 hour MA in the London morning session at 112.22 (at the time) and is closing the day at 112.86. That is the highest level since January 9th. On more upside in the new day, the pair will be testing the 200 week MA at 113.21. Be aware.

The GBPUSD fell below its 200 and 100 hour MA earlier in the day at 1.3237 and 1.3218 and stepped lower on Brexit concerns. The low fell to a low at 1.30669 just before the amendment vote. When May and government survived, there was a run higher. However at the close, the pair is trading near the Friday swing low at 1.3100. A break below will have the bears more comfortable. The bulls will be feeling some pressure.

The EURUSD was following the dollar higher (and perhaps the GBPUSD lower but at a slower pace - EURGBP moved higher today). Like the GBPUSD, the price fell below its 200 and 100 hour MAs and that led to lower levels (at 1.1706 and 1.1683 respectively). The low extended to 1.1649 before bouncing modestly into the close. The 100 hour MA at 1.16818 will be resistance in the new trading day.

In US politics, Trump backtracked on comments made during the press conference in Helsinki. Instead of saying "I don't see any reason why it wouldn't be Russia" - referring to meddling in the US election, he said, " I don't see any reason why it would be Russia".... I guess we should believe him, but given the record of backtracking, and his treating of perceived foes vs friends, it is hard to really know what he truly meant. The US congress is also beginning to question the power of the President. There was talk about increasing sanctions on Russia today and also talk about legislating limits on the trade tariffs that the President can impose. What comes of it, is not known, but Helsinki, tipped some peoples views on both sides of the aisle (or so it seems).