Forex trading news for June 29, 2017

  • US stocks tumble but it could have been a lot worse
  • Bullard answers reporters questions now....
  • S&P says Fed to start to normalize balance sheet starting in September
  • BOE Haldane: Need to prevent higher inflation becoming entrenched
  • And even more Bullard (he loves to talk)
  • US sanctions China bank and 2 individuals
  • US CBO sees 2.1% GDP in 2017 and 2% in 2018
  • Trump will meet with Putin on sidelines of G20 summit in Germany
  • Even more Bullard: B/S normalization should not disturb markets
  • More Bullard: Fed has been raising rates ag. backdrop of relatively weak growth
  • Fed's Bullard: Current level of Fed rates appropriate
  • Talk of a healthcare deal across the aisle in the Senate
  • It is not a good day in the EU equity markets
  • BOC hike not a done deal; risks run both ways for CAD - BTMU
  • USDJPY bangs against the trend line and reversing lower
  • US initial jobless claims for June 24 week 244K vs 240K estimate
  • US Q1 GDP third reading +1.4% annualized vs +1.2% expected
  • The strongest and weakest currencies as NA traders enter for the day
  • Germany June CPI mm + 0.2% vs 0.0% exp

A snapshot of the other markets shows:

  • US stocks ended the day lower, but it could have been worse. S&P down -0.86%. Nasdaq down -1.44%. Dow down -0.78%
  • US bond yields are higher: 2 year 1.3692%, up 1.6 bp. 5 year 1.8469%, +2.6 bp. 10 year 2.266%, +3.8 bp. 30 year 2.816% up 3.5 bp
  • Spot gold is ending mid range down about -$4.00 or -0.31% to $1245
  • WTI crude is up $0.13 or 0.31% at $44.87.

The US trading session started with a Germany economic release. The CPI pieces from the different regions were tallied and the CPI rose 0.2% vs estimates of 0.0%. The YoY rose to 1.6% vs 1.4% estimate.

European yields were supported by the data (German up 8.4 bp, France up 9 bp. Italy up 12 bp), while European stocks did not like the combination of higher yields, and a higher EURUSD too. The major European stocks were all sharply lower (Dax down -1.83%, CAC down -1.88%, Ibex -1.60%). Ouch.

US data at 8:30 AM showed GDP in the 1st quarter, was up 1.4% vs 1.2% estimate. Jobless claims were came in about as expected as well at 244K vs 240K estimate. The data did not really matter, however, as the US yields followed the EU yields and so did the stocks (to the downside).

Making things a bit more muddy for markets was:

  • Stress test results for the largest banks were announced after the close yesterday, and those results opened the door for US banks to increase dividends AND announce buybacks. So although stocks were down, the banking stocks were not. In fact, they did quite well
  • How does the dollar react to higher rates and lower stocks.
  • Month end/quarter end/mid year flows. That may continue tomorrow (and include bond and stock flows as well).

At the start of the day, the dollar fell against the EUR and the GBP but rose against the JPY. The higher inflation in Germany helped to strengthen the EUR. Yesterday's more hawkish comments from Carney kept the GBP bid too.

Both the EURUSD and the GBPUSD traded at month highs. For the EURUSD it traded at a multi-month high. More specifically, it traded at the highest level since May 2016. For the GBPUSD, the pair only trade at the highest level since May 25th but it is only 30 or so pips away from the highest level since September 2016. Remember that pair has to deal with Brexit and political muddiness from the recent election. Yet it is close to trading at the highest in 9 or so months. I guess that says something about the USD (which is weakening as the Fed tightens). Yes the markets can be confusing.

As far as the USDJPY, it had a Dr. Jekyll and Mr Hyde day. At the start, the pair moved higher on the back of the higher yields. Then as stocks started to get hit, the pair started to think "maybe a lower dollar made more sense". In reality, technicals played a role. Looking at the hourly chart below, the price at the high (112.91) found sellers against the topside trend line (at 112.90 - low risk sell). Sellers intensified from profit taking and new shorts and the price was able to move below a lower trend line at 112.28. By the time the low was made at 111.80, the pair had moved to within a couple pips of the 100 day MA at 111.778. The MA stalled the fall yesterday as well. The pair is trading at 112.13 currently with resistance at the underside of the broken trend line (at 112.35) and support at the twice tested 100 day MA at 111.78. Those are the levels for the new trading day.

In other pairs today,

  • The USDCAD fell below 1.3000 for the first time since early February 2017. The 2017 low at 1.29689 remained as the only thing between the price and the lowest trading level since September 2016. The low could only get to 1.2985 - between the 1.3000 level and the 1.2969 next target. The price is trading at 1.3000. Sorry traders but the pair is at one of those key levels. If you want to buy a dip, this is the dip (even if it is just a corrective move). The price can correct to 1.3126 and still keep the bearish bias (it could even go higher). Conversely, if you don't like it, a break of the 1.2969 opens up the downside toward 1.2831 as the next target. It can go either way from 1.3000. So go with the flow (and it might be the month end/quarter end flows too).
  • The AUDUSD moved further away from the 0.7600 level today and into the middle of the 0.7600 to 0.7730-55 upper extreme. If the 0.7730-55 is tested, expect sellers on the first look. Below I also expect buyers at 07600 on a dip.

That does it. For the Asian traders who will be starting your weekend, have a safe and fun one. Thank you for your support.


Below is a snap shot of the strongest and weakest.