Forex news for North American trading on August 4, 2021
- Major indices close mixed. Dow down. Nasdaq higher.
- WTI crude oil settles at the lowest level since July 20
- Treasury Sec Yellen. Expects inflation levels to come down to levels consistent with
- Feds Kaplan: Tapering soon allows for the Fed more flexibility on tightening
- New York Autoshow canceled due to increase Covid measures
- NZDUSD comes off highs with the USD, but also holds 100/200 day MAs
- European indices closing higher on the day
- It was fast break the other way in the USD on Clarida
- Weekly crude oil inventories show a build of 3.62M versus exp drawdown of -3.102M
- Clarida Q&A: I have been surprised by the fall in yields
- Feds Clarida: Expects conditions for raising interest rates to be met by end of 2022
- US ISM services PMI for July 64.1 versus 60.5 estimate
- Markit July US services final PMI 59.9 vs 59.8 estimate
- Feds Bullard: The last time had a run up in cases, it did not have a big impact on the economy
- Canada June building permits +6.9% versus +5.5% estimate
- U.S. Treasury announces quarterly refunding of $126 billion
- US July ADP employment 330K vs 695K estimate
- The NZD is the strongest and the CHF is the weakest as NA traders enter for the day
The market was anticipating some key events and releases today.
The first was the ADP jobs report. With the key US employment report on Friday, getting a feel for the possible direction via this report was eyed by traders. It came out much weaker than expectations at 330K vs 695K estimate. The much weaker than expected number sent the USD lower.
The next key event was at 10 AM ET when the ISM services index was released. Contrary to the ADP report, this report came in at a record high level of 64.1. Moreover, employment did not show weakness but rebounded from a sub 50 level last month to 53.8. New orders rose to 63.7 from 62.1. Order backlog remained high at 63.5. Exports kicked on reopenings overseas at 65.8 vs 50.7 in June. Strong across the board for that report.
At the same time, Vice Chair Clarida was speaking and although his speech and commentary was not as hawkish as Fed officials like Bullard, Kaplan and Waller, it was certainly not as dovish as Powell, Brainard or Kashkari. More specifically, he said that his base case called for raising interest rates by the end of 2022, and to start tapering by December (if his base case projections are correct). That is not the "start by September" like the other hawks but it does not have a 2022 date either.
The combination of Clarida, and the ISM services record numbers, reversed the dollar to the upside. It was fast break the other way.
Looking at the rankings of the strongest to the weakest, the USD won the silver behind the NZD who won gold. The NZD was the strongest coming into the day and remained that way on the back of a much stronger than expected jobs report which now has analysts looking to August RBNZ meeting as the start of tightening. The weakest of the majors was the JPY followed by the CHF.
Technically speaking:
- EURUSD: The EURUSD had a volatile up and down day, but the last run lower after ISM/Clarida, took the price back below its 200 hour MA at 1.18423. The current price is at 1.1836, below that level but not by much. Nevertheless, the last 5 hours of trading stayed below that level and as long as that trend can continue and the price is able to get below the 50% midpoint of the move up from the July 21 low at 1.18296, sellers will continue to maintain control.
- GBPUSD: The GBPUSD is going out near session lows at 1.3889. That is just above the rising 200 hour MA at 1.38824. The price has been above the 200 hour MA since July 26th. A move below it and the swing low for the week at 1.38746 would open the downside for more downside probing
- USDJPY: The USDJPY is closing above its 100 hour MA at 109.36, but below its 100 day MA at 109.588. The current price is at 109.458. A move outside those borderlines should lead to momentum in the direction of the break. For the upside, the 100 hour MA at 109.71 would be the next target. On the downside, The swing low from Monday at 109.18 followed by the 109.00 to 109.06 area.
In other markets:
- Gold is ending up $1.38 in it's own wild up and down day following the lead of the USD. After being up over $20, it gave back all its gains and turned negative before closing modestly higher at $1811.60.
- Spot silver is down -$0.12 or -0.49% at $25.36
- WTi Crude oil tumbled another $-2.18 or -2.10% to $68.02. The price of crude oil closed lower for the 3rd day in a row and has given up more than 7% over that time period.
- Bitcoin is trading just below $40000 at $39848.
In the US debt market today, the benchmark 10 year yield traded as low as 1.127% before Clarida and ISM data, and as high as 1.215% after. The yield is trading at 1.174% near the close of trading today
In the US stock market, a day after the S&P closed at another record, it closed lower by -20.47 points at 4402.68. The Nasdaq index was the only gainer at up 19.2 points or +0.13% at 14789.50. The Dow was the worst performer falling -323.73 points and closing just off the lows for the day at 34792.67. The index was negative all day only reaching -68.96 at the highs.
