Forex news for NY trading on June 4, 2019

A snapshot of other markets near the close are showing:

  • Spot gold up $.18 or 0.01% at $1325.45
  • WTI crude oil futures are trading up $.32 or 0.60% at $53.57
  • Bitcoin on Coinbase tumbled -$900 to $7651. For a technical look at Bitcoin CLICK HERE.

The markets were dominated today by two major themes.

  1. Fed's Powell and the Fed
  2. Tariffs on Mexico.

Regarding Powell, he didn't say a heck of a lot, but he said enough to appease the cut hungry market. Some of his comments included:

  • Fed 'closely monitoring' impact of trade developments
  • We do not know how or when trade issues will be resolved
  • Much higher likelihood rates will fall to effective lower bound in a downturn
  • Crisis-era tools worked and are likely to be needed again
  • Fed will 'act as appropriate' to sustain expansion

It wasn't like he endorsed a July cut (the market has it at 61.4% with a September cut odds at 92.9%), but he has slowly dialed back the "inflation is transitory" theme that came out of the last Fed meeting on May 1. Back on that day, the probability of Fed hike by the end of the year was 65%. The market - as a result of the trade concerns and slower global growth - has nearly the same chance of a cut in July now (and all but certain for a cut by September).

Now Fed's Evan's also spoke today and he too danced around a bit. Some of his highlights

  • Trade uncertainty seems to be weighing on business investment
  • He's comfortable with policy now but worried about inflation levels below 2%
  • I'd be more aggressive in defending 2% inflation target
  • Can look through price increases from tariffs
  • Policymakers should be overshooting 2% target to be symmetric
  • Would take it into account if the economy softens but that hasn't been seen
  • If there is more softening, policymakers need to ask if they are getting in the way of the economy
  • Markets are seeing something that I have not yet seen in the national data
  • Economy still solid but uncertainty higher

The dovish side was highlighted by his comments on running inflation hot, trade uncertainty and fear that the Fed may be "getting in the way of the economy". The not so dovish was that he does not see a softening yet, and his comment that the "markets are seeing something that I have not yet seen in the national data".

The second the influence on the tone today came from Rep. Lopez Obrador who commented that she is optimistic of a US/Mexico deal by June 10 as Mexico is willing to accept proposals of the US on migration.

That eased the "newer" perhaps more crippling trade tariff fears and helped propell stocks.

For the day, the major indices had huge gains. The final numbers showed gains of over 2% for the major indices. For the S&P, it moved back above its 200 day MA AND 100 day MA (at 2801). That is more bullish. For the Nasdaq, it too moved and closed above its 200 day MA at 7519.84. The index closed at 7527.11 (the index remains below its 100 day MA at 7618.15). Both European and US shares closed near their session highs.

The % changes of the major indices today

In the forex market, the USD and the JPY are ending as the weakest of the currencies as investors fleed the safe-haven trades. The CAD was the strongest of the majors today.

The ranges and changes of the major currencies vs each other.

Below are some technical views of the price action today and expectations going into the new day.

EURUSD: The EURUSD closed higher on the day, but chopped up and down for most of the trading day. The high price today stalled at the 100 day MA at 1.1275. The low price today stalled at a old swing highs from May 15/16 at 1.1223-25. The pair is trading in the middle of that range at 1.1252. Traders will look to trade the range until there is a shove higher or lower. The ECB meets on Thursday. The market will be focused on the economic forecasts and comments from Draghi. No change in rates is expected.

GBPUSD. The GBPUSD also chopped higher. The pair closed above both the 100 and 200 hour MAs yesterday (currently at 1.2634 and 1.26558) and although there was an intraday dip below the higher 200 hour MA today, it was only for a single hourly bar. The pair is getting closer to the 100 hour MA at 1.27244. That level will be eyed in the new day as a hurdle for buyers. The price has not traded above that MA since May 13th when it was up at 1.3000. It is much lower now, but still looms as a resistance level that must be broken to give buyers more confidence that a temporary bottom is in. Absent that, and the move higher over the last few days is just a dead cat bounce. Traders will not want to see a move below a rising trend line on the hourly at 1.2661 in the new day. The 200 hour MA is at 1.2656.

AUDUSD: The AUDUSD took the RBA cut in stride and was helped higher today but stock gains. The pair moved above its 200 bar MA on the 4-hour chart at 0.6978 (trading at 0.6990). The pair was last above the 200 hour MA back on April 23rd. Stay above that MA in the new day and the buyers remain in control.

GBPJPY: For GBPJPY volatility lovers, the 100 hour MA has moved down to test the price at 137.39. So far, the MA has stalled against the level but if there is a break, with momentum, more traders will be looking for more of a corrective move higher. If it holds, however, the swing lows at 136.55-62 will be eyed.