Forex today was bullish for the dollar with the DXY at YTD highs, bearish for EUR/USD and cable following Draghi’s remarks that concerned both Italian risks and Brexit, positive for USD/JPY and AUD/USD.
Strong results from Twitter and Microsoft contributed to a bounce in US equities – European bourses also had a better day.
There was an improved risk environment which aided a slight recovery in high betas and the commodity complex although the dollar remained firm on a longer-term outlook with respect to ongoing concerns surrounding geopolitics and the divergence between the US economy and the rest of the world. Both gold and Oil prices were up and industrials were also performing, supporting the Aussie.
Currency action
EUR/USD was sold off following the ECB announcements, with bulls at a slight disadvantage pre ECB due to a yard in options expiry between 1.420/30. This contained the move on what appeared to be a balanced ECB outcome at first shot, but the emphasis on risks associated with Italy and Brexit took their toll and pressured the single currency to 1.1356 as a new trend low, with the move helped along as investors concentrate on all of the positive data of late ahead of Friday’s GDP. On balance, things are lined up for a potential run to 2018’s Aug 15 low down at 1.1301 – from a macro perspective, the US and EZ data have been showing persistently opposing growth paths while technically, RSI has further to run while MACD’s bearish crossover remains intact. Cable was sent to the downside and the lowest level since early September at 1.2798 and all it took was Draghi to address the Brexit saga to knock the pair down to size. The market has made up its mind that the BoE is not going to be in a position to hike rates in the foreseeable future while Brexit remains an outstanding risk with no signs of a solution in the near term. The cross was able to take to the high grounds and ended the NY session up by +0.21% to 0.8862 within Thursday’s range of between 0.8882-0.8832. USD/JPY caught a bid with a bullish correction in stocks and a slightly improved risk-appetite, although the yen pulls a positive bias due to the underbelly of sour sentiment surrounding the grim outlook for global growth and heightened trade was risks. Since Thursday’s Asian session, the pair has travelled from 111.82 to a high of 112.67. AUD/USD bulls were looking good on the return of risk appetite and commodities firmed also, including gold. AUD/USD has recovered from the recent lows in the 0.7050s and managed to pierce the 21-4hr SMA to score a high of 0.7099. However, failures to accumulate interest to get over the line exposes the currency to further supply from a lack of commitment nor conviction on the bull’s part. In the meantime, the pair could be playing catch up to USD/CNH that has been making a new short-term high and US GDP could be the nail in the Aussie’s coffin on a number more impressive than the 3.3% q-o-q annualised market consensus.
Key notes from US session:
- Risk-on? – Rabobank
- Wall Street extends rally, Nasdaq rises more than 3.5%
- ECB: acknowledgement in press conference that economic picture had darkened – Nomura
- ECB: December meeting to lead to significant market reaction – Danske
Key events ahead:
US GDP Preview – 4% Here We Come?
Share
