Search ForexCrunch
  • Forex today was seeing a mixed price action on the board for the dollar once again.
  • USD down vs the commodity-complex, up vs the yen and getting what it deserves vs the greenback following yet another impressive data set from the UK economy.

However, the euro continued to squeeze higher for little rhyme nor reason whereby it simply clings onto risk rallies despite the spread.  Investor sentiment was upbeat after China announced plans to reduce import tariffs on most nations that it does business with – but perhaps on the flip side that might be seen as a defensive measure while it fears the ramifications of a full-blown trade war with the US? Either way, investors liked it and global equities took off – The S&P 500 rallied 0.8% to a new high and The DJIA (new high) and NASDAQ were up almost 1%. The DXY was on its knees despite the benchmark 10yr treasury yield punching through 3% earlier this week and up to 3.08% on Thursday in NY. The US dollar made a low of 93.83 and a break below the 93 handle will turn up the panic selling in this long squeeze that could take the dollar all the way down to the 50 percent Fib at 92.62 where yield spreads and risk will likely be reassessed.

Dollar down despite yet impressive data

“US labour market indicators are holding strong with jobless claims falling to 201k (mkt: 210k; last: 204k) and continuing claims dropping to 1645k (mkt: 1705k; last: 1700k). The Philadelphia Fed business outlook survey rebounded to 22.9 (mkt: 18; last: 11.9; and is better news for the ISM following the weak Empire State print earlier in the week). The employment component lifted to 17.6 (last: 14.3) and new orders to 21.4 (last: 9.9). Notably, there was a sharp fall in pricing data – prices received fell to 19.6 (last: 33.2) and prices paid to 39.6 (last: 55). Existing home sales were flat, but median prices were up 4.6% y/y and average prices up 3.0%. Meanwhile, the Leading Index rose 0.4% m/m in August with solid contributions from jobless claims and ISM new orders. This follows a firm 0.7% gain in July, suggesting Q3 growth is on track for another solid print,” – analyst at ANZ explained.  

Currency action

The euro was unable to get above ground on the 1.17 handle and bulls are wearing out. A few more rejections at key resistance could lead to a sell-off in the absence of broad-based risk-on sentiment. Another factor going for the euro is the yen cross – EUR/JPY continues to support on dips which is headed for a test of 131.50. Us yields may well kick in anytime soon and technicals are turning bearish with an inverse H&S in the making. Sterling stole the show, finally rallying after yesterdays impressive CPI beat that is surely going to bring MPC members to the table and reconsider its latest rate hike projections delayed until after Brexit next year, otherwise they will be needing to get pen to paper and explain why inflation is where it is yet not doing anything about it – The governor must write a letter to the UK’s finance minister if inflation exceeds the 2 per cent target by more than 1 percentage point. Meanwhile, retail sales did the trick and took the pound higher in the absence of yet further disruptions forever conflicting Brexit headlines.  UK retail sales growth beat expectations in August, up 0.3% m/m (mkt: -0.2%; last: 0.9%) led by household goods and electronics and add to the firmer-than-expected CPI earlier this week.  Cable rallied to 1.3298 (from 1.3151 European low) before supply took it down to 1.3226 in NY, ending NY at 1.3164. EUR/GBP ended NorAm at 0.8876 and down 0.08% within Thurs range 0.8890-0.8847. USD/JPY was based on the 112 handle and looking for a break through 112.60. A close above 112.38 opens the 113.27 61.8% of the  2016-18 drop & 200-WMA target while the FOCM will hike next week. AUD/USD was again higher – supported on EM-FX and made a new short-term high of 0.7292 in NY. 0.73 is a big level but bulls continue to squeeze out the stale shorts with pair well above the 21-D SMA – eyes are on the 55-DMA & daily cloud base and 0.7365/85 – further out  0.7455/85 is a key target.

Key events from US session:

Wall Street closes substantially higher on upbeat data and easing geopolitical tensions