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USD: Watching ISM Non-Manufacturing and ADP Employment data today. For ADP, market looks for 160k gain (last was 135k), with ISM non-manuf seen improving to 54.0 (previous 53.7). The market is probably more closely watching ADP, given the Fed’s focus on the labour market as a determinant of when tapering may start.

EUR:   After Monday’s upward revisions to the manufacturing data (primarily for Italy and Spain), the euro will likely be disappointed if we did not see the same for the services data today (preliminary eurozone data was 48.6).

GBP: After Monday’s firmer manufacturing data, sterling will likely be hoping for a sixth consecutive monthly increase in the services release, even though the expectation is for a modest decline from 54.9 to 54.5.   This would make the hurdle for more QE that much higher ahead of the BoE decision tomorrow.

Update: services PMI exceeded expectations with 56.9 points, and GBP/USD jumped.

Idea of the Day

Once again there were new lows for the year on the Aussie overnight.   There is a familiar pattern emerging, with the relentless bearish trend of May being replaced by more corrective activity, of which we’ve seen 3 brief periods. This is to be expected, especially after the over-sold conditions that were in evidence a few weeks ago.   But the momentum in this latest period of correction was a little more lacklustre.

Although the data released overnight was only modestly Aussie bearish, the statement from the RBA on Tuesday was about as clear as a central bank gets in expressing its desire to see a weaker currency. As such, even after the sharp losses seen over the past 2 months, if the central bank still feels that it’s over-valued, then this has allowed investors to view corrective activity on the Aussie as an opportunity to place fresh short positions.

Latest FX News

CNY: A small fall in the HSBC PMI services data, which fell from 54.3 to 53.9.   Stocks were down once again, with concerns that the economy is heading for a phase of slower growth. USDCNY has been stable so far this week just above 6.13.

EUR: There have been more signs of strain in the European periphery in recent days, with two ministers having resigned in Portugal and Greece having a tough time in convincing the troika as to their eligibility for the next round of bailout funds. Sovereign crisis have a habit of coming along during the summer. EURUSD is back below 1.30 in overnight trade, initial support seen at 1.2974, then 1.2838.

JPY: The break above the 100 level was pretty decisive on USDJPY, triggering a wave of stops towards the 100.30 level during Tuesday.   USDJPY has now retraced around 70% of the May to mid-June down-move.

AUD: New lows on AUDUSD overnight at 0.9066 during Asia trade, with data falling to the disappointing side and sentiment remaining bearish after the RBA statement after Tuesday’s meeting.

Further reading:  BOE could release a statement that will reveal Carney’s thinking