Markets Overview (5 AM Sydney):
- US Equities: DJIA (+0.19 %), S&P 500 (+0.27 %), NASDAQ (+0.39 %)
- EU Equities: EuroStoxx 50 (+1.13 %), FTSE 100 (+0.59 %), DAX (+0.94 %), CAC 40 (+0.72 %)
- Commodities: WTI Crude $48.09 (+1.43 %), Brent Crude $49.94 (+1.59 %), Natural Gas $2.75 (+2.69 %), Gold $1339.29 (+0.01 %), Copper $212.50 (-1.25 %)
FX Wrap: Dollar weak, GBP short squeeze
The US Dollar fell against most currencies overnight. It lost the most against the Pound GBP/USD, which rallied 0.50 % amid a short squeeze. Short positioning is at a record level, and not only with the CME futures. Several major dealing banks who publish their own positioning analysis for the FX market also report that clients have build up sizeable GBP short positions. Considering that the recent UK data has been solid, there is no real catalyst to push GBP prices further down and leaves the market vulnerable to a squeeze. To be fair, it will take some more time for the effects of the June vote to appear in the economic data, and the UK has yet to trigger Article 50 (which will make the Brexit official), but that is currently too far away to keep downside momentum in GBP strong.
The Canadian Dollar USD/CAD was another top performer overnight, as the currency received support from the rally in Oil. USD/CAD reached a low of 1.2860 after the Iran headlines arrived, down almost 100 pips on the day. It has recovered somewhat in the meanwhile, but is likely to run into decent resistance at 1.2925/30. Should Oil be able to maintain bullish momentum, USD/CAD is likely to test 1.28 soon.
NZD/USD reached a fresh 14-month high overnight, at 0.7344. It reversed from there and is consolidating around 0.73 ahead of the Wellington open. Short-term techs remain bullish and the RBNZ failed with its attempt to talk the currency lower, so all points to further gains in the near-term. A clear break and daily close above 0.7344 would pave the way for a 0.7740 test (April 2015 highs).
What traders are talking about:
Oil rallies on Iran rumours
Reuters reported overnight that Iran is sending positive signals to join a possible OPEC action to support the oil market. Crude Oil prices rallied on the report, with WTI climbing from $46.60 to a high of $48.30. So far, this remains only a rumour. An Iranian oil ministry official said that he will not confirm Iran's attendance at the upcoming meeting.
Mixed US econ data
The US Markit manufacturing PMI arrived at 52.1, weaker than the 52.7 print expected by the market and down from 52.9 previously. Shortly after the weak Markit PMI release came a weak Richmond manufacturing index print. It arrived at -11 vs +6.0 expected and +10.0 previously. However, new home sales jumped 12.4 % in July, while the market expected a decline of 2 %. The number of new homes sold reached 654k vs. 580k expected.
Metals retrace despite Dollar weakness
Precious metals fell in the US trading session and failed to benefit from the broad USD weakness. Silver fell from $19.00 at the beginning of the NY session to a low of $18.84 and continues to post fresh lows into the APAC open. Gold fell from $1344 to $1337.
What the Charts are saying:
Keep an eye on GBP/AUD. It just broke out of a bullish wedge pattern and has positive RSI divergence on the Daily chart. A retracement towards 1.81 seems likely in the near-term.
Economic Calendar (Sydney Time):
- 08:45 - New Zealand Trade Balance
- 11:30 - Australia Construction Work Done
- 16:00 - German GDP
- 23:00 - US House Price Index
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