Originally published by AxiTrader
Welcome to the Forex Today column.
In it, I'll be trying to add a bit more colour and a lot more charts than I do in my broader overnight Market Wrap I do first thing every morning to set myself and my trading up for each day and each week.
RECAP
Goodness we are a fickle bunch us forex traders. Or someone observing us might think so. One minute the US dollar is under pressure and the next folks are buying because they think that President Trump and his administration might actually get something done on tax reform and repatriation.
That sent stocks and the US dollar higher overnight.
Whether it sticks or not is an open question because all the price action tells us that the US dollar, and the currencies on the other side of US dollar crosses, are stuck in this range while we work out whether or not this trend to US dollar strength will prove real, or ephemeral.
But for the moment at least euro, yen, sterling, Aussie, kiwi, Swiss franc, and the Singapore dollar are all weaker. Only the Canadian dollar really held its own of the big global currencies.
HERE'S A DEEPER DIVE - IN A LITTLE MORE DETAIL AND WITH A FEW CHARTS
Pretty much from the moment European traders got to their desks yesterday afternoon Australian time the US dollar caught a bid. What specifically was behind that is hard to know other than perhaps a recognition – finally – that Mario Draghi is not about to announce a new policy prescription at this week’s Jackson Hole conference.
Or, as I wrote above, perhaps, as is more likely, this is just a continuation of the tooing and froing of sentiment toward the US dollar, and the euro, as traders work through the difficult questions about the outlook for this pair and the US dollar in general. Realistically forex pairs are mapping out a range and we need either Central Bank statements, economic data, or both to drive prices outside the recent ranges.
For the moment though the ranges are holding and the US dollar is a little stronger.
So this morning the US Dollar Index is up 0.44% to 93.50.
Naturally the corollary of that is a EUR/USD fall of 0.47% to 1.1760. last night's release of a much weaker than expected ZEW survey which, with a print of 10 from the previous month's 17.5, highlighted that investors see some issues - specifically emissions - as a handbrake on Germany.
That didn't hurt the DAX which rallied 1.35% to test the top of the 2-month downtrend. But the EUR/USD is down about 70 points from the high this week.
The key parameters remain 1.1660 and 1.1910/20 at the moment.
The yen is a great example of why I respect levels unless or until they break. It's is a little weaker still with USD/JPY up 0.65% to 109.68 this morning. That's 100 points off the low for the week.
Clearly there is a US dollar story here. But equally, I'd argue traders are watching the range. That's the behavioural aspect of technicals that Carol Osler first woke me up to with her writing in Stocks and Commodities magazine and research when she was at the Fed many years ago.
It gelled neatly with my favourite behavioural Keynes quote about the beauty parade which I've always felt highlighted how traders in markets actually react.
Anyway, USD/JPY is higher for the moment. Here's the chart as we wait for the release of the Nikkei manufacturing PMI today.
The pound is down 0.64% at 1.2818 and looking like that head and shoulders pattern I drew in my Forex Today column yesterday might be the way prices for the pound are headed. It looks like a run under 1.26 could be on the cards for GBP/USD.
For the commodity bloc the Canadian dollar is the stand out after that solidly unspectacular retail sales data for June.
The print of 0.1% was well below expectations of a 0.3% rise during the month. But the fact that sales hit a new record of $48.99 billion emboldened those who believe the Bank of Canada is still on track to raise rates.
Naturally, that helped the Canadian dollar buck the US dollar’s strength overnight even if it is off the lows. But that's the point. USD/CAD is off the lows and has actually walked out of the little 4-hour downtrend from the recent highs. So even though the Canadian dollar is winning today against other currencies the US dollar mat=y still be making a charge.
We'll have to see how things map out. For the moment like the AUD/USD the Canadian dollar is in a range with either side breaking needed to kick things to the next level.
And speaking of the AUD/USD I have done my usual daily Aussie specific post. The key takeaway is that it's under pressure but supported by metals and risk appetite.
The kiwi is down 0.61% at 0.7280 while the Singapore dollar is a little higher at 1.3621.
Have a great day's trading.