However, the heavy net selling in EUR/USD for this week could be indicating that the long liquidation trade may be nearing a climax.
Commodity complex relatively robust despite higher yields.

Forex today was pretty uneventful in terms of price action, although there was plenty in the market to digest, especially on a fundamental and political basis.

EUR/USD remained under pressure while rising US yields continue to send short-term spreads wider and the cost of carrying a short USD position is still very expensive. (Risk reversal pricing reflects bearish sentiment/U.S. 10-yr yield hit 3.12% in European trade, the long-bond hit 3.248% and that was the highest since Oct 14)). EUR/USD crash-landed all the way down to 1.1776, (Asia high was 1.1837). The US shift opened near 1.1790 and stuck to a tight 1.1785/1.1815 range in what was a day of consolidation in the FX space. However, the heavy net selling for this week could be indicating that the long liquidation trade may be nearing a climax.

GBP/USD got a lift on the Telegraph reporting around the EU customs union where the UK would tell the EU that it is ready to stay in customs union beyond 2021. GBP/USD hit a high of 1.3568 on the news in early Asia yesterday but it was capped there as conflicting headlines turned on the supply all the way down to 1.3477 in afternoon London trade. However. in a choppy session in late London and NY, GBP/USD firmed up to close the US session at 1.3512, higher by  +0.19% within the North American range of between 1.3482-1.3527.

As for the cross, EUR/GBP ended the US session at 0.8726 and down by -0.25% within a range of between 0.8752-0.8712. The continued uncertainties around Italian politics and Brexit outlook weighs on the euro, with bulls taking the wrap at the moment. 

USD/JPY was extending its recent rally to fresh multi-month highs at levels last seen in late January in European trade, that was extended in North American trade. The high was 110.85. Both the 2Y and 10Y U.S./Japanese spread moved to fresh post-crisis highs while risk reversals have been suggesting further erosion in the premium for protection against JPY strength vs. the USD – (Buoyant Nikkei is also supportive). However, there was a dip in yields in the NY session that sent the pair down to 110.62 and US stocks struggled into the close. There was a recovery, however, and the pair moved in on the 61.8% of Nov-Dec drop and Nov’s low again in early Asia at 110.86, having closed up in NY at 110.76 – Eyes are on the EUR/JPY 130 level ahead of Japan CPI.

As for the higher betas, EM-FX was weak again while all ears were on NAFTA that drew no conclusions once again, essentially meaning that it is very unlikely that anything can be agreed before the end of the year – Mexican Peso and the Loonie feel the pain. Oil, on the other hand, was supportive to the commodity -FX space to some degree, making fresh 3.5 year highs. However, copper was beaten up in Shanghai and was unable to fully recover, weighing on sentiment. – AUD/JPY a spitting image of the chart over same time periods. The Aussie was unable to get off the floor, confined to a tight range between 0.7501 and 0.7517. The Kiwi was sidelined with its wings clipped, just 20 pips above the daily lows, (0.6850) at one stage, closing at 0.6877.

Key notes from US session:

Funda-FX wrap: geopolitical matters lacking signs of traction
WTI capped in bullish territory, RSI confirm further upside
Wall Street stocks in the red as Trump loses hopes on China trade talks
No BAFTA’s for NAFTA play writers today, and here’s why

Key events ahead: 

Analysts at Westpac offered their outlook for the key events to end the week:

“Australia’s data calendar is quiet for the next few days. Japan releases Apr national CPI data, with consensus for 0.7%yr overall, 0.4%yr ex-fresh food and energy. This is so far from the Bank of Japan’s 2% target that it hardly matters if the data surprises in either direction.

Fed officials are chatty again today, starting with hawk Mester speaking at the ECB around the Sydney close, followed by Kaplan (again) and Brainard (again) during NY trade.

There is plenty of risk for CAD in the NY morning: Apr CPI and Mar retail sales. Consensus is for retail sales ex-autos to rebound by 0.5% after a flat Feb, while CPI is seen up 0.3%mth, 2.3%yr, a little lower on the core measures.”

The post Forex today: plenty priced in, much to consider, long liquidation trade may be nearing a climax appeared first on CIX Markets.

Aussie heads into Friday on a sour note, technical correction already running out of gas.
A clear calendar for Friday leaves markets susceptible to mood swings.

The AUD/USD is trading near 0.7500 after failing to jumpstart a technical correction from five-month lows.

The Aussie climbed in early Thursday trading against the US Dollar, but proceed to stumble back down through the rest of the day and the pair wound up largely flat heading into Friday’s action.

Australian inflation expectations rose this week from 3.6% to 3.7%, and Australian jobs reported a 22.6 thousand increase over the previous month, but the Aussie unemployment rate ticked up to 5.6%, and the Aussie’s chance to develop a continued recovery fizzled away as economic data for the Australian economy continued to fizzle.

Nothing of note is slated for the Aussie schedule today, and the week is set to end on a bearish note if buyers don’t step in at these levels.

AUD/USD levels to watch

FXStreet’s Valeria Bednarik on the AUD/USD’s technical outlook to finish off the week: “the pair fell from the mentioned high but found buyers around 0.7500, now a few pips above this last and pretty much unchanged daily basis. The upside seems limited for the pair, particularly if it remains below 0.7565, the 38.2% retracement of the latest weekly decline, yet the short-term picture is neutral, as the Momentum indicator remains flat around its 100 level, while the RSI currently heads lower around 50. In the same chart, the price struggles around its 20 and 100 SMA, both confined to a tight range and slightly bearish. A break below 0.7470 should lead to a steeper decline this Friday.”

Support levels: 0.7500 0.7470 0.7435  

Resistance levels: 0.7565 0.7590 0.7625

The post AUD/USD can't get away from 0.75 on middling figures appeared first on CIX Markets.

Sterling was buffeted by conflicting headlines, as explained by analysts at Scotiabank.

Key Quotes:

“The first suggesting that the UK would possibly stay in a customs union with the EU beyond 2021 lifted the GBP sharply to the upper 1.35s while a subsequent denial saw the GBP sell-off back to the upper 1.34s.”

“Brexit policy remains in flux and the government appears deadlocked on how to proceed.”

“We think the uncertain outlook around Brexit policy may continue to weigh on the GBP in the near-term, especially as markets remain to be convinced that the BoE is in any position to raise rates in the next few months.”

The post GBP/USD: buffeted by conflicting headlines – Scotiabank appeared first on CIX Markets.

Both China and the U.S. seek to avoid a damaging tariff war, although U.S. President Trump’s administration was demanding a $200 billion cut in China’s U.S. trade surplus and greater protections for intellectual property, David Lawder at Reuters reported earlier.

In more recent trade, however, Reuters sources who are familiar with trade talks have said that China has indeed offered Trump a US trade deficit reduction package approaching $200 billion annually.

The post China bowing down to Trump's demand of a $200 billion cut in China's U.S. trade surplus appeared first on CIX Markets.

Analysts at ANZ explain that one clear theme over recent weeks has been the performance of NZGBs, which despite US Treasury weakness and the local swaps curve steepening, remained firmly bid. 

Key Quotes:

“That saw NZGBs richen on asset swap and clearly outperform on a geographic spread basis (with the NZ 10-year yield now lower than both US and Australia).”

“The emphatically neutral RBNZ stance no doubt assisted, but we suspect so too did an expectation that the supply picture would remain benign.”

“Yesterday, the NZDMO announced only a modest lift in its NZGB issuance programme (of $3bn over five years).”

“But in conjunction with reduced T-bill issuance, the ongoing repurchase of the March 2019 (and soon April 2020) nominal bonds, and no new bond syndication – implying a decent lift in the required monthly tender run-rate – we suspect the outperformance of longer-dated NZGBs has now done its dash, with perhaps pressure for the curve to catch up with the steepening seen elsewhere.”

The post Performance of NZGB is firmly bid – ANZ appeared first on CIX Markets.

Analysts at Westpac noted the key events ahead.

Key Quotes:

“Australia’s data calendar is quiet for the next few days. Japan releases Apr national CPI data, with consensus for 0.7%yr overall, 0.4%yr ex-fresh food and energy. This is so far from the Bank of Japan’s 2% target that it hardly matters if the data surprises in either direction.

Fed officials are chatty again today, starting with hawk Mester speaking at the ECB around the Sydney close, followed by Kaplan (again) and Brainard (again) during NY trade.

There is plenty of risk for CAD in the NY morning: Apr CPI and Mar retail sales. Consensus is for retail sales ex-autos to rebound by 0.5% after a flat Feb, while CPI is seen up 0.3%mth, 2.3%yr, a little lower on the core measures.”

The post Key events ahead – Westpac appeared first on CIX Markets.

In a market wrap, analysts at Westpac explained that US data continues to support the Fed’s outlook for ongoing interest rate rises. 

Key Quotes:

“The Philadelphia Fed May business survey rose to cyclical highs at 34.4 (expected 21.0, previous 23.2), with virtually all current components stronger. Prices received were notably stronger, and both employment (30.2 from 27.1) and workweek (34.4 from. 21.6) showed a decidedly firmer outlook for the labour market than a few months ago.

EUR/USD ranged between 1.1775 and 1.1840. Italy’s 5 Star and Lega agreed their main policies and so moved closer to forming a coalition. Individual party members should vote on the agreement tomorrow and so a coalition could be affirmed by President Mattarella early next week.

US and Chinese officials met in Washington, DC. President Trump said that he doubts the talks will be successful because China and the EU have become “spoiled” from taking advantage of the US.

Optimism over the US-North Korea summit also faded a little further as Trump said “If you look at that model with Gaddafi, that was a total decimation. We went in there to beat him. Now that model would take place if we don’t make a deal, most likely.” Of course, national security adviser Bolton had argued that the Libya model of a verified end to its nuclear program in return for economic benefits was an attractive idea, not a threat.

USD/JPY rose from 110.20 to 110.86 – the highest since January- helped by higher US treasury yields. AUD/USD’s Sydney session rally to above 0.7540 petered out to the 0.7500 area. NZD fell from 0.6938 to 0.6873 (yesterday’s Budget did not have any impact on the currency). AUD/NZD rose from 1.0900 to 1.0940 before settling around 1.0920.

Fedspeak involved Kashkari (dove), who said low wage growth is a conundrum; and Kaplan (centrist/hawk), who said the economy is at or past full employment. The US 10yr treasury yield rose from 3.10% to 3.12% which is a fresh high since 2011, though this occurred well before the strong US data. 2yr yields rose 1bp to 2.60% – the highest since 2008 – before slipping to 2.57%. Fed fund futures yields predict a rate hike in June, plus at least another by year end.”

The post Market wrap: US data supported Fed's rate hike forward cycle – Westpac appeared first on CIX Markets.

The US dollar is still the main driver behind NZD/USD weakness.
Earlier in the American session, the US Philadelphia Fed index in May rose to 34.4 vs 21 forecast while the job data came in mixed. 
The New Zealand budget release fails to give any long-term boost to kiwi.

The NZD/USD is trading at around 0.6879 on Thursday as the US forex session came to a close.

Back in Asia on Thursday, the kiwi had a 30-pip boost on the back of optimistic New Zealand’s budget release and almost reached the 0.6940 level. After which bears took the lead throughout the European and American session and established a low of the day at 0.6872.

The US dollar was once again the main culprit for the weakness in the NZD/USD. The US Dollar Index, which measures the buck against a basket of currencies gained about 0.20% on Thursday and is currently trading at around 93.48. Investors continued to dump US bonds as the 10-year Treasury yield benchmark broke yet again to a new multi-year high at 3.122% on Thursday’s trading.

On the macroeconomic front in the US, the US Philadelphia Fed index in May rose to 34.4 versus 21.0 forecast while the job data came in mixed. 

NZD/USD 4-hour chart 

The main trend is bearish and supports are seen at the 0.6851 level followed by the 0.6800 figure while resistance is seen at the 0.6900 figure and at the 0.6938 swing high. The kiwi is trading below its 50, 100 and 200-period simple moving averages on the 4-hour chart which suggests a strong downward bias. 

The post NZD/USD back below 0.6900 as USD remains strong against the kiwi appeared first on CIX Markets.

Funda-FX today was full of geopolitical headlines.
Taking the top spot was NAFTA.

However, the key issue with NAFTA is timing. Unless a deal can be agreed upon this month, there is going to be very little time before the Mexican elections in July or time for anything to be passed by Congress before 2019.  So there are plenty of hurdles along the way through Congress under the ‘trade promotion rules’ before anything can be signed off and agreed, hence why House Speaker Paul Ryan calculated that lawmakers would need to see a deal by TODAY in order to be able to vote on it this year.

No BAFTA’s for NAFTA play writers today, and here’s why

At the time of writing, USD/MXN is consolidating the bullish correction from 19.49 (10-D SMA support) at 19.7244 – targeting the double top highs of 1.1990’s while USD/CAD has been capped by the convergence of the 21 and 50-D SMAs at 1.2826/25 – fundamentally, the downside is favoured in the Mexican peso and Loonie at this stage. 

Wall Street stocks in the red as Trump loses hopes on China trade talks.
WTI capped in bullish territory, RSI confirm further upside.

Meanwhile, here are the major headlines from the day, (source LiveSquawk):

EU brushes off UK pm May’s pitch for customs plan guarantees.
Canada’s Trudeau: even if a new NAFTA is postponed indefinitely, it will always make sense for U.S. And Canadian firms to invest and work together.
Canada’s Trudeau: close to a deal on NAFTA, progress has been made.
Canada pm Trudeau says NAFTA sticking points are sunset clause and dispute resolution.
Canada’s Trudeau says current proposals on autos content are broadly acceptable to industries in three NAFTA nations.
Ryan: still possible for us congress to review NAFTA deal.
Mexico Guajardo: US tariffs on Mexican steel wouldn’t make sense.
Says no date set for next NAFTA ministers meeting.
President trump says doubts China trade talks will be successful.
EU’s Juncker says EU ready to start talks on more energy cooperation with US if gets unlimited exemption from US tariffs;
-Ready to discuss reform of WTO with US.
Fed’s Kashkari says low wage growth is a big conundrum; one theory is there is more slack in labor market than 3.9pct jobless rate implies.
Kashkari says wages may be slow-growing because businesses may have more bargaining power than labor, expected more growth than have seen.
Fed’s Kaplan: U.S. Economy is either at or past full employment, recession not likely.
Fed’s Kashkari says Fed does not think there is a national bubble in housing.
Saudi, UAE energy ministers voice concerns about recent oil market volatility, fueled by anxiety over geopolitical events despite ample supply – joint statement.
Saudi, UAE energy ministers say agree to continue their consultations and to closely monitor oil market .
Saudi, UAE energy ministers vow to work with other producers within established mechanisms to ensure market stability.
Saudi, UAE energy ministers renew their commitment to security of supply and to work towards interest of consumers and health of global economy.
Saudi, UAE energy ministers say to meet with Russian counterpart in St Petersburg next week.
ECB’s Nowotny says: “Some ECB governing council members including me think that we should not wait too long until we normalize monetary policy”.

Federal Reserve Bank of Philadelphia:

Results from the may manufacturing business outlook survey suggest a pickup in growth of the region’s manufacturing sector. The survey’s indexes for general activity, new orders, shipments, and employment increased from their readings in April. A notable share of firms also reported higher prices for their own manufactured goods this month. The survey’s future indexes, measuring expectations for the next six months, reflected continued optimism. 

The post Funda-FX wrap: geopolitical matters lacking signs of traction appeared first on CIX Markets.

US President Trump says that he doubts that talks with China will be successful.
The US dollar and yields keep pushing higher as investors sell riskier assets such as stocks and bonds. 

The three main US indices traded in the red on Thursday. The S&P 500 lost 0.09% to 2,720.13 while the Dow Jones Industrial Average dropped 0.22% to 24,713.98. The tech-heavy Nasdaq lost 0.21% to 7,382.47.

About one hour after the indices initially opened in the red, stocks started to spike higher on the wave optimism that trade talks between US and China were resuming on Thursday. However, during an appearance with NATO Secretary-General Jens Stoltenberg, US President Trump talking about the US-China negotiations said: “will that be successful? I tend to doubt it, the reason I doubt it is because China has become very spoiled. The European Union has become very spoiled. Other countries have become very spoiled because they always got 100% of whatever they wanted from the United States. But we can’t allow that to happen anymore,” and then stocks reversed course and ended the day in the red. 

Meanwhile, the US Dollar Index (DXY), which measures the greenback relative to a basket of currencies was up about 0.22% to 93.49 but failed to break above yesterday’s high while the 10-year Treasury yield benchmark reached a new multi-year high at 3.122%. The prospects of a higher US dollar backed by expectations of at least three to four rate hikes in 2018 is enticing investors to buy USD in order to take advantage of the interest rates it yields. By the same token, investors are also getting rid of riskier investments such as stocks and bonds but also gold which is considered a non-yielding asset. 

Dow Jones Industrial Average

The post Wall Street stocks in the red as Trump loses hopes on China trade talks appeared first on CIX Markets.