21 Ago 2018

FOREX Newsletter

   

FOREX Newsletter

August 21, 2018
 

 

Pulse of the Market

·      President Trump complained about the Fed’s rate hikes at a Hamptons fundraiser this weekend

·      China – U.S trade talks and the Jackson Hole summit could affect all of the major currencies

·      As for Brexit, investors don’t expect any significant progress with the deadline quickly approaching

·      The rally in the Euro was driven by the combination of U.S Dollar selling and short covering

The U.S Dollar started this new trading week with another day of losses. The greenback either held steady or extended its slide against all of the major currencies. While there were no buyers at the start of the NY session, the selling only gained momentum on reports that President Trump complained about the Federal Reserve’s rate hikes at a Hamptons fundraiser this weekend. This is the second time that we’ve heard the President lament about Fed tightening and theoretically, his views are not supposed to affect monetary policy. However, if the central bank raises interest rates next month but fails to commit to a fourth hike, there’s no doubt that some market participants will attribute that to pressure from the President regardless of whether its true. Yet, the real reason why the dollar was down yesterday is because Treasury yields continued to fall and Fed President Bostic said he favors only 3 rate hikes this year, encouraging traders to cover their short positions in euro, sterling and other beta currencies.  The market’s reaction to President Trump’s comments gave investors a taste of what could drive FX flows this week. There are no major U.S economic reports on the calendar and the only pieces of potentially market moving data from other parts of the world are Eurozone PMIs along with Canada and New Zealand’s retail sales reports. As for Brexit, we don’t expect any significant progress but with the October deadline quickly approaching, a lack of positive developments could be perceived as negative for the currency. About 2 years ago, the European Commission’s Chief Brexit negotiator Michel Barnier gave the UK 18 months to negotiate the terms of exit. The European Union, on the other hand, see the deadline as a way to get the UK to bend so as the clock ticks, not only could the deadline get pushed to November but the chance of no deal increases exponentially. None of this is good for sterling and this explains the restrained rally in GBP/USD despite hefty short positions and decent data. Euro, on the other hand, closed at 1.15. The rally was driven by the combination of U.S. Dollar selling, short covering and the relief that Italian bond yields fell sharply after rising steadily for the past 2 months. According to last week’s CFTC data, speculators are short euros for the first time in over a year. While this may not be surprising or seem significant, it is a big change from April, when euro positions were net long and at their highest level in 2 decades.

 

 

 

Time(GMT)   Economic Release IMP Actual Forecast Prior
01:30 RBA Meeting Minutes (AUG 7) Medium      
03:00 New Zealand Credit Card Spending (YoY) (JUL) Medium 3.2%   5.7%
05:30 Japan Nationwide Dept Sales (YoY) (JUL) Medium -6.1%   3.1%
05:30 Japan Tokyo Dept Store Sales (YoY) (JUL) Medium -4.5%   6.9%
06:00 Japan Machine Tool Orders (YoY) (JUL) Low 13.1%   13.0%
08:30 U.K Public Finances (PSNCR) (Pounds) (JUL) Medium     13.3b
08:30 U.K Central Government NCR (JUL) Medium     13.6b
08:30 U.K Public Sector Net Borrowing (JUL) Medium   -2.2b 4.5b
12:30 Canada Wholesale Trade Sales (MoM) (JUN) Low   0.7% 1.2%
22:45 New Zealand Retail Sales Ex Inflation (QoQ) (2Q) Medium   0.3% 0.1%

 

Euro

The single currency has been somewhat noisy during the session but in a good way. The market had beaten this currency down but it seems like fears about the Turkish lira and contagion are starting to drop off a bit. That’s a good sign, and it seems as if the attitudes of traders around the world is the step back a bit. Overall, the EUR/USD traded with a low of 1.1393 and a high of 1.1483 before closing the day around 1.1483 in the New York session.

 

Yen

The Japanese Yen pair finished lower last week for the fourth week out of five as investors pumped money in the Japanese Yen due to safe-haven buying related to the financial crisis in Turkey and its impact on emerging markets. Falling U.S Treasury yields helped tighten the spread between U.S. Government bond yields and Japanese Government bond yields. Overall, the USD/JPY traded with a low of 110.00 and a high of 110.66 before closing the day around 110.08 in the U.S session.

 

British Pound

 

The British Pound continues to get punished for all things Brexit and of course an inability of Conservative Party members in the U.K to get it together and present a united front. People are starting to price in the idea of a “no deal Brexit”, so things are becoming much more negative. At this point, the trade of the century might be buying the Pound at low levels. Overall, the GBP/USD traded with a low of 1.2727 and a high of 1.2797 before closing the day at 1.2797 in the New York session.

 

Canadian Dollar

The Canadian Dollar rose to a 10-day high against its U.S counterpart yesterday, as oil prices climbed and U.S President Donald Trump said he disagreed with the U.S Federal Reserve’s decision to raise interest rates. The U.S Dollar fell against a basket of major currencies as Trump showed his displeasure with Fed tightening. Overall, USD/CAD traded with a low of 1.3037 and a high of 1.3090 before closing the day at 1.3046 in the New York session.

 

Australian Dollar

The Australian Dollar finished higher last week. Aussie was driven sharply lower early in the last week by a stronger U.S Dollar before reversing to the upside. Some of the pressure came from spillover selling related to the previous week’s dovish monetary policy statements. There were also concerns raised over a weakening China economy. Overall, AUD/USD traded with a low of 0.7293 and a high of 0.7342 before closing the day at 0.7340 in the New York session.

 

 

Euro-Yen

EUR/JPY is trading above 14, 50 and 100 days moving average. Fast stochastic is giving a bullish tone and MACD is issuing a bearish stance. The Relative Strength Index is above 38 and lies below the neutral zone. In general, the pair has lost 0.05%.

 

  

Sterling-Yen

Currently, GBP/JPY is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bullish tone and MACD is indicating a bearish stance. The Relative Strength Index is above 29 reading and lies below the neutral zone. On the whole, the pair has lost 0.07%.

 

 

Aussie-Yen

Currently, the cross is trading below 14, 50 and 100 days moving average. Fast stochastic is giving a bullish tone and MACD is indicating a bearish stance. The Relative Strength Index is above 41 reading and lies below the neutral region. In general, the pair has lost 0.08%.

 

  

Euro-Sterling

This cross is currently trading above 14, 50 and 100 days moving average. Fast stochastic is indicating a bullish tone and MACD is also issuing a bullish signal. The Relative Strength Index is above 62 and lies above the neutral region. On the whole, the pair has gained 0.02%.

 

Sterling-Swiss

This cross is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bearish stance and MACD is also indicating a bearish tone. The Relative Strength Index is above 29 and lies below the neutral region. In general, the pair has lost 0.03%.

 

 

Appendix

 

 

FOREX Closing Prices for August 20, 2018
Currency Open High Low Close Net Chg
EUR/USD 1.14352 1.14836 1.1393 1.14836 0.0042
USD/JPY 110.499 110.665 110.002 110.084 -0.4560
GBP/USD 1.27432 1.27978 1.27276 1.27971 0.0045
USD/CHF 0.99507 0.99667 0.99089 0.99166 -0.0039
USD/CAD 1.30551 1.30904 1.30374 1.30463 -0.0016
EUR/JPY 126.374 126.441 126.052 126.4 -0.0610
GBP/JPY 140.828 141.195 140.694 140.865 -0.0920
CHF/JPY 111.016 111.21 110.915 111.03 -0.0240
AUD/JPY 80.788 80.921 80.559 80.79 -0.0660
EUR/GBP 0.89716 0.89743 0.89377 0.89743 0.0002
EUR/CHF 1.138 1.1386 1.13516 1.1386 -0.0004
GBP/CHF 1.26819 1.27094 1.26637 1.26918 -0.0004

 

 

 

Daily Pivot Points
  Trading Range  
Contract S3 S2 S1 Pivot R1 R2 R3
EUR/USD 1.1333 1.1363 1.1423 1.1453 1.1514 1.1544 1.1604
USD/JPY 109.17 109.59 109.84 110.25 110.50 110.91 111.16
GBP/USD 1.2680 1.2704 1.2751 1.2774 1.2821 1.2844 1.2891
USD/CHF 0.9837 0.9873 0.9895 0.9931 0.9953 0.9989 1.0010
USD/CAD 1.2973 1.3005 1.3026 1.3058 1.3079 1.3111 1.3132
EUR/JPY 125.77 125.91 126.15 126.30 126.54 126.69 126.93
GBP/JPY 140.14 140.42 140.64 140.92 141.14 141.42 141.64
CHF/JPY 110.60 110.76 110.89 111.05 111.19 111.35 111.48
AUD/JPY 80.23 80.39 80.59 80.76 80.95 81.12 81.32
EUR/GBP 0.8913 0.8926 0.8950 0.8962 0.8987 0.8999 0.9023
EUR/CHF 1.1329 1.1340 1.1363 1.1375 1.1397 1.1409 1.1432
GBP/CHF 1.2622 1.2643 1.2667 1.2688 1.2713 1.2734 1.2759

 

 

Sources:  News, Charts & Quotes (Courtesy: Reuters, US Department Of Treasury)

 

 

Disclaimer

This information has been prepared for information only and does not constitute an offer or commitment. This information does not constitute investment advice as defined by the rules of the FCA.

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