USDJPY – Will the Gap Hold?

USDJPY – Will the Gap Hold?

Chart Of The Day

The dollar was better bid today with USDJPY gapping higher on the week’s open in Asia as currency markets breathed a sigh of relief that the Flynn indictment may not have been as politically damaging to Donald Trump as initially reported. The passage of the tax cut bill by Senate was also viewed as bullish for US growth with benchmark 10-year yield popping to 2.40% in morning European dealing.

But tomorrow we get an insight into how well the US economy is doing. ISM Non-Manufacturing report covers more than 70% of the US economy and is the 2nd most important data point for investors after the NFPs.

The market is looking for a modest pullback on the headline, but the true interest of traders will the employment component which tends to be the single best forecaster of the job report and the price paid component which could an early hint that inflationary pressures are finally making their way through the economy.

If ISM beats to the upside it could unleash a rally in rates, and USDJPY could head towards 114.00 as all systems will signal go for US growth.

Can Kiwi Hold its Double Bottom?

Can Kiwi Hold its Double Bottom?

Chart Of The Day

Tomorrow the RBNZ will have its final rate decision meeting for the year, and while no one is expecting any action on the rate front, traders will watching carefully for any change of posture with respect to monetary policy.

Up to now the primary mandate of the RBNZ has been price stability. That means that it generally concentrated on inflation and left growth issues to fiscal policymakers. However, with the election of a new center-left Labor government, the RBNZ may now be tasked with the dual mandate of growth and inflation. This will be the first time that New Zealand monetary authorities will face the public and reveal their reactions to this proposed policy.

On balance that means the RBNZ should generally be more dovish in its outlook stressing the need for more growth, fretting about deflation and suggesting that the bank will follow a neutral path for the foreseeable future. However, recent data has actually been hawkish with both employment and inflation better than forecast. If the central bank bristles at any suggestion of a dual mandate and makes clear that it intends to maintain its independence than the kiwi could actually pop towards the .7000 barrier.

AUDUSD – Will .7600 Hold?

AUDUSD – Will .7600 Hold?

Chart Of The Day

Today, the Aussie saw a mild rebound on general anti-dollar flows but tonight it faces the test of the week as RBA meets for it monthly rate decision. While we, like everyone else, expect them to remain neutral we believe there is a strong chance that the RBA’s tone may be decidedly dovish.

Australia may be on the verge of a counter-cyclical slowdown. While the rest of the world appears to be growing, Australia is facing a heavily indebted housing market, stagnant wage growth and slowdown in exports. All of this is likely to cause RBA to be exceedingly cautious with its language and perhaps even guide the Aussie towards the .7500 figure.

Today’s bounce was relatively anemic and unless the central bank provides traders with reason to be bullish the pair will have a hard time climbing much beyond .7700. In fact, if the central bank hints that the next move may be a CUT rather than a HIKE the Aussie could quickly tumble towards .7500 support.

EURUSD – Can it Hold Support?

EURUSD – Can it Hold Support?

Chart Of The Day

After putting on a valiant fight for the past few days, the euro came under selling pressure again today testing the key 1.1700 support level. Although the market has tried to shrug off the issue of Catalan independence it continues to weigh heavy on the trader’s minds as the political situation in the region remains unresolved.

Meanwhile, the buck received a welcome boost from a rise in US yields today as fears that US labor markets would be severely impacted by the markets proved unfounded. Although the market is looking for drastically reduced payroll number tomorrow given the sweep of Irma and Harvey in September, the focus will be on the average hourly wages. If that data proves to be hotter than forecast the greenback is likely to rally further and EURUSD could fall below the key 1.1650 support

USDCAD – Can Range Highs Hold?

USDCAD – Can Range Highs Hold?

Chart Of The Day

It’s been a rollercoaster ride for loonie this week as Trump Administration put the Northern neighbor trough the wringer, first slapping tariffs on soft lumber, then threatening to pull out of NAFTA. Adding insult to injury has been the lackluster performance of oil as crude slipped below the $50/bbl level.

Tomorrow’s Canadian GDP report may be another hit to the pair if it misses rather modest expectations of 0.1% growth versus 0.6% the month prior. With Canadian real estate market in a massive bubble and the country’s banking sector in a credit crunch due to deteriorating loan quality, the loonie may be in for more pain.

Given the Trump Administration’s penchant for protectionism, it is not at all certain if further flare-ups will be in store and loonie remains vulnerable for the time being. USD/CAD has breached the top of its range and unless the pair comes back below the 1.3400 mark the near term trend suggests that the pair could push towards 1.4000 over the near term horizon.

USDJPY – Will 110.00 Hold?

USDJPY – Will 110.00 Hold?

Chart Of The Day

Tomorrow the market will finally get the long-awaited US labor data starting with ADP report and then the ISM Non-Manufacturing release which often serves as a good barometer of the Non-Farm payrolls due at the end of the week.

In Q1 the US data has slowed, as sentiment has climbed to record highs, but actual consumer spending has been subdued. That’s the reason why US bond yields have declined and the dollar rally has stalled. The market will be looking for concrete evidence that US growth continues to maintain its pace. Otherwise, any miss in the data could send USDJPY tumbling.

The pair has survived three attempts at testing the 110.00 figure. So far support has held. However, the short will redouble their efforts if the news disappoints and the pair is likely to tumble through the key 110.00 support level.

AUDUSD – Will .7300 Hold?

AUDUSD – Will .7300 Hold?

Chart Of The Day

Amongst all the volatility of the past several days, the Aussie has stood out as the island of calm, buffered by its still impressive 1.5% yield from the more yo-yo swings of the dollar. Although Aussie has suffered from the melt up in US rates its decline has been much more temperate.

Now however its approaching key support area of .7300. While both the euro and yen have blown past their support/resistance points the AUD/USD has remained relatively well bid holding the .7300 level so far.

Next week the calendar is quiet as we begin to approach year-end holidays, but RBA minutes could provide a boost for the pair as the central bank will likely reaffirm its neutral stance. If US rates don’t rise any further the support in Aussie should hold.

AUDUSD – Can Aussie Hold Support?

AUDUSD – Can Aussie Hold Support?

Chart Of The Day

Last night eco data out of Australia showed that the wage price index rose at 0.4% vs. 0.5% eyed while the yearly data rose only 1.9%. This was the weakest reading on record and suggested that consumer demand may be tempered. With wages and inflation muted, speculation is starting to heat up that the RBA may need to ease in near future.

This has put pressure on Aussie from all sides. A cut in rates would only accelerate the carry trade liquidation move which has been in full bloom ever since US yields have skyrocketed. A rate cut by the RBA would be like adding salt to the wound as it would compress the rate differential between the two currencies even further.

That’s why tonight’s AU employment data is so important. The market is looking for a rise of 20.3K jobs versus a fall of -9.8K jobs the month prior. But if the data surprises to the downside for the second month in a row, the Aussie could break the key .7450 support and fall out of it long held range to start a new downtrend move.

USDJPY – Will 105.00 Hold?

USDJPY – Will 105.00 Hold?

Chart Of The Day

Boosted by surging yields on the 10 year USDJPY barreled through the psychologically key 105.00 level today, rising to a high of 105.35. This was its best performance in three months and the pair looks like it’s ready for a breakout especially if US yields continue to move up. The ten year is only 15 basis points away from the key 2.00% level which would mark a major milestone.

But before the dollar rally can continue unabated the market faces the US GDP figures tomorrow and there is reason to believe that the number may miss the mark. The market is looking for a bump to 2.5% growth from the anemic 1.4% the quarter prior, but Retail Sales soft and with Durable Goods missing estimates as well chances are that the GDP could come in at 2.3% or even lower.

A big miss on the GDP could once again sow doubts about Fed’s policy action in December and USDJPY could quickly tumble off its highs with nearest support now at the 103.00 figure.

GBPUSD – Will 1.2000 Hold?

GBPUSD – Will 1.2000 Hold?

Chart Of The Day

It’s been another relentless day of selling in the pound as the threat of Brexit continues to weigh over the unit like the sword of Damocles. The pair has now sliced through the 1.2300, 1.2200 and 1.2100 figures as it approaches the key 1.2000 support from the spike lows set last week.

The econ calendar this week is light, but the pair continues to ignore fundamental data and moves on headlines out of UK. The latest threat was an internal governmental report that suggested UK economy could collapse by 9.5% in the wake of Brexit trigger next year.

Still, the pair is now so grossly oversold that it is prime for a massive short covering rally that could be triggered by anything as benign as headline stating that PM May is willing to compromise on the immigration issue. For now, the 1.2000 level is the key support while 1.2450 is a massive overhead resistance that is likely to stay in place unless the dynamics of the story change markedly.

USD/JPY – Will 104.00 Support Hold?

USD/JPY – Will 104.00 Support Hold?

Chart Of The Day

The correction in USD/JPY has been swift and brutal. As soon as the market realized that the proposed stimulus package may be a lot smaller than originally reported, the sold the pair with no mercy taking it down by two big figures before finally pausing at the 104.00 level.

Having now established support at the 104.00 figure the pair could head the other way if the FOMC meeting provide tailwind for the buck. Although no one anticipates any rate hikes just yet, the market will be keen to see any change in the language of the communique that could hint at a possible rate hike in September. The US data has been surprisingly resilient and that could lead the Fed to upgrade its assessment of the economy.

For now the 104.00 level is the key hold for the pair while the recent swing highs of 107.50 remain key resistance. A positive Fed release could send the pair towards a retest of those highs.

USD/JPY – Will 100.00 Hold?

USD/JPY – Will 100.00 Hold?

Chart Of The Day

Tomorrow the market will get a look at the marquee event of the week – the NFP report from US. After last month’s disappointing results, the June data is shaping up to be a possible rebound in job growth. Both the ISM Services reports as well as the ADP numbers suggest that the report could be in the 150-200K range.

A print anywhere in that vicinity is likely to prove supportive of USD/JPY which has been basing around the 101.00 level this week. While a strong employment report is unlikely to motivate the Fed on rates, it will pacify the market about the state of US economy and may push the yields on the 10 year Treasury bond higher helping USD/JPY along.

Another weak report however is almost sure to push the pair to a test of the 100.00 barrier, but given the already jittery state of Japanese policymakers any dip below that level could invite an intervention next week.