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The Daily Edge is authored by Ivan Delgado, Market Insights Commentator at Global Prime. The purpose of this content is to provide an assessment of the market conditions. The report takes an in-depth look of market dynamics, factoring in fundamentals, technicals, inter-market in order to determine daily biases and assist one’s decisions on a regular basis. Feel free to follow Ivan on Twitter & Youtube.
The USD attracted steady buy-side flows as yet another piece of evidence via an upbeat US retail sales seems to suggest the upcoming one or two insurance rate cuts by the Fed may be the intended tactical move rather than a rate-cutting cycle. This rationale would definitely gain a larger number of supporters at the helm of the Fed if the US data continues to show stable readings as it’s been the case in recent times through the NFP, CPI or Retail Sales, all beating expectations. Amid the risk that the market has potentially overplayed the amount of easing the Fed is willing to pursue in the next year, Fed’s Dallas President Kaplan made some revealing comments in what may look like an attempt to massage the thematic and downplay the aggressive easing priced in by emphasizing that a tactical adjustment rather than a rate-cutting cycle is what’s needed. The outperformance of the USD comes in stark contrast with the price action witnessed in the Euro, finding an avalanche of sellers through Europe as the German ZEW is yet another reminder that the ECB may, after all, be inclined not to wait any further before initiating its new easing measures, judging by the state of demoralization in Germany’s economic sentiment among the rest of EU-wide poor data. However, one can only imagine the true extent of discouragement to hold Sterlings when even against a pressured currency such as the Euro today, the latter still looks relatively strong vs the UK currency as the market comes to terms that a hard-exit of the EU type of scenario is where the Brexit process seems to be headed with the soon-to-be-elected new UK PM. Still, a lot of water to go under the bridge before the deadline time though. The CAD index, meanwhile, continues to struggle at a critical macro 100% projection level, with the collapse in oil prices on Iran-US potentially back to the drawing table a key driver weighing on the currency. On Tuesday, we also leaed that the NZ CPI Q2 stood steady from the previous quarter, which may not be enough to prevent the RBNZ from embarking upon more rate cuts if it aims to bring inflation closer to the mid-range of its 2% target mandate. However, the market has so far shrugged off such eventuality by keeping the NZD relatively well bid. AUD traders also saw the RBA dampening expectations for further rate cuts short term after decoding Tuesday’s July RBA minutes, with technicals in the AUD index, as in the case of the NZD index, still looking quite attractive. Lastly, a pair of currencies with erratic and non-directional price movements include the JPY and CHF indices, both trading around the 13-ema baselines, which clearly indicates a market that has taken a laxer approach towards supporting risk-off currencies yet not convinced to engage in protracted selling campaigns due to the evident risks that exist of slower global growth, trade uncertainties, hard-Brexit outlook to name the most pressing issues.
* The Information is gathered after scanning top publications including the FT, WSJ, Reuters, Bloomberg, ForexLive, Institutional Bank Research reports.
Right off the bat, what jumps at first glance through Tuesday’s price action is the solid appreciation of the USD, which finishes off in style by the NY close, supported by higher US nominal yields after the upbeat US retail sales. From an equally-weighted measure against G8 FX, the USD index performance communicates risks of follow-through demand based on the latest sequence of volume dynamics and technicals, which serve as our premise to set a directional bias.
EUR/USD: Next 100% Proj Target Not Completed Yet
GBP/USD: Sellers In Full Control As Hard-Brexit Prospects Priced In
USD/JPY: Trendline Violation Shifts Focus To Stabler Price Action
AUD/USD: Trendline Breakout On Increasing Vol Warrants Caution
USD/CAD: Bullish Breakout To Encourage Dip-Buying, Canadian CPI Next Mover