With money continuing to flow into the USD and the GBP, traders continue to bet if the Fed will move to raise rates before the Bank of England. The EURUSD is set to consolidate after a six straight trading day advance from the 1.0850’s with the recent price advance stopping just short of the 1.1220’s resistance levels. Technically, I am expecting the EURUSD to dip towards the 1.1080’s – 1.0980’s as buyers may emerge at those levels before any attempt to test towards the 1.1260’s. The EUR market continues to re-price, at least in the short term, to reflect the diminished GREXIT concerns.
German Q2 GDP expanded 0.4% q/q, a slight acceleration from the 0.3% q/q in Q1, which brought the working day adjusted annual rate to 1.6%, up from 1.1% y/y in the previous quarter. French non-farm payrolls raised 0.2% q/q in Q2, while wage growth slowed to 0.3% from 0.5%. Overall, French unemployment remains high, especially among the under 25s, but this is also due to France’s ongoing structural issues and low growth potential. Greek parliament approves 3rd bailout after an all night debate that showed the strains in Tsipras’ coalition. The vote paves the way for an agreement by Eurozone finance ministers at the Eurogroup meeting this afternoon.
Markets are trading cautiously after a choppy week in the wake of China’s unexpected devaluation of the yuan, but the move has been generally accepted by the markets. Wall Street also shrugged off the ongoing slide in crude oil below $42 for the time being. Firmer U.S. retail sales data was offset somewhat by negative trade price data and an uptick in jobless claims.
Currency Pairs, Grouped Performance (% change)
The new Currency Movers Charts show the percentage change from previous day’s close to the current moment against the other major currencies.
The USD is trading lower in cautious trade following a volatile week. The AUD is higher and commodity prices will continue to dictate the level of the AUD, as demand for Australian commodities seems to be improving.
Significant daily support and resistance levels for these pairs are:
Main Macro Events Today
• EUR Eurozone Jul HICP: inflation confirmed at 0.2% y/y, unchanged from the preliminary reading and the previous month. Prices dropped 0.6% m/m, driven mainly by a renewed decline in energy prices, which were down 0.7% m/m and fell 5.6% y/y. Excluding energy, the annual rate stood at 0.9% y/y in July and core inflation was confirmed at 1.0% y/y, up from 0.8% y/y in June. Even the core rate is considerably below the ECB’s 2% limit for price stability, but the pick up confirms that the risk of a real deflationary spiral is very slim.
• CAD Manufacturing Sales: A swing in aerospace production featured in the May move higher, as activity in the sector rose 22.2% following the 18.0% drop in April. The depreciation in the value of the CAD during June should boost the value of sales and inventories held in U.S. dollars.