U.S. Dollar Trading (USD) The aggressive rally in Global stocks continued overnight without pause and some key levels were broken on the US DOW30 which broke to all time fresh highs above 18370. The USD as a safe haven was mixed gaining against the JPY and Gold but falling against more risk sensitive pairs such as the Australian Dollar. The Dramatic reversal in global risk appetite since the brexit has analysts questioning just how off the table FED rate hikes are this year.
The Euro (EUR) the EUR/USD was remarkably stable unable to join the GBP/USD in a relief rally against the USD and remaining in a tight 60 point range. Heavy EUR/GBP selling as profit taking set in to the pair was seen as main reason for limited gains. The ECB meets next week and expectations for more easing may play out in Euro weakness in coming days.The Sterling (GBP) the GBP/JPY led short squeeze overflowed into the other GBP pairs with GBP/USD rallying two big figures to 1.3250. The Bank of England meeting looms on Thursday and expectations are high of a rate cut and perhaps new measures to support the UK through the Brexit. BOE Carney's spoke overnight and was coy on the BOE's next move with a media blackout in place for MPC members.
The Japanese Yen (JPY) Tested Y105 as the relief rally continued for a 2nd day. A break above Y105 targets the long term downtrend line near Y107 but the pace and speed of the rally on little more than speculation is becoming dangerous. Potential for disappointment is very real as seen in the past when the market priced in too much easing and reversed sharply on the release. The Australian Dollar (AUD) AUD/USD broke above June highs at 0.7650 but failed to maintain the gains and eased back to 0.7610 on profit taking. The strong sentiment seen in global risk appetite is helping support and the next big piece of data is tomorrow's June Australian employment numbers. The NZD and CAD both also enjoyed solid gains with WTI Oil rallying back above $47 a barrel
Stocks Indices(DAX) Tested 10000 but this proved a little too tough and we eased back to 9950. The FTSE and NIkkei have really led the rally so far and the DAX is still significantly lower than pre Brexit levels. US Stocks (DOW) followed the S&P to break to fresh all time highs above 18350 and closed on a strong footing after a small pullback. There is some risk as the Nikkei is up over 1000 points in 48 hours and is the main catalyst for the rally this week.
Pairs to watch
USD/JPY Y105 time for rally to slow down?
GBP/USD Relief Rally in Full swing? Sellers where?
Economic Data Ahead
Chinese Trade Balance
Bank of Canada Rate Announcement
By Anthony Darvall (TonyD)