U.S. Dollar Trading (USD) Risk remained on with a rebound after the failed coup in Turkey saw investors keen to resume buying. The USD gained against the JPY but was generally muted against most pairs. OIL/USD remained firm and this is a bullish sign given the rally on Friday on supply issues in the middle east did not reverse substantially.
The Euro (EUR) the EUR/USD traded sideways but the EUR/JPY saw a nice rally as risk rebounded. The ECB is looming on Thursday and the market is ready to break one way or the other and the bar is going to be set very high to get aggressive Euro selling. The Sterling (GBP) the GPB/USD grinded higher back to 1.3250. GBP/JPY movements are going to be critical for the recovery GBP in general so traders are keeping a close eye on the recent stock market rally.
The Japanese Yen (JPY) resumed the market leading role and is back above 106.30 and in target of the bigger 106.80-107.30 resistance area. A break above opens up Y110 but the market at some point will want specifics from the BOJ and government about their plans to bring Japan out of deflation. The other side of the ledge in the USD is still in play if sentiment improves to the point that the FED brings forward its rate hike schedule once again. The Australian Dollar (AUD) was quiet spending most of the day orbiting 0.7600 with risk on helping support but weakness in its antipodean partner the NZD. Weak CPI (0.4% vs. 0.5% forecast) in New Zealand has led to speculation that the Australian CPI next Wednesday may also print a low number and with the RBA rate cut chance at 50% in August the potential for firming of those odds may lead to more AUD selling. AUD/NZD continued to rally however and is now above 1.0700 with the RBNZ this morning announcing loan valuation rules will be spread from Auckland to the whole country. This new development increases the chances that the RBNZ will cut in August but the odds are already high at 80%.
Stocks Indices(DAX) Rallied higher briefly at the open above 10150 but failed to hold onto these gains and settled flat near 10060. The underperformance of the DAX relative to the DOW and Nikkei is noted and the ECB decision will be critical. US Stocks (DOW) Consolidated sideways but on a strong footing after gains last week put us to fresh record highs above 18500. Further upside is possible but consolidation is normal after a huge rally so profit taking as long as not aggressive should be seen as normal.
Pairs to watch
AUD/NZD rally got legs?
NZD/USD Under Pressure 0.7000 test likely
Economic Data Ahead
RBA Monetary Minutes for July
German ZEW Economic Sentiment forecast at 8.2 vs. 19.2
By Anthony Darvall (TonyD)