U.S. Dollar Trading (USD) USD weakness retraced after the heavy falls on Friday after the weak Q2 GDP report. EUR/USD and USD/JPY were largely unchanged but the Dollar bounced against most other pairs. WTI/OIL was very weak down 4% to test $40 a barrel as over supply fears resurfaced on more rigs coming online in the US and Libya resuming the shipping of Oil.
The Euro (EUR) the EUR/USD was very quiet unable to break 1.1200 even with strong PMI data but gaini against the commodity currencies and GBP. The ECB bank tests were generally positive but the biggest motivator for further gains will be weakness in the USD so Friday's NFP Jobs report is gaining in importance.The Sterling (GBP) the Strength seen in GBP on Friday was reversed as more economic data shows confidence down post Brexit. Last night the manufacturing PMI came in next in contractionary territory at 48.2 vs. 52.4 in June. Expectations of dramatic BOE easing on Thursday is increasing with QE likely to be restarted to help kickstart lending and improve confidence.
The Japanese Yen (JPY) The heavy selling on Friday back to Y102 on the BOJ disappointment and the weak US data saw a small bounce to Y102.70 but the sentiment is very weak and another attempt lower in the coming sessions is likely unless the MOF/BOJ can jawbone once against the USD/JPY higher. GBP/JPY was weak once again on poor UK data and this is an important cross lately getting alot of attention from traders as the most volatile pair in.The Australian Dollar (AUD) was sold in the European and US session yesterday as profit taking ahead of the looming RBA meeting today was able to overpower the better than expected Private Chinese July Caixin PMI manufacturing report with surprised with a jump back to expansionary territory at 50.6 vs. 48.6. AUD/NZD also fell back to the key 1.0500 level ahead of the RBA but the market will quickly look to next weeks RBNZ so any selling today on a RBA cut is likely to be short lived. CAD was sold on Oil weakness with USD/CAD back above 1.3100 but still well below 1.3250 from last week even though OIL/USD is significantly.
Stocks Indices(DAX) Was strong at the open hitting pre prexit levels near 10500 but rolled over with US stock weakness and finished lower at 10300. Support is quite a bit lower given the uninterrupted rally over the past 3 weeks in global stocks.US Stocks (DOW) Had a rare day of weakness with the rally stalling and profit taking setting pulling back gently from 18500 to 18400 at the close. The weakness in Oil is not helping sentiment but is not the key focus at the moment with global central bank stimulus and a benign FED the main catalyst for the move higher in recent weeks.
Pairs to watch
AUD/NZD Near Key support will RBA help or Hurt?
USD/CAD Decoupled from OIL/USD or Opportunity to buy cheap?
Economic Data Ahead
AUD June Trade Balance forecast -2bn vs. 2.2bn previously.
AUD RBA Rate Decision forecast cut to 1.50% vs. 1.75% previously.
By Anthony Darvall (TonyD)