Daily Market Report: EURUSD, GPBUSD, USDJPY, USDCAD, AUDUSD
US dollar plummets as dovish Powell testimony takes rate cut expectations higher
EURUSD: US dollar plummets as dovish Powell testimony takes rate cut expectations higher
This week’s focus has been on Fed speak and the minutes, and Powell’s first day of testifying before Congress yesterday struck a dovish tone and sent the US dollar plummeting on higher expectations of a rate cut, with one priced in for the end of this month’s meeting and potentially three by the end of 2019. As of this morning, the greenback is dropping further, with portfolio repositioning following the Fed Chair’s testimony likely taking place ahead of his second day of testifying and US CPI figures released later in the day. Although the bulk of the technical indicators for this pair are neutral, fundamental force combined with a trending ADX may make breakout strategies more attractive, and with opposing trades ideally made after significant reversals to avoid getting stopped out. Out of the Eurozone, it's the ECB's turn to release its minutes.
GBPUSD: USD weakness takes its price off the lows and tests its technical overview
With the greenback in retreat across the board, this pair’s price managed to rise off the lows on yesterday’s fundamental events and in the process keep its bear trend technical overview stalling heavily. However, while the US dollar lagged the most, the pound was the second-worst performer amongst the FX majors yesterday, highlighting the issues the pound will still face moving forward once the dust settles from the current USD repositioning. In terms of data, UK GDP grew at the expected 0.3% rate and its large trade deficit narrowed slightly, but manufacturing figures were worse than expected. Up next, the BoE will be releasing its Financial Stability Report, followed by a press conference held by the BoE’s Governor Carney.
USDJPY: Heading back towards the lows on USD weakness
While the yen didn’t outperform against most of the FX majors, the massive drop in the greenback has meant that this pair’s price has made another run lower and back below all its main long-term moving averages. Negative technical bias is still in play, and with a trending ADX will keep breakout strategies potentially attractive, even if the remaining main technical indicators are neutral. With the fundamental events significant, pivot points are set to easily get tested, making fading strategies a mistake that’ll likely be prone to being stopped out. Retail bias has risen slightly to a heavy long 65% as shorts initiated in the 108+ region get enticed into closing out.
USDCAD: USD weakness, higher energy prices, and a BoC on hold
The events yesterday were significant for both aspects of this pair, with the USD aspect hurt by a more than expected dovish Fed tone, and the Canadian dollar hurt by lowered global growth forecast from the BoC that kept rates on hold at 1.75%. It did however, receive a boost from rising energy prices following a larger than expected EIA deficit and geopolitical tensions, and as of this morning is making another run towards its short-term support level and keeping its bear trend technical overview intact. As for retail bias, it has dropped 5% to a majority long 64%, while institutional bias is a modest 54% short having shifted last week.
AUDUSD: Neutral technical indicators run contrary to trending fundamental shifts
NZD and AUD were the top performers yesterday, and against a plummeting greenback meant a near complete reversal of the losses suffered on Tuesday. With the greenback weakening, commodities prices are soaring, and that’s a boon for commodity currencies like the kiwi and aussie. On the technical front (and it matters less when moves are more fundamental in nature), a trending ADX will keep things interesting, and increased volatility will likely test pivot points easily, but with the main remaining indicators neutral on daily and weekly charts, predicting the direction will be more difficult. In terms of data, Australian housing data this morning was better than expected, as attention will turn towards US CPI figures later in the day.
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