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Market Wrap
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The EURUSD used the highs after the FOMC and Bank of England rate hikes as support before launching higher towards the next key resistance level at 1.0800. The catalysts for today’s rising euro were the German Flash Manufacturing and Services PMIs. The services data missed expectations, but the manufacturing was a solid beat, with a revision higher for the previous reading too. Several ECB members are calling for rates to be raided by 50bps at a time to ensure the bank rate is above zero by the end of the year.
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The pound was on the receiving end of some serious selling this morning, as UK PMIs came in much worse than expected and the worries of further declines in the UK economy towards a recession were also within the report. In this morning’s video I did outline how this bearish sentiment could have been used to get some market participants on the wrong side of the trend and that I was waiting for a break higher and for the 1.26330 level to be a higher target.
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In the next session the RBNZ are scheduled to deliver another rate hike. The market analysts think the RBNZ will deliver a 50bps hike to take the Official Cash Rate to 2.00%. Today’s price action though has been very subdued and within the prior days trading range. 0.6530 is currently the nearest level of resistance, but 0.6800 and the daily 200-period EMA is always a good magnet for a news event. What I really want to see is a push towards a double bottom or top, and the nearest equal highs I see are all the way up at 0.7200, so that would make for a great trade. Especially of the US dollar is retreating from its recent highs.
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The USDJPY has added to the downside pressure in the US dollar index today. A break below the 127.00 was significant and now we wait to see if it is just a look below or whether the start of a more purposeful retracement. Following on from the disappointing US data that came out today I was expecting a greater push lower into the start of the US futures open. The problem facing any trending move over the next 24 hours is the number of Fed speakers before we get to the weeks focal point, which is the FOMC meeting minutes.
The forex heatmap has remained risk-off today, with the GBP and CAD now battling it out for the weakest currency relative to its peers. The CAD is lower today on talk around the US releasing more from the SPR and weak US economic data, which is leading worries for a lack of demand.
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Brent continues to trade within the channel that it has been carving out for over 6 weeks now, with the CME OPEC watch tool, showing most traders are expecting OPEC+ to stay the course and only up production at the current agreed rate of 400K BPD.
