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Market Wrap
In today’s US session the mornings tentative risk-off mood turned more positive as commodity pairs moved from being sold off to bid and the safe haven of the yen was offered. The US dollar which has been leading markets was the biggest faller into the London session close with the USDCHF falling -0.44% and the US dollar index dropping -0.36%. The pound continued to rise through the London session into the US session as coronavirus cases appear to be slowing although last week was the start of the relaxed restrictions and there could be a new peak in cases in the coming days.
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Cable if it closes at these levels at the end of the US session will have rejected the daily 200 exponential moving average and will have closed above the 20 period ema. The price action to the left of the chart is fairly range bound, so it will take a continued sell-off of the US dollar to accelerate through these next levels towards the 1.4000 big figure.
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The DXY has traded below the lower bounds of the rising channel before, and it would probably take speculators 2 down days to consider this a real breakdown. Once again the US senate are not helping things by arguing over the next stimulus bill. Republican senators have rejected the so-called “global” infrastructure deal offer proposed by the Democrats and the White House.
Also, on the bad news front Sales of new homes in the United States decreased 6.6% in June compared to the previous month missing analysts’ expectations. Earlier this morning the German Business climate fell unexpectedly. The Ifo indicator dropped to 100.8 in July from the previous high of 101.7.
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The day’s trading range in the DAX has been relatively small but the start of the US session has generally positive so the drop from this morning’s Ifo data has been unwound.
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With the yen weaking once again the EURJPY has been able to capitalise and is now breaking much higher out of the descending channel it has been in for over 6 weeks.
Traders’ sentiment is relatively bearish the EURJPY on the ActivTrader sentiment indicator. I am expecting to see the number of sellers increase and for those traders to get squeezed out of their short positions. The vaccination rollout across Europe has been successful and Japan is currently under some major lockdown conditions, so the trade is in the single currencies favour currently. Japan’s Services activity decreased the most in 5 months according to the au Jibun Bank data in the overnight session.
Today we have Lockheed Martin and Tesla earnings which could give the US equities a further lift. The S&P500 is currently at a new all-time high as is the Nasdaq. Tomorrow we get earnings data from Apple, Amazon, Facebook and Google.
