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Dean's Daily FX Update – 30 June 2017
Noteworthy News
- Next week is the G20 meeting and with a first face to face meeting between Trump and Putin, I am sure that NATO will be discussed.
Recap
I will certainly be happy when this week is over, I can’t remember the last time the market was this volatile and confusing. The US GDP data came in better than expected and the initial reaction was for the dollar to strengthen somewhat but by the end of the day most of these gains had been undone, it is clear that the market is trying to rebalance positions as central banks become a little bit more hawkish. We saw something similar in the US a couple of years ago and the Fed then left us for waiting for over a year for that initial rate hike, I suspect something similar could be going on here as I find it difficult to believe that the global economies can stomach a mass increase in rates.
The EURUSD traded at multi month highs, levels not seen since Brexit in May 2016 and this was mirrored in the GBPUSD. It seems as though the market has temporarily forgotten about the political mess and impending Brexit and instead concentrating on the weak dollar.
The USDJPY had a choppy day as the pair moved on the higher treasury yields and then traded a lot lower later on in the evening as the stocks took a tumble. Technically speaking the pair did trade as high as 112.90, just shy of the 113.00 level, but the sellers took the opportunity to build some offers at this level. Once the momentum starting building it gathered some steam behind it and traded as low as 111.80 before finding some support. I suspect that the levels to watch leading into the weekend is 112.15 on the topside and 111.80, which is the 100 day MA on the bottom side.
We highlighted that 1.2968 could be the first target in the USDCAD and it eventually broke through 1.3000 yesterday for the first time since February. Thus far the low is trading at 1.2985 and the market will see what traders do from here as this could entice some dip buyers after such a big move. The defining level will be 1.3000 but I am left wondering if we are seeing another classic “Buy the rumour, sell the fact,” trade unfold as the BOC convene next week – I will definitely be watching next week.
I must say that I am somewhat confused as to how to trade the markets, the Fed is gradually tightening and yet the dollar is getting weaker – strange. There is some divergence starting to develop across all the pair today and so perhaps we will some opportunity shortly.
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