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In the Zone
- The EU Chief negotiator sounds as though he has had enough of the talks as he has called for the talks to end, and actual negotiation to start – hallelujah.
The dollar finally marched a little higher yesterday, the question now will be whether the move has momentum in it or will it prove to be merely a relief rally. There was a slight hiccup when Trump started tweeting about North Korea – he just can’t help himself – either way the market quickly ignored it, it is something we discussed last month and I am not sure it is a good thing or not when the market ignores anything the President says. The day was rather data driven as we saw strong prints in both the GDP and ADP which lifted the greenback.
There were some huge talking points, the EURUSD fell a second day and this time closed below the 1.1900 level – this after almost trading at 1.2100 on Tuesday. The low got to 1.1885, I am sure that there will be some buyers lurking and I will now watch the 1.1900 level again, if this dollar move is not a flash in the pan, the sellers will build offers and we could see another big move lower this week.
The commodity currencies were the big mover yesterday which may have been expected considering the last couple of months in these pairs. The USDCAD climbed by 115 pips yesterday, the biggest single day move in over a month, and is up nearly 200 pips on the week. A lot of the weakness had to do with the spiralling oil prices as oil faces an oversupply in the next couple of months – I suspect that USDCAD, like oil, will become a fundamental trade in the coming weeks.
After numerous efforts, the kiwi finally broke below 0.7200 this morning. The catalyst for the move was Chinese data, this is a pair that I will be eyeing carefully for the next couple of weeks. I sustained break below 0.7200 will open up the head and shoulders trade we have been watching. The neckline trades 0.6825 and this is a level I will be watching keenly.
Keep an eye out for the afternoon video that tries to tie everything together.
Important Economic Data out today
14:30 CAD GDP
Effect: Actual higher than expected is good for the CAD
14:30 USD Unemployment Claims
Effect: Actual lower than expected is good for the USD
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