Did you know: The Forex or FX Market derives its name from Foreign Exchange. It is essentially the exchange of currency (money) between two different countries. The FX market is the largest financial market in the world, and is open 24 hours per day, 5 days per week. Read More – Introduction To The Forex Market
Dean's Daily FX Update – 29 June 2017
Noteworthy News
- Rumours are surfacing that we could see the Healthcare Bill tabled before the Senate on Friday, this after the initial postponement. I don’t think that President Trump would table it unless he had a realistic chance of getting it through. This could be the domino effect for Trump, and if this passes you could see the travel ban, tax reform and infrastructure bill pass quickly after that.
Recap
It was always going to be an unprecedented day with four of the central bank “giants” on the same panel discussion. In truth, the actual discussion was a bore, but comments by first ECB President Draghi (again) and BOE Governor Carney sent the markets rocking for a second consecutive day. It is no secret that I am wary of Draghi, as I sometimes feel that he is perhaps out of his depth, and yesterday was an example of why I resent some of the present central bankers. Part of their mandate is to maintain stable markets but over the course of the week we have seen unnecessary volatility created by these very same people.
After an overly hawkish comment on Tuesday that sent the EUR soaring against all FX pairs, yesterday morning the ECB released a statement that the market misjudged Draghi comments, the initial reaction was to send the pair lower by a 100 pips before it bounced by a 120 pips. Last week BOE Governor was overly dovish and reiterated that there would “not be an interest rate hike soon,” yesterday he decided to change his tune and announced there would be some removal of stimulus – the pair rallied by close on 150 pips and is targeting the high that traded prior to the October Flash Crash.
Surprisingly the USDJPY did not get in on the action, and instead chose to trade in a somewhat contained fashion. The low for yesterday is 112.35 which means that we have seen some nice support formed around 112.00. I suspect that the pair may target something closer to 113.00 today, but I must warn that this pair is starting to look overbought on the higher time frames. I will be watching this closely as generally speaking when the JPY reverses trend – it does so with momentum and that could put pressure on the other major pairs.
The USDCAD is continuing with its strong move against the greenback, buoyed by the overly hawkish nature of the BOC and recovering oil prices. We are seeing continuous comments that the oil shock is behind us – but I am not convinced by this argument. Regardless, the USDCAD is targeting that 1.2968 level and this was a huge support level stretching back to May 2016, the risk to the CAD for me is support – if the BOC don’t raise interest rates next week we could see this pair take off.
If I can take anything from the current situation, it is that we saw similar scenarios in the US two years ago and what I learnt is that it is one thing talking hawkish – but another thing to actually raise rates. What this volatility has done is created looming opportunities, in fact it is raining divergence on all the pairs on daily charts. We may have to be patient and wait for opportunity, I still seek opportunity in the commodity currencies and my view has not changed. I mentioned on Monday that NZDUSD could be the trade for the week and I am convinced this morning with the NZD the only pair showing a little retreat against the dollar – I am hoping for some momentum behind the move though.
Just as the case yesterday there will be no daily ranges. I prefer to wait for the dust to settle before trying to dictate support and resistance.
Download Our New Weekly Calendar
High Risk Investment Warning: Trading foreign exchange and/or contracts for difference on margin carries a high level of risk, and may not be suitable for all investors. The possibility exists that you could sustain a loss in excess of your deposited funds and therefore, you should not speculate with capital that you cannot afford to lose. Before deciding to trade the products offered by BlackStone Futures you should carefully consider your objectives, financial situation, needs and level of experience. You should be aware of all the risks associated with trading on margin. BlackStone Futures provides general advice that does not take into account your objectives, financial situation or needs. The content of this Website must not be construed as personal advice. BlackStone Futures recommends you seek advice from a separate financial advisor. Please take the time to read our Risk Disclosure Notice.
