In an otherwise quiet trade, Sterling soared on a story that Germany and Britain abandoned key Brexit demands. Which would pave the way for the UK to strike a deal with the EU. GBP/USD jumped 150 points. Germany later said that their position on Brexit was unchanged which saw the Pound slip 75 points to settle at 1.2910 (1.2855 yesterday), up 0.4%. The Dollar eased overall.

Outlook: Data releases yesterday saw Australian Q2 GDP jump and beat forecasts. This enabled the Aussie to climb off its 2016 lows. The US Trade deficit widened in July but the deficit was less than forecast.  US imports rose 0.9% to a record. UK Services PMI bettered expectations.

In Europe, Italy’s government reassured the European Union that they would respect EU deficit rules. Italian bond yields fell.  EM currencies stabilised. The USD/TRY eased 0.71% to 6.00 (6.67).

Trading View: Market positioning is coming into play.  We highlighted earlier this week that total net speculative USD longs are at their biggest since 2017. The Greenback’s medium-term uptrend needs a correction to stay healthy.

The Dollar’s 1-week rally has been due to a large part to Emerging Market weakness. US yields were unchanged yesterday with the benchmark 10-year bond stuck at 2.90%. While we have bounced off the 2.80 % support level, we are half-way to 3.0%. The Dollar needs yield support to see further gains.

Sterling’s volatile spike started off with fresh buyers emerging which then triggered short-covering.  Net speculative GBP short bets are at their highest since May 2017.
The fall in Italian sovereign bond yields saw the Euro climb after it held the 1.1530/40 level. The rally in the Pound and Euro could extend today which would see further easing in the Dollar Index.

The Aussie and Kiwi, both oversold, rallied on the back of a softer Greenback. We can expect further short-covering to boost the Antipodeans.

Events and economic data releases today: Australia August Trade Balance; Swiss Q2 GDP; German August Factory Orders; US Challenger Job Cuts, US ADP Non-Farm Employment Change, US Weekly Jobless Claims, Final Services PMI, ISM Services PMI, August Factory Orders; Canada August Building Permits.

USD/DXY – The Dollar Index retreated 0.3% to close at 95.129 (95.428 yesterday). Overnight high traded was 95.663. The 95.60/70 resistance level held once again and looks formidable. Immediate resistance today lies at 95.40. Overnight low traded was 95.085. Immediate support can be found at 95.00 followed by 94.80. Strong support remains at 94.40. Look to trade a likely range today of 94.85-95.35. Prefer to sell rallies.

GBP/USD – The British Pound jumped to a high of 1.29826 on the German/UK Brexit story before easing to 1.2890, and eventually closed at 1.2910 in New York. A German government spokesman said that Germany’s stance has not changed. Sterling still managed a 0.4% gain versus the Greenback. UK Services data bettered forecasts while the speculative community is short Sterling bets. GBP/USD has immediate resistance at 1.2940 followed by 1.2980. Immediate support can be found at 1.2890 followed by 1.2860. Look to trade a likely range today of 1.2890-1.2990. Prefer to buy dips.

EUR/USD – rallied to a high of 1.16401 before easing to 1.1630, finishing up 0.37% from yesterday (1.1585). EUR/USD has immediate resistance at 1.1650 followed by 1.1680. Immediate support can be found at 1.1600 followed by 1.1580. Euro area Services PMI data released yesterday were mostly as expected. The big support for the Euro was the move down in sovereign Italian bond yields. Today sees the release of German factory orders. Look to trade a likely range today of 1.1600-1.1680. Just trade the range shag on this one.

AUD/USD – initially jumped upon the release of the Australian Q2 GDP data which easily beat forecasts (+0.9% vs +0.7% f/c). AUD/USD soared to 0.7214 before slipping back following weaker than expected Chinese Caixin Services data. Today sees Australian Trade Balance for August. Overnight low traded was 0.71442. AUD/USD closed at 0.7195 (.7177 yesterday). Today sees immediate support at 0.7170 followed by 0.7140. Immediate resistance can be found at 0.7215 followed by 0.7245. Net short speculative Aussie short bets are at their largest since late 2015. Look to buy dips with today’s likely range 0.7170-0.7270.

111.52 (111.47 yesterday). The Dollar traded to an overnight high of 111.756 Yen. Immediate resistance can be found at 111.70/80. Immediate support lies at 111.30 (overnight low 111.311). The next support level is at 111.00. The focus for the USD/JPY will be on the US data which culminates on the Payrolls numbers tomorrow. For today look for a likely range of 111.10-111.70. Prefer to sell USD rallies, the specs are short JPY/long USD.

 

Haven picks Japanese Yen and Swiss Franc rallied as risk aversion rose, lifting the VIX (Volatility Index +5.3%). Mounting trade war concerns as well as protracted EM weakness weighed on market sentiment. The US Dollar eased heading into August Payrolls after the ADP National Private Employment report increased less than expected. Stocks fell, treasuries rose, yields dropped.

Outlook: Despite US Jobless Claims to hit a post 1969 low, private jobs numbers underwhelmed. The softer than expected private sector employment result undercuts analyst’s forecasts of an increase in August Payrolls. Watch Wages data tonight, they also matter. US ISM Services PMI beat forecasts.
Australia’s Trade Balance in August bettered analyst’s expectations. German Factory Orders fell.

Trading View: “Let’s get ready to rumble!” Michael Buffer’s trademark catchphrase says it all. It’s Friday, Payrolls day.Jobs Creation for August is expected to be around +190,000 from Julys modest +157,000. Average Hourly Earnings (Wages) are expected to ease from the previous month.

The fall in stocks saw Treasury prices rise and yields fall. The yield on the benchmark US 10-year treasury fell 3 basis points to 2.87%. Germany’s 10-year Bund yield slipped to 0.35% (0.38%). The yield on Japan’s 10-year JGB was flat at 0.10%.

Emerging Market stocks extended their fall while most currencies settled. The Dollar eased against the offshore Chinese Yuan (CNH) and South African Rand (ZAR). USD/RUB (Russian Ruble) was higher. USD/TRY (Turkish Lira) was little-changed.

Uncertainty on the trade front continues with President Trump due to announce a fresh tranche of tariffs against China later today. Chinese trade data is due out over the weekend. Look out!
Amidst all of this, current market positioning is still overbought US Dollars. Which is looking tired. Traders would need a much better-than-forecast Payrolls to re-invigorate the Greenback.

USD/DXY – The Dollar Index eased 0.09% to 95.022 at the New York close from 95.129 yesterday. Overnight low traded was 94.933. Immediate support lies at the 94.80/90 level followed by 94.40/50. The overnight high traded was 95.208, which is where immediate resistance can be found. The next resistance level is at 95.50/60. Look to trade a likely range of 94.80-95.30 today pre-Payrolls.

USD/JPY – slumped 0.65% to 110.71 from 111.52 yesterday. The Dollar got smacked by a double whammy of a lower US 10-year yield and risk-off sentiment. Overnight low traded was 110.52 which was hit when reports that President Trump is looking to target Japan next in his trade crusade. The report was more the opinion of a Wall Street Journal writer. Immediate support lies at 110.50 followed by 110.20, then 109.80. Immediate resistance can be found today at 111.00 followed by 111.30. The Yen has stayed relatively weak in the current environment but the rise in risk aversion and higher VIX could see Yen strength re-emerge. Watch this currency. Likely range today 110.40-111.10 before Payrolls. Prefer to sell rallies.

Yesterday the financial market had an unusual move after the Federal Reserve raised the interest rate 0.25 to 2.25% as expectations and 4 other gains were made in December and another 3 in 2019 as well as another increase in 2020 to keep the Federal Reserve in line with market expectations. Traders will be focusing on the USD today as the annual GDP reading is released As well as the Fed’s Fed Chairman Jerome Powell.

Crude oil futures fell 0.95% to 71.48 hours after the news of the US crude oil inventory was negative, but recovered its strength and then rose to close at 72.02 which makes us believe in a clear positive price for the barrel During trading on the level of the coming days

As for the currencies, the exchange rate of the euro against the US dollar increased with the news of the interest to 1.1797 and then fell to 1.1731 and ended at 1.1746 and continued to decline this morning to reach 1.1685 levels at the time of writing this article to break the point of support for the first day At 1.1712 towards 1.1680 and 1.1640

EUR/USD

As for the British pound, which fell with the morning trading to 1.3110 until the moment after the moment of news of interest to 1.3217 and then ended at 1.3166 at the end of trading yesterday Points for this day support 1.3130 / 1.3090 / 1.3050

GBP/USD

As for the Australian dollar, the movement was somewhat violent compared to the rest of the currencies where it rose to levels not seen since August to 0.7314 and ended at 0.7258, as well as the basket of currencies affected by the dollar fell with the trading this morning to the first support level at 0.7221 so far If this level is broken we will see 0.7190 as a second support and 0.7160 as a third support point

AUD/USD

The Japanese Yen has seen little change since it did not break out of the trading range since the beginning of the week but recorded yesterday at 113.13 as the highest point at the moment of the news, but the US Dollar returned to recoup its losses and ended the whisper at 112.73 and can say that the US Dollar will harvest more Of the day’s gains versus the Japanese Yen as well as the rest of the currencies and the support points and resistance to the US dollar against the Japanese Yen will be as follows Support: 112.50 / 112.30 / 112.00. Resistance: 113.00 / 113.30 / 113.50

Volatile conditions were seen during the European session as there were multiple conflicting reports concerning the Italian Budget. An early tone was set by a Corriere article suggesting that populists were looking for a 2.4% deficit/GDP level, postponement of yesterday’s deadline-day meeting and further threats towards the Finance Minister.

The EUR/USD was offered below the 1.17 in response, as Italian 10y yield rose by 9bps through the open with consequent risk-off moves seen across all markets. The Budget meetings were eventually confirmed with League/Five Star still seeking more spending.

The Bund/BTP spread settled around 11bps wider after solid a BTP auction, with bunds selling-off after the German regional CPIs point towards a strong national print. The U.S. Treasuries rose through yesterday’s FOMC-highs with the curve marginally flatter.

The CAD weakened after Trump imposed auto tariff threats. Crude futures were initially supported by the U.S. Government, confirming that there is no intention to release from their Strategic Petroleum Reserves before Saudi supply reports caused a reversal.

The volatile European session is taken over by a rather hectic day for the American session. To start off, Economic data from the American session include the U.S. Final GDP and Core Durable Goods Orders, both of which have an effect on the markets especially after Wednesday’s FOMC decision to increase interest rates by 25 basis points to 2.25%.

There was also a full house of speakers yesterday from the U.S., U.K., and EU. The ECB’s President Mario Draghi was talking alongside members of the governing council Praet and Lane. The BOE’s Chief Economist Haldane and Governor Carney are said to be participating in a panel which Carney will be chairing.

TRADERS VIEW

The Bloomberg Dollar Spot Index rose to the highest level in more than a week as Italian politics weighed on the euro, which managed to pare some losses on finding support from strong German regional inflation data. The greenback advanced versus all Group-of-10 peers except the yen amid stronger Treasuries and with stock markets in defensive mode. Emerging-market currencies lingered near a three-week high as commodities consolidated recent gains.

EUR/USD – Failure to close above 1.1780 Fibonacci retracement keeps bears in the game; close below Sept. 24 low of 1.1724 opens room for a test of 55-DMA; longs need conversion line at 1.1716 to hold to keep the pair in consolidation mode given Trendstall suggests exhaustion of rally since mid-August. The pair fell to 1.1638 and closed at 1.1642. The immediate resistance is located at 1.1724 followed by 1.1800. Immediate support can be found at 1.1620 followed by 1.1525. Looking forward to trading in a possible range today from 1.1650-1.1750

EUR/USD

GBP/USD – The Pound dropped to the level of 1.3073 and closed at 1.3079. range Signs of mean reversion accumulate; 55-DMA support pivotal for longs to target move above 1.33 handle; strong support near 1.3050. The immediate resistance for today is 1.3150-90 followed by 1.3275. Immediate support can be found at 1.3052 followed by 1.3000. Look for a possible trading range today from 1.3000-1.3150.

GBP/USD

USD/JPY – Price action stays strong with July highs in focus. The pair rose to the level of 113.48. The immediate resistance is at 113.90 followed by 114.35. Immediate support can be found at 112.60 followed by 111.90.

USD/JPY

AUD/USD – A short-term bottom seems to be in place; 55-DMA resistance caps for now. The Australian dollar fell to 0.7204 yesterday after rebounding to 0.7314 two days ago. Immediate support at 0.7200 with next support at 0.7141. The immediate resistance is at 0.7280 followed by 0.7362. Looking to buy dips with a potential range today from 0.7170-0.7280.

AUD/USD

USD/ZAR – The rand on Wednesday surprised analysts by firming during the day and holding onto its gains even after the US Federal Reserve Bank raised interest rates. The Fed, as expected, raised interest rates by 25 basis points to 2.25% just after 20:00 South African time.

“The rand surprised by gaining momentum to trade at R14.11/$ shortly after the announcement was made,” noted Botes. Analysts had thought it more likely the rand would come under pressure if rates were hiked.

At 07:22 on Thursday the local currency was trading at R14.17 to the greenback, down 0.3% on the day.

USD/ZAR