Forex Afternoon Summary Key Notes:
- NAB Business confidence 1 vs. 5 previously
- Japan preliminary machinery tools orders y/y 36.6%
- Switzerland unemployment rate 3.1% vs. 3.2%
- German trade balance 20.6bn vs. 18.1bn forecasts
- French trade balance -4.6bn vs. -4.5bn forecasts
- UK manufacturing production m/m -0.7% vs. 0.2% forecasts; industrial production m/m -0.1% vs. 0.3% forecasts
The Japanese Yen was strong today in what appears to be a risk off mode as the safe haven managed to strengthen against most of its peers. At the time of writing, USDJPY was trading lower for the day near the 119.8 handle after starting the day higher at 121 levels. The Swiss Franc was also seen strengthening against major peers including the USD and the GBP. Earlier, the Swiss unemployment rate was released which showed a modest improvement to 3.1% with last month’s unemployment rate also revised to 3.1%
The Euro started the day on a strong note with the EURUSD currently trading above the 1.235 handle. This after the pair reached yearly lows of 1.227 levels. The single currency also managed to stage a modest rally, gaining against the British Sterling, trading above the 0.79 handle.
The British Pound was weaker heading into today’s session. It was weighed down by weaker than expected industrial and manufacturing production, both of which disappointed, falling below forecasts. While industrial production decline -0.1% for the month, it slowed down on an annualized basis to 1.1%, below estimates of 1.8%. Manufacturing production also saw a decline for the month at -0.7%, well below forecasts while on an annualized basis, manufacturing production rose only by 1.7%, below 3.2% expectations. There were some revisions to past data which was mostly mixed across the board. GBPUSD declined after making intraday highs of 1.56887, but the pair looks to be largely stabilized at the time of writing.
There are no major market moving events scheduled for the US session. ECB officials are expected to make their speeches today but it is unlikely that any major comments would be made in light of the TLTRO auctions due for this Thursday.
The US Dollar index looks set to post a second day of decline, reversing after hitting the major resistance level near 89.17 as noted in our weekly Dollar Index analysis. Should the correction ensue, a break below 88.45 could spell further correction towards 86.80 levels, which in turn translates to minor strengths in EURUSD and even the GBPUSD.
Crude oil futures made a new five year low after prices dropped to the lows of 62.33, well below the 62.45 price level we have often quoted in the weekly Crude Oil analysis.
Gold futures, which saw some choppy price action yesterday was trading above the $1200 handle. Should the psychological level of $1200 turn into support, Gold futures are likely to rally higher in the near term targeting $1250, the next resistance.
