Thin Trading Takes Over
Today, trading activity is thin compared to Monday.
All of the FX major currencies seem reluctant to move in any direction with narrow and short-lived spikes making the best of the session so far.
Pound Lower on Poor Jobs Data
Despite Monday’s upbeat session, cable struggled to get past the multiweek high of 1.2380 registered only yesterday. Not only did bulls take a break but they also initiated a sizeable sell-off after receiving a rather disappointing jobs report.
That, however, marks a good setup as bulls rejected bears at the psychological $1.23. With that said, unemployment and wages in the UK grew. This means that the steep decline could only have been headline-based infused, rather than ending as a reversal.
EURUSD and USDJPY Unmoved
With the ECB meeting on Thursday, it is uncertain whether we will see Monday’s flows again before the crucial event. EURUSD had a good session yesterday. But, the rejection caused at the $1.1050 is likely to keep the currency pair in a tight range.
German trade data did support EURUSD on Monday. However, since the trade war remains unresolved, traders must stay cautious. At least until further clues on policy guidance come to light on Thursday!
The continuous recovery in risk appetite has led safe-haven flows to lower levels. This has caused the yen, as well as the Swiss Franc, of course, to move lower against the greenback.
USDJPY recorded a nice breakout move above 107 on Monday. But with the US calendar somewhat light until Friday, it will most likely be safe-haven activity affecting dollar-yen.
USDJPY does indeed look bullishly biased on the back of the PBOC’s decision last Friday to lower the reserve requirement ratio (RRR) for financial institutions by 50 basis points.
Commodity Pairs Bullishly Eco-Biased
Australian home loans and electronic card retail sales in New Zealand are keeping Aussie and Kiwi firm against the buck. Not only has risk appetite sent both pairs to fresh multiweek highs, but recent data also suggest that both economies are walking on a healthier path than before.
Although mixed in the first half of the session, Monday’s closing saw AUDUSD and NZDUSD adding another positive session onto their consecutive winning streak. It is only a matter of time before bulls continue adding more bets.
Commodities Also Lackluster
WTI is currently taking a breather from yesterday’s surge. This comes amid the Saudi Minister reshuffle and a reach of the psychological resistance at $58 per barrel. Crude oil prices could move higher as profit-taking hasn’t yet initiated. It could be the NY open that triggers a fresh breakout to new highs.
Gold also remains unchanged early on Tuesday, similarly to yen and the Swiss franc. However, XAUSUD was little unchanged on Monday as well. It didn’t follow the yen/franc rhetoric as investors seem to be more confident on the precious metal than they are on currency safe-havens. Gold is likely to put on a good fight around the $1500 per ounce as this remains the most active level for both sellers and buyers. At least for now.
Equities Slide but Dollar Mixed
The dollar slid yesterday and equities closed mixed. However, today, the two markets seem to have replaced one another. The DXY trades near its open price and SPX is weak, falling below 2970 from an open of 2980.
Lacking economic data and despite the PBOC’s decision, the dollar ended Monday with a Doji candlestick, albeit bearishly biased. With 98.20 holding strong we could see a short-term bullish pullback registering in one of the following sessions (if not today.) But that should be supported by either politics or economics.
The PBOC’s decision didn’t seem to have much of an effect on equities. So the current decline could be attributed to recent, minor trade talk development between the US and China.