Everyone is watching this headline rate for USD direction, pitching the strength of the US economy against Europe where the recovery is gathering pace. Strong durable goods orders yesterday were bolstered by the large Boeing (NYSE:BA) orders as we all know, but core was also healthy enough, not so much on June's readings but for the strong revisions seen in May.
Today's US GDP forecasts have been revised higher by a number of banks as a result, and this pulled the spot rate in from the near 1.1800 highs - Asia traded to a little over 1.1775 post FOMC - back to sub 1.1700, but the mid 1.1600's have contained so far.
Fresh downside possible, but we look to next support ahead of 1.1600 figure. Early attempts on reclaiming 1.1700 this morning have struggled, but we do not see too much momentum either way ahead of today's top tier stats.
From the EU perspective, investors are still happy to increase their exposure into Europe, and EUR/CHF demand has taken off with the cross rate pushing aggressively into and through 1.1200-25 resistance, which not breached has taken us to 1.1300+ levels.
Irrespective of the above levels reviving memories of the SNB peg abandonment, this looks to be a EUR more for the most part, but USD/CHF tracking higher to also suggest the greenback has had enough of the downside for now.
USD/JPY
The spot rate is now falling behind in the broader USD moves, or so it seems, but throughout the sell off, USD/JPY has been relatively well insulated, with the downside contained ahead of the 110.50-30 support zone.
The latest weakness is a part of the broader turn in risk, which saw the Nasdaq in particular taking a hit last night, and this has impacted on the Nikkei. JPY gains seen across the board, so dependant on how the risk mood continues today, we may or may not see the lower 110.00's tested.
Out of Japan we saw the national inflation data sticking to 0.4% yoy as of Jun. There were signs that a further pick up is coming - you would hope so with so much stimulus being injected by the BoJ, but Tokyo CPI is ticking higher as of July data, and household spending is much higher than expected and will be a key factor as money is now finally getting put 'through the system' - the whole point of QE!
On the upside, sellers are still lining up above 112.00, and this proved a stern sticking point on the way up early on this week.
GBPUSD and EUR/GBP
More signs that retailers are faring well in the current climate, where the Brexit clouds continue to hang over. The CBI Distributive Trades Survey showed showed strong results for July, and this gave GBP the boost to test 1.3145-50 at the time. EUR/GBP was already under pressure ahead of the data, but this has since passed, so once USD sentiment changed, the spot slumped back under 1.3100.
On the data alone, we would like to point out that the summer months are usually strong due to tourism, and this will have been enhanced by broadly lower GBP levels, which still provide favourable exchange rates coming in.
On Brexit, we had some potentially worrying rhetoric from the EU's chief negotiator Barnier, who is reported to have said that he has no idea of what UK policy is on many issues. This is a very worrying revelation, and will only heap more pressure on the unsettled government and GBP thereon. Much has been made of the UK stance going into the talk, so we now go beyond soft or hard Brexit and back to outright credibility on how PM May and minister Davis can get the UK the 'best deal'.
Cable is holding the upper 1.3000's for now, but is starting to look heavy again. We also have the month end flow into EUR/GBP to consider, and this is already pushing the cross rate back to the mid 0.8900's as I write.
AUD/USD and AUD/NZD
We look to have hit some near term highs above the 0.8000 mark - indeed, 0.8000-0.8200 was a major AUD/USD target zone, and in light of potential recovery in the USD, profit taking is to be expected.
This comes amid a revival in positive sentiment over China, which has seen the commodity markets - metals in this case - ramp higher, taking the 'benchmark' copper price up to $2.90. That said, prices are coming off the boil, likely as a function of the USD pick up, but the ASX 200 was the worst performing index in Asia today and this keeps the pair under 0.8000, but modestly so as yet.
Risk sentiment also plays its part, as it does with the NZD, and for this reason, AUD/NZD is little changed in the mid 1.0600's for now.
As an aside, we heard little from the RBA with AUD above 0.8000, but these latest moves will no doubt be welcome - as the CHF weakness is to the SNB!
NZD looked reluctant to push back under 0.7500, but we are on a 0.7400 handle now as the USD fights back.
Any NZ specific drivers look to be something to consider later on down the line as the currency moves on external factors for now, but yield seekers look to be holding on here for now, and this could prompt a little more downside in the AUD/NZD cross rate.
We hit the low 1.2400's in the aftermath of the FOMC statement on Wednesday, but since then, none of the trading centres have managed to push past this and we have since recovered back through 1.2500 and higher up above the first line of resistance at 1.2550. Gains faltering a little as the pair follows the rest of the USD pack, but looks relatively steady around here for now.
Reports out yesterday suggested the Canadian government is concerned about the wholesale turnaround in BoC sentiment, hiking rates 'too soon' in their view (according to to reports) and risking a greater fallout in the housing market. In recent months, (house) prices have tumbled, so if true, concerns are perhaps justified as the market is pricing in more rate hikes to come.
Needless to say, the CAD has responded in kind, but few can argue that the currency has appreciated at break-neck speed, rallying over 10 cents in the last month and a half or so. Such rapid price change has implications for the economy - as the BoJ have alluded to many times in the JPY - so the need for correction rings true on many counts.
We still see the prospect of a move down to 1.2000-1.2200 at some stage, but for now, a recovery to 1.2700 at least, would not look out of place.
May GDP stats due out later today, and looking at the consensus expectations of a 0.2% rise on the month, this looks rather tame considering the strong wholesale and retail sales numbers for that month.
Disclaimer: All information and content in this article should be viewed as educational only. Although the author, FX Daily Ltd. and its contributors believe the information and contents to be accurate, we neither guarantee their accuracy nor assume any liability for errors. The concepts and methods introduced should be used to stimulate intelligent trading decisions. Any mention of profits should be considered hypothetical and may not reflect slippage, liquidity and fees in live trading. Unless otherwise stated, all illustrations are made with the benefit of hindsight. There is risk of loss as well as profit in trading. It should not be presumed that the methods presented on this website or from material obtained from this website in any manner will be profitable or that they will not result in losses. Past performance is not a guarantee of future results. It is the responsibility of each trader to determine their own financial suitability.-