May 19 • Morning Roll Call • 1844 Views • Comments Off on MORNING ROLL CALL

U.S. Dollar recovers from Wednesday’s sell off, USA equities stabilise, gold slips, EUR/USD slips from 7 month high

The dollar stabilised and recovered much of the ground lost on Wednesday, the dollar index remained just above the lows experienced shortly after the USA presidential election result in November. However, the FX analyst team at Citigroup, believe the dollar has further to fall over the summer months. So much so that they’re advising many of their institutional clients to divest of the greenback, over the coming summer months.

After analysis of the dollar index (a basket of currencies weighted versus the U.S. Dollar), Citigroup believe the index could fall back to the 1200 level witnessed around November 9th/10th. The COT (commitment of traders) report published on Friday, may shed light on any movement large institutions are making in the FX markets, with regards to selling the dollar. What’s termed the “net shorts” reading will make for fascinating reading to discover if Citigroup’s analysis (and advice), is beginning to gain traction.

Having breached the 200 SMA to the downside, measured on the daily time frame on Wednesday, USD/JPY recovered some of the lost ground on Thursday, but remained below the critical moving average, to end the day close to flat and anchored to the daily pivot point, at circa 111.42. EUR/USD ended the day close to S1 at 1.111, down circa 0.5%. GBP/USD ended the day at approx. 1.294 after breaching R2 early in the London session and briefly breaching the critical 1.30 handle, the currency pair reverted sharply in the New York session, breaching S1 and also ending the day close to the daily pivot.

In terms of economic calendar news; promising Australian employment/unemployment data caused the Aussie to rise versus most of its peers early on in the Sydney and Asian session, however, the momentum failed to maintain and the currency ended down (or flat) on the day versus its major peers; AUD/USD down by circa 0.1% at 0.7419. Japan posted positive data in the Asian session; GDP rose to 2.2% YoY, beating the forecast of 1.7%, the price index fell by 0.8% and the capital expenditure for Japan rose by 0.2%, versus expectations of a -0.4% fall. Despite the positive news, traders failed to create a bullish market and environment for yen, it ended flat or moderately down versus the majority of its peers; GBP/JPY ending the day close to the daily pivot, at circa 144.17.

Looking at Europe, the main equity markets sold off; with the UK’s FTSE ending the day down 0.89%, CAC down 0.53%, DAX down 0.33% and the STOXX 50 index down 0.63%. Positive UK economic data dominated the European landscape; retail sales in the UK have risen by 2% in the month of April and by 4.5% YoY. There was very little market reaction concerning ECB president Mario Draghi’s speech in Tel Aviv, despite it registering as a high impact event.

From the USA the published high impact economic calendar news revealed that weekly unemployment claims fell to 232k from 236k previously, whilst the Philly Fed survey smashed the forecast; coming in at 38.8, ahead of the prediction of 18.5. As a much respected index the Philly Fed report generally serves as a prescient forecast of the ISM reading, the survey stretches back to 1968, and principally highlights the manufacturing strength of the Philadelphia area. The DJIA closed up 0.27%, the SPX up 0.52% and NASDAQ up 0.73%.

Gold reversed its six day advance, selling off by circa 1%, it’s safe haven appeal waining as the main USA equity indices recovered; the precious metal ended the day at circa $1247 per ounce. WTI oil maintained its upward trend, closing the day out at circa $49.19 per barrel, having for the second day breached the 200SMA at $49.30 and R1, without holding the advance. The $50 handle remains an obvious target.

Economic calendar events for May 19th, all times quoted are London GMT time.

06:00, currency impacted EUR. German Producer Prices (YoY) (APR). Prices are expected to have risen to 3.2%, from an annual 3.1% rise in March.

10:00, currency impacted GBP. CBI Trends Total Orders (MAY). The forecast is for the reading to remain unchanged at 4. These orders indicate pipeline business, across many sectors in the UK.
12:30, currency impacted CAD. Consumer Price Index (YoY) (APR). CPI is predicted to have risen to 1.7%, from 1.6% in March.

13:15, currency impacted USD. Fed’s Bullard to Speak about U.S. Economy and Monetary Policy. Although not listed as a high impact event, given the current situation in the USA with relation to Trump, this speech could prove to be eventful.

14:00, currency impacted EUR. Euro-Zone Consumer Confidence (MAY A). The expectation is for a reading of -3, from the -3.6 reading printed in April.

17:00, currency impacted USD. Baker Hughes U.S. Rig Count (MAY 19). With WTI oil recovering in price, the reading of 885 last week will be monitored closely, for evidence of any dramatic fall or rise in the rig count.



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