The clear standouts in trade were the commodity bloc currencies, which were relative underperformers on the back of some weaker data from the antipodeans, lackluster movement in commodity prices and lower US equities. Also seen weighing on the higher yielders was another round of soft data out of the US, highlighted by a weaker than expected durable goods orders, with sentiment further dampened by a less than upbeat Fed Beige Book.
Most traders are looking to the Euro for hints at near-term direction and it is a tough call with the market putting in back to back doji closes as the price sits right around key barriers by 1.3000. Technical studies suggest that the Euro could be on the verge of carving out some form of a top, while fundamentals still show room for additional USD weakness as local economic data rehashes the structural deficiencies within the economy.
Asian trade has been highlighted by the RBNZ rate decision which has resulted in some additional selling of Kiwi despite the move to go ahead and raise rates by 25bps to 3.0% as was widely expected. The accompanying central bank statement has offset any of the yield allure after the RBNZ threw cold water on hawks, saying that the pace and extent of future rises will be more moderate than the June forecasts and that the recent rise in the local currency was inconsistent with the softening economic outlook. Elsewhere, New Zealand’s trade balance came in much softer than expected as imports surged during the period and money supply measured by M3 contracted further. In b came in bang on expectations but failed to materially factor into price action.
Looking ahead, UK nationwide house prices (-0.3% expected) are due at 6:00GMT, followed by German unemployment (7.6% expected) at 7:55GMT. Back to the UK at 8:30GMT for net consumer credit (0.2B expected), net lending on dwellings (1.0B expected), mortgage approvals (48.5k expected), and M4 money supply. Eurozone business climate (0.39 expected), industrial confidence (-5 expected), consumer confidence (-14 expected), economic confidence (99.1 expected), and services confidence (5 expected) are all out at 9:00GMT.
Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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