Financial market research and analysis

The US dollar softened against the majority of G10 currencies on FBI’s decision to expand the Trump investigation to his business ties. The US stocks were flat on Thursday, the S&P500 stagnated after hitting a fresh all-time high on Wednesday’s session. The US stock futures lacked demand in Asia.

The US 10-year yield is stagnating below 2.30%. The hawkish expectations regarding the Federal Reserve’s (Fed) monetary policy are waning, as the fiscal reforms are being pushed back due to Trump shenanigans. The Fed will meet next week and may or may not disclose more details regarding its plans on the balance sheet normalisation. The interest rates are expected to be kept unchanged.

Gold reversed losses on Thursday. The global risk reluctance, soft US yields and Trump-related worries drive capital into the yellow metal. Gold tested the $1’247 resistance (100-day moving average). Light offers are eyed at $1’250 (50% retracement on June – July decline). The key short-term resistance is presumed at 1’260 (major 61.8% retracement).


Cable is out of puff

Cable consolidates near the 1.30 level despite a softer US dollar. The UK’s encouraging retail sales data was not enough to brush away the Bank of England (BoE) doves, who gained confidence after Tuesday’s soft inflation data. The downside correction in Cable could extend to 1.2884 (minor 23.6% retracement on March – July rise), 1.2866 (50-day moving average), 1.2812 (100-day moving average) and finally 1.2736 (major 38.2% retrace).

The FTSE 100 is hesitant face to 7500p offers. Energy and technology stocks are pulling the index lower in London.

The WTI crude is sold pre-$48, and more resistance should come into play before $50/barrel.


Euro rallies on hawkish ECB speculations

The euro resumed its rally even though the European Central Bank (ECB) President Mario Draghi said that discussions on the Quantitative Easing (QE) tapering were pushed back to after summer.

The EURUSD pulled out the 2016 peak of 1.1616 and rallied to 1.1677, a two-year high. Traders increased their hawkish bets as Draghi described the European recovery as ‘robust’.

The ECB is certainly preparing to unwind its asset purchases program starting from September, yet has no incitement to announce it before the decision date, given that the pricing happens almost instantaneously and a premature announcement would jeopardize the performance of the QE program.

A reasonable next move would be reducing the size of monthly purchases, yet keeping the duration flexible.


Aussie down on profit taking

The Aussie (-0.84%) has been the biggest loser against the greenback in Sydney. Carry traders are realising their profit before the weekly closing bell. The correction could deepen to 0.7833 (minor 23.6% retracement on the exponential April – July rise) and 0.7736 (major 38.2% retracement). Price pullbacks could be interesting opportunities for strengthening the long AUD positions before the next week’s Fed meeting. The next positive challenge is at 0.8000/0.8015 (psychological level / 200-week moving average).


Yen turns neutral

The USDJPY sees support at the 100-day moving average (111.46), but the positive trend has fully waned on an unfavourable combination of safe-haven demand in the yen and the broad-based weakness in the US dollar. The sentiment turns neutral.


Inflation data could dent the Loonie appetite

The USDCAD extended weakness to 1.2572. The Bank of Canada’s (BoC) latest move on the interest rates revived the hawks. Traders had no sympathy for Governor Poloz’s demand to stay calm when it comes to speculating about the future of the rate policy. The 1.25 level is just around the corner, yet today’s inflation and retail sales data could spoil the appetite, if the figures meet the soft expectations. The Canadian consumer prices may have contracted by 0.1% on month to June, and the retail sales may have eased to 0.3% on month to May from 0.8% printed a month before.