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• Fed’s Powell to speak at CFR in speech titled Monetary Policy Strategy, Tools and Communication Practices
• Investors continue to pile into the safe havens as Iran diplomacy takes a turn for the worse.
• German bund yields trade to new lows, US 10s pressure 2.00% again, Aug gold trades to new swing high > $1,440.
• AUDUSD teasing with upside breakout, led by NZDUSD ahead of RBNZ rate decision tonight at 10pmET.
• USDJPY clinging to Fibo chart support in the 106.90s amid global “flight to quality” bid.
• USDCAD remains under pressure. Chart support in the 1.3170s breaks
Dollar/CAD is managing to hold trend-line chart support in the 1.3170s this morning as traders watch the global deflation trade continue. The German 10-yr bund yield has fallen to a new all time low of -0.33%, US 10-yr bond yields are threatening a move below the 2.00% level once again, August gold prices continue to rally to new swing highs, and the December Eurodollar futures have effectively re-tested the post Fed highs (implied 1.80% Fed funds rate). A stern verbal response from Iran today regarding yesterday’s latest round of sanctions from the US is contributing to the “flight to quality” bid. Iran’s foreign ministry said the latest sanctions mean the closing of diplomacy forever and President Rouhani said the US is lying about wanting to negotiate, the administration is in “despair” and the White House is “mentally retarded”. Canada has just released its Wholesale Sales report for the month of April and the figures beat expectations (+1.7% MoM vs +0.2%). Next up is a slew of Fed-speak, starting with Williams at 8:45amET, Bostic at 12pm, Powell at 1pm, Barkin at 3:30pm and finally Bullard (last week’s dissenter) at 6:30pm. We think the technicals for USDCAD remain the same as they did yesterday. We expect the market to remain on the defensive so long as price continues to trade below the 1.3210s.
AUG CRUDE OIL DAILY
Euro/dollar took a peek above trend-line resistance in the 1.1390s in Asian trade overnight, but has slipped back below the level in European trading so far. With not much data to chew on out of Europe today, talk is making the rounds as to what month-end/quarter end flows will look like. We’ve heard everything from large USD re-balancing sales to real money accounts/corporates using these advantageous EURUSD levels to hedge. The fact that EURUSD is not holding its gains like gold today is a bit concerning technically speaking, and we would chalk this up to today's new lows for the German bund yield. We think the 1.1390s will be the pivot for price action today. Stay below it and we would not be surprised to see some more sales, but rally back above it and we would expect traders to focus on the 1.1440s.
AUG GOLD DAILY
It’s looks like shorts were the victim of some good old fashioned buy stop hunting in the early goings this morning, as GBPUSD surged quickly above the 1.2770s only to fall back down minutes later. The EURGBP cross has also seen some volatility this morning as the typical month end buying flows out of Germany are rumored to have hit the tape. Boris Johnson defended his Brexit plan in an exclusive interview with the BBC today and he also said it was “simply unfair” to involve “loved ones” in the debate. More here. Today’s daily candle for GBPUSD is shaping up so far to be a “doji” (long wicks, no body) and so it appears the market would prefer to stall here for the time being. Support lies in the 1.2710-30s while resistance is now fortified in the 1.12770s (the overnight highs).
The Aussie continues to tease traders with a big upside breakout above trend-line chart resistance in the 0.6970s. The market has been crawling higher today, largely on the back of NZDUSD gains we would argue, as traders appear to be giving up on the thought that the Reserve Bank of New Zealand might cut rates tonight at 10pmET. The OIS market has been pricing in a 20% chance of a 25bp cut ever since the RBA (Australia) cut rates and the Fed signaled rate cuts to come. We think an explosive NZDUSD rally could propel AUDUSD through the 0.6970s and set a path for the 70 handle, and it doesn’t look like the fund community at CME is positioned well for this (still ~65k contracts net short as of June 18).
Dollar/yen is not having a fun time of it this morning as the global rush into bonds and gold again today pressures US yields. Fibonacci chart support in the 106.90s appears to be the last line of defense for the market here as we now approach the January 3rd flash crash range. Almost 1blnUSD of options roll off the board at the 107.25 strike this morning at 10amET. All eyes should be on Fed speak today, with the feature being Powell’s speech before the Council on Foreign Relations at 1pmET.
US 10YR YIELD DAILY
Charts: TWS Workspace
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