Sold to square AUD long, Comment on AUD, EUR, GBP
Real Time AmpGFX – Comment on AUD, EUR and GBP (Thu 7/20/2017 8:14 AM MDT)
AUD is weaker from the employment report, suggesting we are finding more significant resistance, probably near .80. The impetus to push higher is in more doubt near term.
There has been some peaking in iron ore and steel prices. Chinese short term rates have turned higher again recently, as have higher yielding corp bond yields, although only gently so far, and some shift in CNY indicators to suggest some capital outflow, although again only modestly.
The market is likely to be in more wait and see mode ahead of the Australian CPI release next week, and RBA speakers.
Lowes speech just after the CPI data will be closely watched “The Labour Market and Monetary Policy”
I doubt we will get much from Bullock or Debelle
Lowe is likely to highlight the under-employment in Australia which may suggest dovishness
He is likely to otherwise sound more upbeat on the economy, note the recovery in leading indicators of employment and recent shift towards full-time and higher aggregate hours worked, supporting income and spending.
Market expectations for the CPI data are now posted on Bloomberg. They appear about in line with the MI monthly data; some increase in headline, underlying stable.
EUR has bounced initially after the ECB press conference. Draghi didn’t go out of his way to say the market has got ahead of itself in predicting tapering. He said only that the strength of the EUR was discussed, but did not offer any clear indication that this was a big concern. He instead said financial conditions still remain favourable. He said the Council had not discussed taper. It will address QE beyond the end of the current program that ends this year in the Autumn (presumably next meeting in Sep). So rally suggests market still generally bullish EUR/USD.
GBP is weaker despite stronger than expected retail sales, suggesting the market is expressing more concern of Brexit and political uncertainty. Deutschebank CEO said it was preparing for a hard Brexit.
US in recent data has been reasonable: housing starts and permits stronger, initial jobless claims fell back to recent lows. Some softness in Empire State and Philly Fed manufacturing indices, but not too severe, some fall in NAHB housing market index, but from a high level. Bloomberg weekly consumer confidence indicator stabilizes after modest recent fall.
Trying to get on and stay on trends this year has made it difficult to make profits from trades with significant corrections at times and just false breaks. I see a high risk that I am chopped out of a long AUD position with little or no return, even if AUD/USD has begun a more significant up move after a technical break. The events next week are a reason to be wary of whippy moves in the AUD. The breakout levels are closer to the low 0.77s.
As such, I am playing conservative and taking profit, with an eye to re-establish.
I remain long AUD/NZD. It too may be affected by AUD corrections around events next week. However, it should be less volatile; and positioning a s/l less problematic.
Position
Long half unit AUD/NZD at 1.0553; 1.0693
Real Time AmpGFX – sold AUD to square long position (Thu 7/20/2017 7:51 AM MDT)
Sold AUD/USD half unit at 0.7924
Comments to follow