All of the major currencies are trading higher this morning on reports that the US and EU could drop their respective auto tariffs. No formal deal has been announced and there’s no mention by President Trump on twitter so it is too early to tell whether this story has real merit but it is driving risk on flows. However with the U.S. holiday bringing lower liquidity (many traders are off through the weekend) and trade war still a major issue the day before tariffs on China begin, investors remain nervous about retaliatory measures from China.
Today’s ADP, Challenger and non-manufacturing ISM reports could also have a significant impact on the U.S. dollar ahead of Friday’s non-farm payrolls report. The best performing currency this morning is the euro followed by the deeply sold New Zealand dollar. All of the commodity currencies are trying to claw higher this morning.
I like CAD in particular because of the continued uptick in oil along with the rise in Canadian bond yields. Sterling on the other hand saw very little benefit from BoE Governor Carney’s positive comments but that should be temporary following yesterday’s strong PMI services data. With the Fed expected to raise interest rates again this year, investors are hopeful that today’s U.S. economic reports will reaffirm the strength of the labor market.
*The MAIN THEMES I see today are*
+EUR, +AUD, +CAD, +GBP, +NZD
*Today’s Initial Trades*
Here’s the summary —
1. Buy AUDCHF at .7331, Stop at .7304, .7360
2. Buy EURUSD at 1.1685, stop at 1.1657, Target 1.1713
3. Buy CADJPY at 81.16, Stop at 83.88, Target 84.44
Close ALL open day trades by 10:20AM NY / 15:20 GMT