With just over 24 hours to go before the next FOMC meeting, we’re not seeing any clear direction in the FX market. The U.S. dollar is trading higher against the Japanese Yen and Swiss Franc but is lower against euro, sterling and the commodity currencies. A rise in German wholesale prices is supporting the EURO while hawkish comments from the BoE’s Vlieghe took GBP/USD back above 1.3150.
He said 2 or 3 hikes a year is appropriate. The big story today is the broad based rise in global yields. Interest rates in the US, UK and Germany are up with 10 year Treasury yields rising to their highest level since May.
This along with BoJ Governor Kuroda’s comment that the US-Japanese yield spread should drive USD/JPY higher has the pair eye 113. US consumer confidence is the only major piece of US data on the calendar today but NAFTA, Brexit and UN headlines could have a bigger impact on FX trade. With oil prices moving upwards and equities rising, USD/CAD should trade lower.
AUD and NZD are trying to bounce and they may but at the end of the day, the RBNZ will keep policy unchanged tonight and the RBA will do the same next week which should cap the gains for both currencies in an environment of rising US rates.
*The MAIN THEMES I see today are*
+CAD, +CHF, +GBP, +EUR
mildly +AUD, +NZD, +USD
*Today’s Initial Trades*
Here’s the summary —
1. Sell USDCAD at 1.2958, stop at 1.2986, Target 1.2930
2. Sell USDCHF at .9657, Stop at .9685, Target .9629
3. Sell EURGBP at .8943, Stop at .8971, Target .8915
4. Buy USDJPY at 112.89, Stop at 112.61, Target 113.17
Close ALL open day trades by 10:20AM NY / 15:20 GMT