USD Keeps Weakening As Earnings Are Watched – Market Update
AvaTrade | Jul 18, 2017 05:16AM ET
EUR/USD – appears to breaking through a very important resistance level and a weekly close above this would be another positive signal for the EUR. If this will indeed happen will most likely depend on what the ECB and Draghi have to say on Thursday on the interest rate decision and monetary policy. While the interest rate is unlikely to change, they could make a reference to the start of tapering QE, which could give the EUR a further boost. Today we have data out of Germany as well.
USD/JPY – the USD is losing ground again and safe havens are a bit more in demand after 2 republican senators announced that they are against the proposed healthcare plan. This is a setback for President Trump and casts doubt if he will be able to implement his other policies. Thursday will see the BOJ interest rate decision which could see some more volatility.
GBP/USD – the Brexit negotiations and the correction of the USD weighted on the GBP, although we are seeing a paring of this move in the morning as we wait to see what the UK inflation data will bring this morning and comments from BOE Governor Carney. The chances that we will see a hard Brexit are still very much there, even though that is not the desired outcome for both the UK and the EU.
USD/CAD – the CAD lost ground yesterday as oil prices dropped and because a general correction where we saw the USD try to recover some of its recent losses, but these proved to be short-lived.
AUD/USD – yesterday the AUD was not able to benefit from the good data out of China, but the RBA meeting minutes did give it a new lift to reach the highest level in over 2 years. The minutes showed that the RBA sees the economy as continuing to improve and also said the neutral rate is 2% above the current interest rate level, boosting expectation that the RBA will move forward with rate hikes as it sees less downwards risk.
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NZD/USD – whipsawed after the weak inflation data out of New Zealand, which initially weakened the NZD, but within 3 hours the 60-pip drop was pared and is no already moving higher, as the USD keeps on struggling.
USD/ZAR – is trading below the 13 level again after the ZAR strengthened as mentioned yesterday due to the Chamber of Mining suspending a contentious charter. Obviously, the weakness of the USD is also helping the pair moving down.
Bitcoin – moved up $300 yesterday as the expectation is that Segwit2x will be widely accepted, reducing the risk that Bitcoin will face a split in 2 weeks.
Dollar Index – with 2 more republicans opposing the proposed healthcare bill, the USD lost even more strength as a failure to deliver on the healthcare plan will delay any reforms on taxes and regulations. Within a week the whole outlook for the USD has changed radically with the inflation data casting doubt on the path the FED will take from reducing its balance sheet to raising the interest one more time this year. The Dollar Index is now trading near the support around the 94.57 level.
S&P 500 – remains trading close to the new record high it just reached as we are seeing volumes go down a bit due to the summer vacation. However, the earnings should be able to cause for some more volatility as we remain trading near the upper Bollinger band.
h3 Commodities/h3Copper – as an industrial metal, used in benefited from the strong data out of China which showed the economy was growing at a greater than expected pace, which should lead to an increase in demand.
Corn – is seeing an upwards move again due to an increase in demand as export data showed an increase and also the weather forecast is changing again to hot and dry weather.
Gold – has moved further up and reached the highest level since the start of the month and is not nearing the resistance around the 1240 level. The USD strengthened yesterday, but this didn’t have a real impact on gold, as it is moving up on the change in outlook for the US with regard to plans for monetary tightening which are likely to be put on hold due to the low inflation data. In the background, there is also uncertainty regarding the way the Brexit negotiations will play out.
Oil – dropped yesterday as focus shifted from the increase in demand to the oversupply once more, as it appears compliance with the production cut deal is dropping among OPEC members, and Libyan production now tops the 1 mbpd. Something that has been lingering in the background for quite a while, but could also impact oil, is the political unrest in Venezuela which is ongoing for a few months. As a reminder, Venezuela is a member of OPEC, and its production has been hovering around 2 mbpd, depending on where the numbers are taken from. This evening we will get the API data which always comes ahead of the EIA data and in both yet another reduction is expected.h3 Stocks/h3
Bank of America (NYSE:BAC) – will be reporting its earnings today.
Boeing (NYSE:BA) – has reached a new record high and remains the best performing stock of the Dow Jones index, having risen over 30% so far this year. Boeing will report its earnings on the 26th of July.
Johnson & Johnson (NYSE:JNJ) – will be reporting its earnings today.
Lockheed Martin (NYSE:LMT) – the largest defense contractor will be reporting its earnings as well today after having reached a new record high.
Morgan Stanley (NYSE:MS) – will be reporting its earning tomorrow before the market opens.
Tesla (NASDAQ:TSLA) – will not be reporting earnings, it will do so on the 2nd of August after market, but dropped after a driver involved in an accident with a Tesla car blamed the autopilot system for the crash.
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