The US dollar took it on the chin after the FOMC minutes were released yesterday afternoon. By the time Asia opened, the greenback had experienced a hefty drop against all the majors, except for Sterling.
Traders and analysts read the recap of the inflation debate as evidence of a “divided” committee and downgraded expectations for another rate hike in 2017.
This morning’s better than expected US Jobless Claims report (Actual 232,000 vs. forecast 240,000) and Philadelphia Fed Manufacturing Survey (Actual 18.9 vs. forecast 18.5) led to a re-think of those conclusions. The US dollar marginally extended its European market gains.
EURUSD rallied from 1.1692 to 1.1789 in Europe on the back of the FOMC minutes. Then it reversed course and dropped to 1.1663 in the wake of the US data. Prices have since bounced to 1.1695. European Trade and inflation data were positive. Headline CPI rose 1.2%, y/y in July (forecast 1.2%) while Core CPI was 1.3% (forecast 1.2%).
Sterling enjoyed a brief bounce on better than expected UK July Retail Sales. (Actual 0.3% vs. forecast 0.2%) GBPUSD popped to 1.2977. It dropped to 1.2854 in New York undermined by the US data and revisions to the June retail sales data.
USDJPY plunged from 110.88 before the FOMC minutes, to 109.67 in Asia. A rally in Europe ran out of steam at 110.36 and USDJPY is hovering around 110.15.
New Zealand PPI data was better than expected but not good enough for NZDUSD to keep its gains. NZDUSD dropped from 0.7333 to 0.7291 after the US data.
The Australian dollar suffered a similar fate. AUDUSD jumped to 0.7961 on a forecast beating -employment report but is back at 0.7923. The job report details were soft as all the gains were due to a 48,200 increase in part-time employment.
USDCAD dropped from 1.2712 before the FOMC minutes to a low of 1.2590 in Europe. Prices rebounded to 1.2644 in New York markets. NAFTA headlines, including one that said the US wants major changes, not tweaks” contributed to the dollar demand.
USDCAD Technical outlook:
The intraday USDCAD technicals turned bearish with yesterday break of 1.2710, the uptrend line from the end of July. The break below support at 1.2650 suggests that a short-term top is in place at 1.2770. If support at 1.2550 holds, 1.2550-1.2750 consolidation is likely until the end of August. A break of 1.2550 would target the 1.2415 low. For today, USDCAD support is at 1.2590 and 1.2550. Resistance is at 1.2650 and 1.2710
Today’s Range 1.2590-1.2660
Chart: USDCAD 30 minute