NY Open: Twenty pounds of headlines
Markets started the day in a confusion of incoming news as ECB chatter met with trade talk updates and US macro data. EURUSD took it on the chin and dropped from 1.1270 to 1.1235.
FX markets are lethargic. It may be the heat, it could be the humidity, but it is certainly holidays that are responsible for the lethargy. Many European centers were closed for a holiday today, and it looks like New York traders have taken the day off.
A slew of US economic reports underpinned the greenback which is at or near overnight peaks against the major G10 currencies except for the Japanese yen. Retail Sales surprised to the upside, posting at 0.5% gain in July, well above the 0.1% that was forecast. The ex-autos component surged 0.6%, m/m. (forecast 0.3%) US Industrial Production at 0.1 m/m, missed the 0.3% forecast while Capacity Utilization was unchanged at 78.1%. Today’s economic reports support the case for two more Fed rate hikes this year.
The US economic data and lingering Turkey tension fears undermined Wall Street which turned a slightly positive opening into losses in early trading. The DJIA is down 1.13%, the S&P 500 dropped 1.09%, and the Nasdaq is down only 0.18% as of 1410 GMT.
EURUSD a inched higher, rising from 1.1310 to 1.1328 before the data and has retreated to 1.1305. Turkey central bank’s actions to shore up the Turkish lira may have given the currency a reprieve, but President Erdogan may regret his decision to levy sanctions on US imports. If (when) President Trump reacts, fresh concerns about Eurozone ban exposures to Turkey will renew EURUSD selling.
A break of EURUSD support at 1.1305 and 1.1280 would extend losses to 1.1120. A break of 1.1350 would lead to a test of 1.1380 then 1.12405.
USDJPY extended overnight losses. It opened in New York at 111.24 and is testing support in the 110.60-70 zone. Risk aversion demand because of Turkey and soft US Treasury yields trumped the healthy US economic data. A decisive break below 111.60 would target 110.40. The upcoming Japanese trade data may limit losses today.