Dollar Weakness Dominates Market Sentiment- 21/07/2014

Currencies

USD

The Dollar is trading mostly lower against its counterparts, though no particular movement is being seen. The USD is losing its battle against the EUR today due to technical support in favor of the European currency, while against the JPY, the American currency is erasing its Friday gains, almost back at 101.17.

The American session will have a light economic calendar today, with US Chicago Fed Natural Activity Index, and the 3 and 6-month bill auctions. The market will be preparing for tomorrow, when the US Consumer Price Index is out, with expectation of the same YoY figures, at 2.1%. The month-on-month data may ease from 0.3% to 0.2%.

The Housing Price Index in May, Existing Home Sales in June, and the Richmond Fed Manufacturing Index in July are due tomorrow as well.

JPY and CHF

Some risk off sentiment weighs today as the Israel-Palestine and the Ukraine conflicts didn’t bring much good news during the weekend, while the US and European Union pressure Russia with more restrictions after the deadly attack to a Malayan airplane in Ukraine by the pro-Russian forces, according to the US. Fear of worse things to come is sending the traditional safe havens higher, both the JPY and the CHF.

The USD/JPY is softer today, but needs to drop to 101.18 to erase Friday’s gains, while the USD/CHF continues its climb higher, closer to the 0.9000 mark and Friday’s high at 0.9304.

CAD and AUD

On the other end, and also due to intolerance to risk after a not so great weekend in terms of conclusive news about the current geopolitical conflicts, commodity currencies are on their way down today.

RBA Governor Glenn Stevens will speak tomorrow and the inflation report comes on Wednesday. The AUD/USD is standing still at 0.9390.

 

Stocks/Indices

The S&P 500 was able to save last week’s trading with last Friday’s rebound to $1971, from $1942 low. However, the pre-market for today is somewhat gloomy, with S&P 500, Nasdaq 100 and Dow Jones in risk of a lower opening, . In Europe, the German DAX and the French CAC aren’t looking well either, just before the opening of the bell.

The US Securities and Exchange Commission, FBI and New York attorney general are investigating the dark pool and high-frequency traders’ industry, that have been attracting large sums of money for trading in millionths of a second. This kind of electronic trading finds little support among financial professionals.

 

Commodities

Crude Oil

Oil is naturally rebounding from such a big fall, from $107.50 area to $99.00. However, last Friday’s $1.50 drop is pressuring the commodity down. At the moment, it is trading around the opening price but has fallen $0.30 during the Asian session. Mideast unrest has shrunk net-long positions on WTI to 259,259 futures and options, with long bets 10% down and shorts 38% up.

 

Gold

Gold has been picking up since June-19 rally, and today the precious metal is trading higher at $1314.69, from opening at $1310.02. Conflicts in Ukraine and Gaza are pushing investors towards safe havens, while the EU and US tighten sanctions against Russia. The Israel-Palestine conflict is becoming increasingly violent, with yesterday’s ground offensive being its deadliest phase.  Another force driving Gold to the upside is expectation of higher interest rates in the US.

Wild Card

NZD

Given that the RBNZ will meet this week, the New Zealand Dollar will attract much attention, especially because there is reasonable expectation for a rate hike. Lately, the NZD has been dropping as investors take profits, but a rate hike would allow an extension higher. At the moment, the NZD/USD trades at the 0.8700 mark.