Intraday Market Thoughts

Euro Cracks, Aussie CPI Next

by Adam Button
Jul 22, 2014 22:29

You would think some negative Eurozone headline would have been the catalyst for EUR/USD finally closing below 1.35 but it was simply the weight of the market that pulled it through. On the day, the Australian dollar led the way while the Swiss franc led. The focus will remain on the Aussie with CPI due later.  

It's been a grinding battle for euro bears since the ECB cut rates and introduced TLTROS but they can finally claim a small victory as the solid zone of support around 1.35 and the Feb low of 1.3477 finally gave way. Selling continued down to 1.3459 and the euro closed on the lows.

The main newsflow in US trading was negative for the US dollar, not the euro. Core CPI rose 1.9% versus 2.0% expected and the dollar took a broad 20-40 pip swoon. What was telling (at the time) was that the euro didn't participate in the rebound as sellers continued to hammer the earlier break of 1.3500. That indicates a heavy selling hand in the market.

An initial level to watch is the 200-week moving average at 1.3426. The selling wasn't limited to EUR/USD; the euro also fell to a 7-month low even as stocks and broad risk appetite improved. Aside from some oversold indications, there is very little going for the euro bulls at the moment.

Ashraf wrote about the upcoming Australian CPI report and some tell-tell signals about which way the report will go in the Premium Section. The report is due at 0130 GMT and expected to rise 3.0% y/y and 2.7% on the trimmed mean. 

We have a new set of Premium Insights ahead tonight's Aussie CPI & tomorrow's RBNZ rate decision. Less than 2 months after our AUDNZD longs hit their final targets, we issue a new ideas and trades on AUDNZD & NZDUSD.
Act Exp Prev GMT
Consumer Price Index (Q2) (q/q)
0.6% 0.6% Jul 23 1:30
RBA trimmed mean CPI (Q2) (q/q)
0.6% 0.5% Jul 23 1:30
Consumer Price Index (Q2) (y/y)
3.1% 2.9% Jul 23 1:30
RBA trimmed mean CPI (Q2) (y/y)
2.7% 2.6% Jul 23 1:30

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