Intraday Market Thoughts

USD Finding It Easier on the Downside

by Adam Button
Jul 1, 2014 23:41

Plenty of good and bad headlines have hit the US dollar in the last month but the larger moves are on the negative news. The Australian dollar was the top performer while the yen lagged on Tuesday as risk trades rallied. The Aussie will stay in the spotlight with trade balance later. 

Manufacturing and US auto sales vied for the spotlight on Tuesday. The ISM manufacturing index was at 55.3 compared to 55.9 expected but new orders rose to the highest since December. Meanwhile, June auto sales numbers were blockbuster, erasing all the crisis losses and climbing to a 16.9m annual pace from 16.3 expected.

The news was mixed but the market wasn't. The clear reaction was to sell the US dollar. The main beneficiaries were cable (5-year high), AUD/USD (7 month high) and CAD (5 month high). The momentum trade and a beginning of quarter flows were part of the reason but it's not a new phenomenon. The US dollar has been unable to react to good news since Q1 GDP revisions and traders need to be cautious with ADP, NFP and ISM services due.

Yesterday we wrote about the bullish case for the RBA decision and the upbeat technical setup in AUD/USD yesterday and the pair delivered with a surge to the highest since November. The pair closed narrowly below 0.9500 but could get a boost from trade balance at 0030 GMT. Alternatively, the USD side of the equation is a risk with ADP employment due Wednesday.

Our Premium long in GBPUSD entry 1.6030-50 from Mid May remains in progress with 300 pips in the green. Final target is in the Premium.
Act Exp Prev GMT
Trade Balance (MAY)
-122M Jul 02 1:30
ISM Prices Paid (JUN)
58.0 60.3 60.0 Jul 01 14:00
ADP Employment Change (JUN)
205K 179K Jul 02 12:15

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