Commodity Linked Currencies Under Pressure

U.S. Dollar Trading (USD) we saw some USD strength overnight as commodities including Gold and Oil fell during the US session. Moves were relatively small though with many traders sitting on the sidelines ahead of the Jackson Hole Speech tomorrow. US Pending house Sales gained 2.4% m/m in July and follows a series of stronger housing data releases lately. Looking ahead, July Personal Income forecast at 0.3% vs. 0.5% previously. Weekly Jobless claims forecast at 370k vs. 372k. previously.

The Euro (EUR) some discord between European leaders appeared overnight with differences of opinions the role of the ECB. Italy’s Monti and Germany’s Merkel have different views on the ESM getting a banking license and borrowing from the ECB. Another fierce Critic of the ECB intervening in the bond market who has been quite vocal in his opposition is the German Central Bank Governor (BUBA) Weidmann. The Sterling (GBP) Cable was stronger than most holding above 1.5800 and testing 1.5850 yesterday as traders remain bullish. GBP/AUD is continuing to rally and is pushing towards 1.5300. Looking ahead, German August Unemployment Change forecast a t8k vs. 7k previously. Also July UK Mortgage Approvals forecast at 47k vs. 44.2k previously.

The Japanese Yen (JPY) USD/JPY was supported making small gains overnight as traders hedge bets on Bernanke’s speech tomorrow. EUR/JPY and GBP/JPY are supporting the major but AUD/JPY is following commodities lower and dampening the sentiment of the Japanese Carry Trade. Australian Dollar (AUD) the AUD/USD is getting a lot of attention in recent days with the China slow down story getting worldwide press and Iron Ore Prices tumbling as demand from China slumps. Large mining companies in Australia are falling heavily as the market gets spooked on the outlook. Q2 CAPEX was still strong at 3.4% vs. 2.4% forecast.

Oil & Gold (XAU) Gold fell sharply to $1655 as profit takers booked more trades from the recent run. OIL/USD fell back as commodities in general retreated. Support was found at $95 the same level as Monday’s trade.

Pairs to watch

EUR/USD range trading until Jackson Hole Speech?

OIL/USD to hold at $95 or further pullback?

TECHNICAL COMMENTARY