Market Drivers July 11, 2017
- USDJPY tests 114.50
- Kiwi slips on earthquake, carry trade fears
- Nikkei 0.57%
- Dax 0.17%
- Oil $44/bbl
- Gold $1209/oz.
Europe and Asia
AUD Home Loans 1.0% vs. 1.5%
North America
No data To get an idea of just how quiet the FX markets have been this week, the EURUSD range for all of the past 48 hours has been less than 40 pips.
The FX markets are clearly on pause ahead of Janet Yellen testimony in front of Congress tomorrow, as well as news from BOC which holds its monthly policy meeting tomorrow as well. Meanwhile, most of the majors are treading water with absence of any economic data this week only adding to the lackluster pace of trade. Among the few movers, USDJPY managed to pop towards the 114.50 level but stalled just ahead of that number in late session Asian dealing.
The move was caused by comments from Fed's Williams who is in Australia now and reaffirmed that the Fed is likely to hike rates one more time before the year end. USDJPY remains well supported in the aftermath of Friday's better than expected jobs report and any hawkish testimony by Yellen tomorrow will likely push the pair through the key 115 barrier which it has not seen since March of this year.
Still, beyond that level, the pair could see much greater resistance unless US growth and inflation improves materially suggesting that further tightening could take place next year. Finally, the weakest pair of the day was the New Zealand dollar which saw some momentum selling kick in after it broke the .7250 support handle. Reports of a 6.8 earthquake off the coast only added to the skittishness of the market, although so far there has been no warning of a tsunami or any physical damage on land. The kiwi continues to see carry trade outflows as markets become convinced about the prospect of another rate hike in the US and if Ms. Yellen confirms the bullish sentiment tomorrow, kiwi could quickly tumble through the .7200 support.