Article / 20 July 2016 at 14:48 GMT

FX Board: Commodity dollars cold-shouldered despite risk-on tone

Head of FX Strategy / Saxo Bank
Dollar and euro banknotes
 The US dollar strengthened nearly across the board and the euro dipped 
ahead of Thursday's ECB meeting. Image: iStock

By John J Hardy

Key developments in FX today

  • USD firmed almost across the board, only weaker versus surging sterling after more positive rhetoric in a monthly report from the Bank of England. But a few resistance lines remain in some major USD charts before we can call this a broad rally.

  • Consolidations in JPY cross charts after the recent JPY weakness have been virtually nonexistent as risk appetite remains high and as the JPY crosses have largely recovered from the Brexit-inspired dip, save for GBPJPY.

  • The commodity dollars have been weaker on recent central bank signals from New Zealand and Australia, and USDCAD is also nearing the top of its range after consolidating in a triangular fashion for weeks (see chart below.)

  • Gold and silver headed lower today, with gold in particularly needing to find support soon if the bullish case is to endure.

EURUSD flirts with key level

EURUSD has flirted with 1.1000 today, perhaps failing to follow through lower as traders would like to get a look on Thursday at whether the European Central Bank is sufficiently dovish to engineer a solid break lower and set up a run to 1.0800, the next apparent support area.

Source: SaxoTraderGO 

USDCHF rally resumes

The USDCHF rally re-engaged as markets are pricing in higher odds of a Fed rate hike. The move to new local highs is encouraging, but we've seen many false starts before, and a takeout of parity and EURUSD breaking lower below 1.1000 post-ECB are likely two keys that could pull the view all the way to the highs for the cycle above 1.0300.
Source: SaxoTraderGO 

USDCAD coils up

USDCAD is pushing higher and coiling in a shrinking range — a break through the 1.3140/1.3188 zone could point to a 100% extension to 1.3380 or more to the upside.
usdcad Source: SaxoTraderGO 

XAUUSD slips

Gold has punched lower and is approaching the last local zone of support that is important for keeping the bull market alive in the $1,300/1,308/oz area. Below there, the final gasp would perhaps be the rising trendline from the multi-year lows below $1,100/oz.
Source: SaxoTraderGO 

— Edited by John Acher

John J Hardy is head of forex strategy at Saxo Bank

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FX Board for Wednesday, July 20, 2016


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