USD love, where oh where has it gone?
Earthquakes in New Zealand and fat fingers in China. All the news that’s fit to print overnight. The former is self explanatory, while the latter relates to an error which caused the Shanghai Composite index to spike higher by over 5 percent when an erroneous set of trades hit the market. Things have obviously since calmed down in China as the market has returned to almost exactly the same levels as before the incident.
Elsewhere the most fun had was perhaps late in the European session yesterday when the metal complex started the move and the FX space was soon to follow. Broad USD sales on nothing more than momentum saw gold jump close to USD 30, while in currencies we saw straight line moves of over 80 pips in the likes of Cable and EURUSD. The true laggard however was the AUDUSD which admittedly has since (overnight and this morning) sought to cover that differential and trades a little perkier itself.
Data on the day will remain light and most will likely look to cover positions heading into the weekend. This could in itself mean a USD reversal of fortune as those that have been selling it in the last couple of days may look to lock in profits. But even so, I wouldn’t get too worked up over the momentum this may (not) cause in the market.
Turn in USD sentiment
I mentioned yesterday in my post Traders make a mockery of Mark Carney's forward guidance about the turn in USD sentiment or at the very least the positioning. Well the unloading of stale USD longs is likely to continue as far as I’m concerned, and the turn? Well, how about the September Federal Reserve meeting? Yeah I think so. Will the Fed reduce purchases then? No. But will it be enough to put the fear of God into the market and hence get the USD bulls excited once again? Yes!
As an aside over 10 yards of USDJPY expiries between 97.10 and 98.10 today will keep things interesting in Bill and Ben (dollar-yen) closer into the New York cut. Keep your eyes peeled folks.
Helmets on and good luck out there.