FOMC Hawkishness and the prospect of another rate hike in 2018 is
pulling down equities. This is a much clearer/logical reaction
compared to FX markets.
EurAud would be our vehicle of choice on a hawkish ECB meeting today.
Aussie is suffering from worse domestic data and worse data out of China.
Aussie is a proxy for bets on China and is showing weakness.
Sometimes understanding the market's movements is difficult.
After a haskiwh message by the FED, it's quite counterintuitive to see USD weakness.
We have only one explanation: disruptive potential from the ECB and US/China
trade issues.
CPI came out in line with consensus. Higher than previous but no real surprize here.
Market unfazed, and everyone waiting for FOMC and then ECB (tomorrow).
GBPJPY is our vehicle of choice for playing (the reaction to) the UK CPI data today.
We expect a decent number which may not be totally discounted by the market.
DXY remains in the broader uptrend, supported by 92.50s.
However, the performance has been mixed since our last update.
Ahead of FOMC, the Dollar seems poised for an upwards breakout
but we do need to wait for FOMC before stepping in.
After the key resistance held, GBP has broken back below it's retracement trendline and
is headed lower. However, with key Employment Data later, and the Brexit Bill vote
to be held between today and tomorrow, expect the Pound to remain volatile.
Risk appetite is still sound today, after the Trump/Kim meeting ended on a positive note.
History is being made. Long bias remains on Dow, key support highlighted.
AUDJPY has reached our 1st Target at 83.00 on continued risk-aversion this morning.
Short-term agendas will be protecting profits, but there is no sign of exhaustion yet.
Pre-G7 jitters are starting to drag Jpy crosses and equities lower.
With no sign that the deterioration is ending, the outlook for Friday is bearish on the Dax.
Markets are preparing for a tough G7 meeting since Trump has been tweeting against the US's former allies (Canada, Europe, the World...).
Trump will also be leaving the G7 early (goes to show how much of a negotiator he is).
Jpy crosses and equities are weak going into the Eurex Open. We suspect further losses are possible.
Ahead of the G7 meeting (which is shaping up to be confrontational) traders seem to have reduced longs
on equities and there is a tad of risk aversion creeping into the market as Jpy crosses are lower as well.
From a technical perspective, 7220s/previous key high have been rejected. Tomorrow we may see
some counter-trend possibilities.
