USD Weakens With No Data June 9, 2015
European Spread Yields Widen Causing USD Weakness
As long as conditions deteriorate in Europe and the Greek mess continues its likely that we may be seeing a market setting of interest rate spreads whether the central banks like it or not. Of course they will be doing all they can to try and keep this from turning into full blown bond carnage but there are some that believe that central banks have already lost control. This is from the WSJ.
“Volatility over the last days has been breathtaking, especially in bond markets,” said Wouter Sturkenboom, senior investment strategist at Russell Investments. He said that it rippled through equity and currency markets, which overreacted. The yield on the benchmark German 10-year bond touched 0.99%, its highest level since September, before erasing the day’s rise and falling back to 0.84%. The 10-year U.S. Treasury yield, which hit a fresh 2015 high of 2.42% earlier Thursday, recently fell back to 2.33%. Yields rise as prices fall.
This may or may not be the beginning of something bigger but I have to admit it is actually a good thing that markets actually moving price rather than relying on the central banks. The writing on the wall is in plain view when we start seeing comments saying that a sell off in treasuries is a risk off move, not risk on.
In a morning note before the open, Brean Capital’s Peter Tchir wrote: “It is time to reduce US equity holdings for the near term and look for a 3% to 5% move lower. The Treasury weakness is NOT a ‘risk on’ trade it is a ‘risk off’ trade, where low yields are viewed as a risk asset and not a safe haven.”
EUR/USD Takes Back All NFP Gains
With the EUR/USD retracing all of the Friday NFP move I wont be having a set bias on direction today. There was the higher daily close that does suggest the failed second push which also increases the probability of a push to the up side. However the levels below are weak until we see them push to 1.1180. I will be cautious about using the Asian range as levels but open for a stop run to yesterdays highs for a short. Otherwise it would be best to see a wider Asian range or see them playing breakout traders adding probability for an entry.
GBP/USD Has Failed Second Push
The failed push on the GBP/USD along with a push to the upside does give me a small bias for the next push up but I will still be open for the short with a stop run from the highs. Right now the best level for the long is at 1.5328 where the hourly and four hour 200 EMAs sit as confluence but it would be better to see them hold and push up this morning and see the test during the London session. Otherwise they may push it as low as the 1.5300 before making a turn.
EUR/JPY Returns To Third Push Chop
The EUR/JPY is still moving more with the EU but going back into the chop leaves me with no bias on direction. As long as the EU gets its push up this will likely follow but the best level for a long is down at 139.88 unless the Asian range widens to the downside and test 140.29 and holds. Otherwise I will be open for the short at 140.61 while watching for a stop run to yesterdays highs.
Forex News Today
The calendar is slow again today with only UK Trade Balance that usually dont get them pushing and Euro Zone Monthly GDP. Expected at just above zero they would likely need a sharp move upward to cause much Euro strength while a drop below zero should make some Euro weakness. Having said that if the situation in bonds is what drives them again today we will see the USD weaken further even if there are small misses on the data.
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