Today’s Key Market Drivers: 2nd July 2019
A gap up followed by a sharp pullback.
Financial markets opened to the upside on Monday morning with emerging market currencies including the AUD and NZD gaining against safe haven rivals and the S&P 500 hitting record new highs. Fast forward to the US trading session and in morning trading the trend look set to continue until around midday when the buyers dried up and profit taking was all the rage.
The Aussie, Kiwi, Euro and Pound all fell sharply against the US Dollar as traders banked long position profits and also squared stock index long positions. Base currencies that trade against the US Dollar fell between half a cent and a cent and the Dow Jones fell 278 points and the S&P shed 26 points from their highs closing their gaps created by the weekends G20 positive news.
I don’t believe the recent reversal lower in the US Dollar is done and the price action in Monday’s market is going to allow traders to reload short positions on the Greenback when weaker than expected US data is again released.
US Manufacturing data beats market estimates.
It wasn’t’ the catalyst for the US Dollar rebounding on Monday but it certainly helped. US Manufacturing activity exceeded economists’ expectations when released with a reading of 51.7 vs the 51.0 anticipated. Over 50 means expansion and therefore a better than expected reading was one reason not to sell off the Greenback further following weaker data numbers in previous weeks. As I said in the previous article the only thing the market needs is more weak US data and the Greenback will be sold once again.
Will the RBA pull the trigger on another rate cut today.
The Aussie Dollar may have fallen off its recent highs through the trading sessions on Monday however if the RBA doesn’t drop the official cash rate as expected today the local currency will rebound sharply and move back towards the key 0.70c level. The market has priced in a rate cut from the RBA which will bring the official cash rate down to 1.0% from 1.25%. Given the rate cut has been priced into traders’ expectations if the RBA signals that it is now likely to sit and wait before another rate adjustment the Aussie Dollar will likely rally rather than fall even if they lower the cash rate. The devil will be in the detail.
Governor Lowe is also speaking in Darwin Tuesday evening at 7.00pm and may add more commentary to the official RBA statement he releases at 2.30pm AEST today.
Looking to the economic calendar today.
The US trading session is US data free however Canadian manufacturing figures are set for release and will move the Caddie (nickname for the Canadian Dollar) if out of line with expectations. Bank of England Governor Mark Carney is also speaking in the UK and his comments have the potential to shift the Pound if he gives any forward guidance on monetary policy (interest rates) or the economy.
Always remember trading is about quality over quantity.
About the Author: Andrew Barnett
Andrew is a professional trader and successful investor who has a strong focus on education. He is a regular Sky News Money Channel Guest and one of Australia’s most awarded and respected financial experts and is regularly contacted by the Australian Media for the latest on what is happening with the Australian Dollar. Director at LTG GoldRock, Andrew Barnett, guides thousands of traders around the world in the live market on a daily basis, advising them on buy and sell directions, as well as trading his own personal account. Andrew, a regular keynote speaker at trading and wealth-creation events throughout the Asia Pacific region, is an authorized representative registered with the Australian Securities and Investment Commission (ASIC).
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