New Zealand Dollar is flying high after the RBNZ Governor dampened expectations that the central bank would need to utilise unconvential monetary policy tools (QE). At the same time, part of the recovery can be attributed to notable short-covering, given the extreme bearish positioning highlighted in the weekly commitment of traders report. While a sustained move higher in NZD is doubtful at present vs the US Dollar, risks are tilted for further losses in AUD/NZD however following the break below 1.0725, eyes for a move towards 1.0630 on a close below 1.07.
Euro finds support from 2019 low yet again at 1.0925, subsequently forming a triple bottom. That said, price action has been relatively contained in EUR/USD throughout the session amid sizebale option expiries situated from 1.0925 ($1bln) to 1.1000 ($6.5bln). Despite this however, the outlook remains bearish for the Euro with a pick-up in US-EU tensions on the horizon as the WTO are likely to rule that the US can place $8bln worth of tariffs on EU goods in relation to the EU’s illegal state aid to Airbus, thus given scope for pressure on EUR/JPY. Elsewhere, the uber hawk, Sabine Lautenschlager, stated that she would resign from the ECB amid the disagreement over the ECB’s latest stimulus package. Although, it is too soon to discern the tone of the ECB until her replacement is announced.
Today option expiries (expires at 10am NY cut)
Source: Refinitiv (SDRV), DTCC
Source: DailyFX, Refinitiv
WHAT’S DRIVING MARKETS TODAY
- “EUR/USD Support Under Heavy Pressure, Eyes a Gap Lower Down” by Nick Cawley, Market Analyst
- “Dow Jones, S&P 500 & Nasdaq 100 Charts: Holding Above Support” by Paul Robinson, Currency Strategist
- “Japanese Yen Price Outlook: USD/JPY, EUR/JPY Risk of Lower Levels” by Justin McQueen, Market Analyst
- “Using FX To Effectively Trade Global Market Themes at IG” by Tyler Yell, CMT , Forex Trading Instructor
— Written by Justin McQueen, Market Analyst
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