Forex news for North American trading on July 6, 2020
- NASDAQ and S&P close higher for the 5th straight day
- CFTC Commitments of Traders: Traders trim EUR longs
- California average at 7876 cases daily over 7 days
- Dr. Fauci: The mutation of COVID-19 is not as impressive as other viruses.
- WTI crude oil futures settle at $40.63
- US CDC reports 44,361 new coronavirus cases as of yesterday
- NJ virus transmission rate rises to highest level in 10 weeks
- European equity close: Fast start to the week
- Arizona cases rise 3.4% vs 4.1% seven-day avg; positivity remains above 20%
- Bank of Canada Q2 business outlook future sales -35.0 vs +22.0 prior
- Florida Covid cases rise by 3.2% vs. 7 day average of 5.1%
- June US ISM non-manufacturing index 57.1 vs 50.2 expected
- Gold nears a fresh 7-year high as dollar softens
- June final Markit US services index 47.9 vs 46.9 expected
- Stock-market fever grips China
- The EUR is the strongest and the JPY is the weakest as NA traders enter for the day
Other markets:
- spot gold is trading up $10.15 or 0.57% to $1786.11
- WTI crude oil futures are trading near unchanged levels at $40.64
The ISM nonmanufacturing index for June jumped to 57.1 from 45.4 in May. It was also well above the 50.2 estimate. The nature of the index has the potential to show the movements especially when shocks like the coronavirus shut down quickly reverse. One month businesses are closed. The next month, they are open. As a result, the rebound is not all surprising.
Looking at the components however, the one red flag comes from the employment component which remains in the contraction side despite the sharp increase from 31.8 to 43.1. If employment remains depressed/contractionary (i.e. more more states close down restaurants, bar, theaters, etc.), it could have a negative impact on the other components. Below are the impressive changes seen in June.
- New orders 61.6 vs 41.9 last month
- Employment 43.1 vs 31.8 last month
- Inventory sentiment 55.9 vs 55.1 last month
- Prices paid 62.4 vs 55.6 last month
- Backlog of orders 51.9 vs 46.4 last month
- Supplier deliveries 57.5 vs 67.0 last month
- New export orders 58.9 vs 41.5 last month
- Imports 52.9 vs 43.7 last month
The CDC reported reported 44,361 new cases which was slightly higher than the number yesterday (around 43,000). The bright spot is the death numbers remain low at 235. The focus over the next few weeks will be on that death toll. If it increases dramatically as a result of the rise of new cases, that would be trouble.
The USD was vying with the JPY as the weakest of the major currencies at the start of the North American session. At the end of the day, it was the weakest although it did gain marginally in the session as some shorts took profits.
The EUR was the strongest of the majors. It was the strongest at the start of the NY session but weakened in the NY session (also saw modest profit taking).
Although the US dollar was weaker across the board, the declines were mixed with the GBPUSD, USDJPY and USDCAD little changed. The USD declined the most vs. the EUR at -0.55%. The AUD and NZD gained nicely vs the greenback as "risk on" flows helped those currencies.
Helping the "risk on" flows was sharply higher stocks. The NASDAQ index led the way with a 2.21% gain. The NASDAQ also closed at record levels and has it been up for 5 consecutive days (as has the S&P index). The Dow industrial average rose by 1.78% and close at its session highs. The S&P moved up 1.59% and is within 1.58% of the unchanged level for the year.
European shares also advanced with the UK FTSE leading the way at +2.09% followed by Spain's Ibex at 2.06%.
In the US debt market, yields closed marginally higher and near the low yield for the day. The 2 – 10 year spread was nearly unchanged on the day.
A technical look at some of the major currency pairs shows:
- EURUSD: The EURUSD race higher with the pair getting within a few pips of the June 23 high of 1.1348 (high reached 1.1345) before reversing lower. The correction did fine support against last week's high at 1.1302. That level will be the barometer for the bulls/bears into the new day. Stay above keeps the buyers more in control. Move below and there could be more rotation and probing back to the downside.
- USDJPY: The USDJPY fell below its 100 hour moving average in the London morning session and stay below that level through the New York session (with one test). The 100 hour moving average comes in at 107.552 (and moving lower). In the NY afternoon, the price extended below its 200 hour moving average (currently at 107.417). Staying below those 2 moving averages would tilt the trading bias to the bearish side in the new trading day. Move above the 100 hour MA at 107.552 would tilt the bias back to the topside. On the downside the 50% retracement of the move up from the June 23 swing low comes in at 107.112. Move below should open up the downside.
- GBPUSD: The GBPUSD moved higher and peaked in the NY session at 1.25193. That was still 10 pips short of last week's high at 1.25291 and some 22 pips short of the June 24 high at 1.25413. The price decline off the highs is trying to find support against a lower trendline. A move below that line would have traders looking toward the rising 100 hour moving average at 1.24608 and below that the 100 day moving average at 1.2442.
